“On Economic Stupidity”: How Little Many People Who Would Be President Have Learned From The Past
Bill Clinton’s 1992 campaign famously focused on “the economy, stupid.” But macroeconomic policy — what to do about recessions — has been largely absent from this year’s election discussion.
Yet economic risks have by no means been banished from the world. And you should be frightened by how little many of the people who would be president have learned from the past eight years.
If you’ve been following the financial news, you know that there’s a lot of market turmoil out there. It’s nothing like 2008, at least so far, but it’s worrisome.
Once again we have a substantial amount of troubled debt, this time not home mortgages but loans to energy companies, hit hard by plunging oil prices. Meanwhile, formerly trendy emerging economies like Brazil are suddenly doing very badly, and China is stumbling. And while the U.S. economy is doing better than almost anyone else’s, we’re definitely not immune to contagion.
Nobody really knows how bad it will be, but financial markets are flashing warnings. Bond markets, in particular, are behaving as if investors expect many years of extreme economic weakness. Long-term U.S. rates are near record lows, but that’s nothing compared with what’s happening overseas, where many interest rates have gone negative.
And super-low interest rates, which mainly reflect market forces, not policy, are creating problems for banks, whose profits depend on being able to lend money for substantially more than they pay on deposits. European banks are in the biggest trouble, but U.S. bank stocks have fallen a lot, too.
It looks, in other words, as if we’re still living in the economic era we entered in 2008 — an era of persistent weakness, in which deflation and depression, not inflation and deficits, are the key challenges. So how well do we think the various presidential wannabes would deal with those challenges?
Well, on the Republican side, the answer is basically, God help us. Economic views on that side of the aisle range from fairly crazy to utterly crazy.
Leading the charge of the utterly crazy is, you won’t be surprised to hear, Donald Trump, who has accused the Fed of being in the tank for Democrats. A few months ago he asserted that Janet Yellen, chairwoman of the Fed, hadn’t raised rates “because Obama told her not to.” Never mind the fact that inflation remains below the Fed’s target and that in the light of current events even the Fed’s small December rate hike now looks like a mistake, as a number of us warned it was.
Yet the truth is that Mr. Trump’s position isn’t that far from the Republican mainstream. After all, Paul Ryan, the speaker of the House, not only berated Ben Bernanke, Ms. Yellen’s predecessor, for policies that allegedly risked inflation (which never materialized), but he also dabbled in conspiracy theorizing, accusing Mr. Bernanke of acting to “bail out fiscal policy.”
And even superficially sensible-sounding Republicans go off the deep end on macroeconomic policy. John Kasich’s signature initiative is a balanced-budget amendment that would cripple the economy in a recession, but he’s also a monetary hawk, arguing, bizarrely, that the Fed’s low-interest-rate policy is responsible for wage stagnation.
On the Democratic side, both contenders talk sensibly about macroeconomic policy, with Mr. Sanders rightly declaring that the recent rate hike was a bad move. But Mr. Sanders has also attacked the Federal Reserve in a way Mrs. Clinton has not — and that difference illustrates in miniature both the reasons for his appeal and the reasons to be very worried about his approach.
You see, Mr. Sanders argues that the financial industry has too much influence on the Fed, which is surely true. But his solution is more congressional oversight — and he was one of the few non-Republican senators to vote for a bill, sponsored by Rand Paul, that called for “audits” of Fed monetary policy decisions. (In case you’re wondering, the Fed is already audited regularly in the normal sense of the word.)
Now, the idea of making the Fed accountable sounds good. But Wall Street isn’t the only source of malign pressure on the Fed, and in the actually existing U.S. political situation, such a bill would essentially empower the cranks — the gold-standard-loving, hyperinflation-is-coming types who dominate the modern G.O.P., and have spent the past five or six years trying to bully monetary policy makers into ceasing and desisting from their efforts to prevent economic disaster. Given the economic risks we face, it’s a very good thing that Mr. Sanders’s support wasn’t enough to push the bill over the top.
But even without Mr. Paul’s bill, one shudders to think about how U.S. policy would respond to another downturn if any of the surviving Republican candidates make it to the Oval Office.
By: Paul Krugman, Op-Ed Columnist, The New York Times, February 12, 2016
“At The Top Of The To-Do List For 2017”: Here’s What Will Happen On Taxes If A Republican Is Elected President
The Tax Policy Center has released an analysis of Marco Rubio’s tax plan, which, like their analyses of Jeb Bush’s plan and Donald Trump’s plan, shows that it would result in a staggering increase in the deficit if it were implemented — $6.8 trillion in Rubio’s case, compared to an identical $6.8 trillion for Bush and $9.5 trillion for Trump.
The problem is that it’s awfully hard to wade through all these details and numbers, grasp the distinctions between them, and determine which one you find preferable.
The good news is, you don’t have to.
That’s in part because the differences between the various Republican candidates’ plans are overwhelmed by what they have in common. But more importantly, it’s because if one of them becomes president, the tax reform that results will reflect not so much his specific ideas as the party’s consensus on what should be done about taxes.
So to simplify things, here’s what you can expect if a Republican is elected president in November:
- Income tax rates will be cut
- Investment tax rates will be cut
- The inheritance tax will be eliminated
- Corporate income tax rates will be cut
- Corporations will be given some kind of tax holiday to “repatriate” money they’re holding overseas
And that’s basically it. Yes, there will be hundreds of provisions, many of which could be consequential, but those are the important things, and the things almost all Republicans agree on.
Let’s keep in mind that this is the policy area Republicans care more about than any other. There are pockets of conservatives for whom the details of defense policy are important, and others who care a lot about education, and even a few who care a lot about health care. But all of them want to cut taxes. They may get passionate talking about how much they want to repeal the Affordable Care Act, or how tough they’ll be on border security, or how they’ll totally destroy the Islamic State. But if a Republican is elected in 2016, it is a stone-cold guarantee that changes to the tax code will be at the top of the to-do list for 2017.
That doesn’t mean, however, that the tax reform we get will be exactly what that president promised during the campaign. For instance, Ted Cruz is proposing what’s essentially a Value Added Tax (VAT). But he won’t get that passed even with a Republican Congress, because it’s controversial within the party.
That’s critical to understand. It isn’t as though congressional Republicans, who have been waiting to do this for years, will just take the new president’s plan and hold a vote on it. Instead, they’re going to hammer out a complex bill that reflects their common priorities. It will be a product of the party’s consensus on what should be done about taxes, a consensus that has been forming since the last time they cut taxes, during the George W. Bush administration.
You can make an analogy with the ACA. By the time 2008 came around, Democrats had arrived on a basic agreement on what health care reform would look like. That isn’t to say there was no disagreement within the party. But the outlines had been agreed to by the most powerful people and the wonks within the party: expand Medicaid for those at the bottom, create exchanges for people to buy private insurance, offer subsidies to those in the middle. That’s why the plans offered by Barack Obama, Hillary Clinton, and John Edwards in that election all followed that outline, and that’s what the Democratic Congress eventually produced.
The things that I listed above are the essential tax consensus of the GOP at the moment. Some people would add or modify some elements — Rubio, for instance, would completely eliminate investment taxes while others would merely reduce them, but he would also expand the child tax credit. But the outline is the same, particularly in its effects. Here’s how we can summarize those:
- Poor and middle-class people will pay a little less in taxes
- Wealthy people will pay a lot less in taxes
- Corporations will pay a lot less in taxes
- The deficit will explode
Republicans, who profess to care deeply about deficits, will claim that their tax plan won’t actually cost anything (or will cost very little), because when you cut taxes, you create such a supernova of economic growth that the cost of the cuts is offset by all the new revenue coming in. This is sometimes referred to as a belief in the “Tax Fairy” because it has as much evidence to support it as a belief in the Tooth Fairy. It is a fantasy, but their continued insistence that it’s true requires us to address it.
You don’t need a Ph.D. in economics to remember the history of the last quarter-century. Bill Clinton raised taxes, and Republicans said the country would plunge into recession and the deficit would balloon; instead we had one of the best periods of growth in American history and we actually got to federal budget surplus. Then George W. Bush cut taxes, and Republicans said we’d enter economic nirvana; instead there was incredibly weak job growth culminating in the Great Recession. Barack Obama raised taxes, and Republicans said it would produce economic disaster; instead the deficit was slashed and millions of jobs were created.
So we don’t actually have to argue about whether the Republican tax plan will increase the deficit, because the theory behind it has been tested again and again, and the results are obvious. If they cut taxes as they’d like, maybe the deficit will go up by a trillion dollars, or five trillion, or eight trillion. We don’t know exactly how much it will go up, but we know it will go up.
As far as Republicans are concerned, dramatic increases in the deficit are a reasonable price to pay to obtain the moral good of tax cuts. If you think I’m being unfair, ask them whether they believe Bush’s tax cuts were a mistake. They don’t.
You can agree or disagree. But you don’t have to wonder what will happen if a Republican is elected. There may be other plans that president will be unable or unwilling to follow through on, but I promise you, cutting taxes is one thing he absolutely, positively will do. And we don’t have to wonder what it will look like. We already know.
By: Paul Waldman, Senior Writer, The American Prospect; Contributor, The Plum Line Blog, The Washington Post, February 12, 2016
“How Change Happens”: Why Democrats Can’t Seem To Decide Between Clinton And Sanders
If Republicans are engaged in a three-sided civil war, Democrats are having a spirited but rather civilized argument over a very large question: Who has the best theory about how progressive change happens?
On the Republican side, the results in Iowa showed a party torn to pieces. Ted Cruz won because he understood from the start the importance of cornering the market on Christian conservatives who have long dominated Iowa’s unusual process. Message discipline, thy name is Cruz.
Donald Trump has created a new wing of the Republican Party by combining older GOP tendencies — nationalism, nativism, racial backlash — with 21st-century worries about American decline and the crushing of working-class incomes. He appeals to the angriest Republicans but not necessarily the most ideologically pure. A novel constituency proved harder to turn out in Iowa than polls and Trump’s media boosters anticipated.
Marco Rubio was the remainder candidate, pulling together most of the voters who couldn’t stand Trump or Cruz. He was strongest among the best-educated Republicans, a crowd that has less reason to be angry. Almost as conservative as Cruz, Rubio runs verbally against the party establishment even as he is beloved by it.
The main question in New Hampshire next week (besides whether Trump can actually win an election) concerns Rubio’s ability to repeat his consolidation trick — this time against a fully competitive field. Does he get enough bounce out of his third-place finish in Iowa to beat back John Kasich, Jeb Bush and Chris Christie, who largely skipped Iowa but have been working hard to find Granite State salvation? It’s politics of a classic sort.
The Democratic contest is far more subtle and, as a result, intellectually interesting. The obvious contours of the race are defined by Hillary Clinton’s identity as a moderate progressive and Bernie Sanders’s embrace of democratic socialism.
But there is less distance between Sanders and Clinton than meets the eye. Their sharpest programmatic differences (other than on Sanders’s mixed gun-control record) are over his sweeping ideas: breaking up the largest banks, establishing a single-payer health-care system and providing universal free college education. These disagreements are closely connected to their competing theories of change.
Clinton believes in change through incremental steps: toughening financial regulation, building on Obamacare, expanding access to scholarships and grants without making college free for everyone. One-step-at-a-time reform is the best way to reach a larger goal, she believes. And proposals that are too big are doomed to fail — politically for sure, and probably substantively as well.
Thus her signature critique of Sanders. “In theory, there’s a lot to like about some of his ideas,” she says, and then the hammer falls: “I’m not interested in ideas that sound good on paper but will never make it in the real world.”
Sanders, by contrast, has long believed that the current configuration of power needs to be overthrown (peacefully, through the ballot box) to make progressive reform possible. It’s why he focuses so much on breaking the corrupting power of big money in politics. He believes that loosening the Republicans’ grip on working-class voters requires initiatives that will truly shake things up, and that only the mobilization of new voters will change the nature of representation in Washington.
Democrats, he told NPR’s Steve Inskeep in 2014, have “not made it clear that they are prepared to stand with the working-class people of this country [and] take on the big money interests.”
The same year, he told Vox’s Andrew Prokop: “You gotta take your case to the American people, mobilize them, and organize them at the grass-roots level in a way that we have never done before.”
Sanders added: “The Republican Party right now in Washington is highly disciplined, very, very well-funded, and adheres to more or less the Koch brother position. You’re not gonna change them in Washington. The only way that they are changed is by educating, organizing, and what I call a political revolution.”
By: E. J. Dionne, Jr., Opinion Writer, The Washington Post, February 3, 2016
“Ugly Rhetoric Of The GOP Primaries”: The Republican Candidates Are Finding New And Innovative Ways To Alienate Minorities
It’s safe to say that the Republican nominee for president, whoever he ends up being, will not be getting too many votes from Muslim Americans. Or possibly any votes at all.
Donald Trump who claimed falsely that thousands of Muslims celebrated the downing of the Twin Towers, and who wants to ban Muslims from entering the United States, is still leading the polls. The one who said that no Muslim should be allowed to be president isn’t doing so well; Ben Carson just fired much of his staff and his campaign is obviously melting down. But Marco Rubio, who appears to be on the rise, sent a clear message to Muslims on Wednesday, which we’ll get to in a moment.
The point, though, isn’t that the Muslim vote will be critical to the 2016 outcome; Muslims make up only around 1 percent of the U.S. population, and many of them are not yet citizens and so aren’t eligible to vote. But the rancid Islamophobia on display in the Republican primary campaign is more than a threat to Republicans’ showing among Muslim voters, it’s a threat to their prospects among all non-white voters. Combine it with the way Republicans have talked about immigration and the way they’ve talked about President Obama, and you could hardly have assembled a better case to minorities that they should reject the GOP.
Back to what happened this week: President Obama visited a mosque in Baltimore on Wednesday, the first such visit of his presidency. He hit familiar notes in his speech, condemning hate crimes against Muslims and noting the long history of Islam in America. He acknowledged a young woman in the audience, Ibtihaj Muhammad, who will be representing the United States in fencing at this summer’s Olympics — in her hijab. “At a time when others are trying to divide us along lines of religion or sect,” he said, “we have to reaffirm that most fundamental of truths: We are all God’s children.”
For Marco Rubio, that statement of unity was just too much to bear. “I’m tired of being divided against each other for political reasons like this president’s done,” he told an audience in New Hampshire. “Always pitting people against each other. Always! Look at today: He gave a speech at a mosque. Oh, you know, basically implying that America is discriminating against Muslims.” Indeed, what could be more divisive than a plea for solidarity and understanding?
Donald Trump also weighed in on the president’s visit to a mosque, saying, “Maybe he feels comfortable there.” Because he might be a secret Muslim, get it? Ha ha!
Think for a moment about how a member of any minority group — African-American, Hispanic, Asian-American, Muslim, Jew, Pacific Islander — would view everything that has gone on in this primary campaign, and how inclined it might make them feel to vote for whichever candidate the Republicans nominate.
We often assume that the effect of something like Trump’s comments on Muslims or the GOP debate on who hates “amnesty” the most will only affect the opinions of the particular group being targeted at that moment. But everyone else hears those things too. For people who have the experience of being a minority in America, it doesn’t go unnoticed when one party communicates that it’s actively hostile to people who aren’t white and Christian. Even if you’re, say, Asian-American and you haven’t heard a GOP candidate attack people like you specifically, you’ll probably suspect that that’s only because they haven’t gotten around to it yet. In case you were wondering, Asian-Americans gave Barack Obama 73 percent of their votes in 2012, and they’re the fastest-growing minority group in the country.
The other critical fast-growing group is, of course, Hispanics. While we don’t yet know who the GOP nominee will be, we know that he’ll be someone who spent an awful lot of time condemning undocumented immigrants and trying to get to his opponents’ right on “amnesty.” And as multiple demographic analyses (see here or here) have shown, if Republicans don’t dramatically improve their performance among Hispanics, it will be all but mathematically impossible for them to win.
That’s not even to mention African-Americans, the most loyal segment of the Democratic coalition. They were certainly energized by the presence of the first African-American president on the ticket, and do you think they’ll be motivated to vote against the Republicans who attack Barack Obama with such venom?
There is the chance, however, that the GOP could have the first Hispanic major-party nominee in 2016. But it’s impossible to say how much of an impact Marco Rubio or Ted Cruz would have on the Hispanic vote.
Many knowledgeable Hispanic politicos (at least the Democratic ones) argue that it wouldn’t change Hispanic voters’ feelings much, for three reasons: First, Rubio and Cruz are both Cuban-American, and the ties of solidarity between Cubans and people whose heritage is Mexican or Salvadoran or anything else aren’t as strong as some might think (this is even more true for Cruz, who unlike Rubio doesn’t speak fluent Spanish). Second, Hispanic voters are keenly aware of the policy differences between them and the GOP, differences that have been heightened during the campaign. And third, Rubio or Cruz wouldn’t be able to escape the message of hostility their party has sent to Hispanic voters for years, but especially this year.
They’ll have trouble escaping it not only because of the clear record of the primaries — which among other things included Cruz making clear his opposition to birthright citizenship, a bedrock American principle — but because they’ll find themselves assaulted relentlessly by other Hispanics who oppose them. Recently, Jorge Ramos, the most influential Hispanic journalist in America, wrote a scorching column criticizing Rubio and Cruz (among others), in which he said, “There is no greater disloyalty than the children of immigrants forgetting their own roots. That’s a betrayal.” Expect to see a lot more of that in the general election.
You can also expect to see the Republican nominee take a drastically different tone on issues like immigration once the general election rolls around, because he’ll have a different audience and a different set of voters to persuade. He’ll play down the positions he has taken, and talk in more welcoming, inclusive terms. He’ll pull people of all races up on stage with him. The appeals he makes to white resentment will become more subtle and implicit.
In short, whoever that nominee is, he’ll try to make everyone forget the ugly rhetoric of the Republican primaries. But by then it will probably be too late.
By: Paul Waldman, Senior Writer, The American Prospect; Contributor, The Week, February 5, 2016
“Far, Far More Right-Wing”: Marco Rubio Isn’t The Second Coming Of George W. Bush. He’s Much Worse
With his unexpectedly strong third-place showing in the Iowa caucuses, Marco Rubio demonstrated that he’s the Republican establishment’s best shot to scuttle the Donald Trump and Ted Cruz insurgencies. And now, in the aftermath of Iowa, thoughtful critics of that establishment, from the liberal Jonathan Chait to my paleoconservative colleague at The Week Michael Brendan Dougherty, have begun to describe Rubio as the second coming of George W. Bush.
The comparison makes sense in a purely formal way. Like W in 2000, Rubio promises to unite the party’s grumpy, warring factions (which have grown much grumpier and more belligerent over the past 16 years), making Rubio a strong consensus choice within the party. It’s also true that this formal unity would be built out of the same old planks that have formed the party’s platform since Reagan’s first election: deficit-fueled tax cuts for upper-income earners, strident military interventionism abroad, and lots of speeches (but few policies) in support of traditional faith and families.
But this obscures the fact that substantively, Rubio is far, far more right-wing than George W. Bush ever was. That Rubio has a chance of serving as a consensus candidate positioned somewhere near the ideological center of his party is a tribute to just how far right the GOP has lurched since Bush left office seven years ago.
Here are five areas where Rubio clearly and sharply outflanks W on the right.
Bush signed Medicare, Part D into law, vastly expanding drug benefits for millions of Americans. Rubio, by contrast, has promised with great fanfare that he will eagerly work with Congress to repeal the Affordable Care Act, which would strip millions of Americans of health insurance. It’s also true that, like all the Republican presidential candidates, Rubio talks vaguely about replacing the ACA with a wonderful, unspecified market-based alternative. But no informed commentator on either side of the issue expects any Republican proposal to strive for coverage of as many people as the ACA currently does — let alone as many people as it would have covered if a series of Republican governors hadn’t refused to participate in the law’s expansion of Medicaid.
Bush cut taxes drastically. Rubio, meanwhile, would cut them…even more drastically. How much more? His proposed tax cut amounts to more than three times the size of the Bush tax cuts, with nearly half of it going to the top 5 percent of income-earners. These cuts would produce a revenue shortfall of $6 trillion after 10 years. That’s an amount that even staunch conservatives have described as “huge” and “irresponsible.”
Pro-lifers loved Bush, and for good reason. He appointed a string of conservative judges to the bench, and he spoke frequently about how every child, born and unborn, should be “protected in law and welcomed in life.” Yet on abortion, too, Rubio manages to place himself several steps to Bush’s right, refusing to permit exceptions for terminating pregnancies in cases of rape or incest.For all of Bush’s manifest foreign policy failings, he consistently upheld the distinction between the religion of Islam and terrorists who murder in its name. Compare that to Rubio, who has picked up the bad habit common to post-Bush Republicans of speaking much less precisely and responsibly about the supposedly severe danger that Muslims pose to the United States. Rubio has even suggested that the federal government should shut down any place that Muslims gather to be “inspired,” including mosques — a move that would place Rubio on a collision course with several clauses of the First Amendment.
Rubio resembled Bush most closely in the months following the 2012 presidential election, when the junior senator from Florida took on a leadership role in the Senate’s efforts to revive a failed initiative of W’s second term — a reform of the nation’s immigration laws, including a push to devise a path to citizenship for undocumented immigrants. The reform effort failed, and his role in it is now widely presumed to be Rubio’s greatest electoral liability. (Sort of like how the rightward listing GOP treated Mitt Romney’s signature achievement as governor of Massachusetts as a potentially fatal electoral defect during his 2012 presidential campaign.) The result? On immigration, too, Rubio now finds himself far to Bush’s right, railing about the need to close and seal the nation’s southern border before even beginning to talk about any other kind of reform.
The lesson? Don’t oppose Rubio because his presidency would amount to a third term for George W. Bush. Do it because a Rubio presidency would be a whole lot worse.
By: Damon Linker, The Week, February 3, 2016
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