“Doesn’t Remotely Comport With The Evidence”: Why The GOP’s War Against Welfare Programs Is Both Cruel And Pointless
Why do people work?
That question is at the center of the conservative case against anti-poverty programs. Republicans like Rand Paul conclude that policies like disability insurance or the Earned Income Tax Credit take away a key motivation — putting food on the table — that propels people to look for work. Thus these policies must be reducing labor supply and economic growth.
Liberals often don’t confront this point head-on, arguing instead that it’s unjust for people to starve because they’re out of work. It’s an inevitability, given that conventional understandings of market capitalism require around one out of 20 people to be unemployed at all times.
This is a good point, but the conservative argument is worth confronting on the merits. While there is an inherent trade-off between work and economic output, the story is not so simple as conservatives make out. Austerity — which often requires cutting anti-poverty programs — also kills labor supply.
For an example of the conservative position, let’s go to Daniel Mitchell, who wrote up some new findings from the National Bureau of Economic Research:
The mid-1990s welfare reform apparently helped labor supply by pushing recipients to get a job. Disability programs, by contrast, strongly discourage productive behavior, while wage subsidies such as the earned-income credit ostensibly encourage work but also can discourage workforce participation for secondary earners in a household. [The Federalist]
There is some surface plausibility to this argument. Social Security reduced poverty among the elderly by 71 percent, but in so doing probably also reduced the number of old people working. On some margin, there is a trade-off between work and poverty reduction, because a lot of jobs suck and people will quit them if they can.
However, it leaves a great deal out. Most critically, it doesn’t consider the business cycle. At the bottom of the Great Recession, for instance, the ratio of job seekers to job openings was nearly seven to one. That means it was mechanically impossible for six out of seven unemployed people to get jobs then. In order for “pro-work” welfare reform to have a prayer of working, the jobs you’re pushing people into actually have to exist.
In other words, when there is a recession, fiscal and monetary stimulus is the way to preserve labor supply, and austerity is the way to destroy it. But if you refuse to accept the logic of aggregate demand, as Mitchell did back in the very pit of the Great Recession, you’re stuck arguing that soup kitchens caused the Great Depression.
The international context presents an even more obvious problem. The conservative account of anti-poverty programs straightforwardly implies that the larger the welfare state, the lower the labor force participation rate (that is, the fraction of people who are working or actively looking for a job). If people don’t have to work due to generous government benefits, then they won’t work.
This doesn’t remotely comport with the evidence. In point of fact, by developed world standards, the U.S. welfare state is extremely stingy and our labor force participation rate is quite low. Take Sweden, for instance. It boasts the welfare benefits of Ayn Rand’s deepest nightmares: universal health and dental insurance, 480 days of paid parental leave per child, a monthly child benefit of about $120 up through age 16, two weeks sick leave, government pension at age 65, and so on.
Overall, if we look just at market incomes, then Sweden has about the same market poverty rate as the U.S. — but its welfare benefits cut the actual poverty rate down to half that of the U.S. That’s the scale of transfers we’re talking about, and other Nordic nations do even better. Yet Sweden’s labor force participation rate was 64.1 percent as of two years ago, more than a percentage point better than the U.S. rate, which has been hovering below 63 percent for the last couple years.
Again, at some point there has to be a trade-off between work and output. In decades previous, the U.S. beat European nations in labor force participation, because those nations chose relatively more free time as they became richer, instead of maniacally ratcheting up GDP for its own sake.
But correct macroeconomic policy also matters a great deal. If there is a catastrophic collapse in aggregate demand that is not fixed for years and years, that’s also going to burn up labor supply — in a way that is both cruel and pointless.
By: Ryan Cooper, The Week, April 28, 2015
“Kansas Has Gone Full Tea Party”: Kansas’ Experiment In Concentrated Conservatism Keeps Getting Grimmer
Kansas is in the midst of a grim experiment putting crackpot supply-side economic theories into practice. While these economic anti-reforms will have devastating results for poor people in the state, in other respects Republican Gov. Sam Brownback and his legislative allies have made the government more intrusive into the private lives of the state’s citizens. April has provided some particularly egregious examples of this disastrous turn.
Kansas has been a Republican state for a long time. Since 1936, the only time the state has given its electoral votes to a Democratic candidate was to Lyndon Johnson in the massive landslide of 1964. Despite this, Kansas has historically not been a far-right state. Prominent Kansas Republicans have generally been moderates, like Bob Dole and Nancy Kassebaum. Kathleen Sebelius, President Obama’s former secretary of health and human services, was the state’s Democratic governor as recently as 2009.
But since the election of Brownback, Kansas has gone full Tea Party. Kansas Republicans have enacted massive upper-class tax cuts, with the idea that they would produce such an explosion of economic growth that the state would actually gain revenues. This makes no sense in theory and has been a catastrophe in practice. Revenues have cratered, while economic growth lags behind neighboring states. Spending on the poor has decreased, while the tax burden on the poor has increased. Needless to say, Kansas has rejected the Medicaid expansion offered by the Affordable Care Act, denying access to health care for many poor Kansans.
Kansas Republicans certainly have no intention of taking responsibility for this disaster, which means a search for scapegoats. The targets should not be surprising: poor people, women, and gay people.
Earlier this month, Brownback signed a bill that, among other things, prevents welfare recipients from spending government-provided funds on things poor people do not spend their money on, such as cruise ships. As Emily Badger of The Washington Post observes, this reflects a trend in Republican-governed states of placing burdens and restrictions on poor people that do not apply to any other recipients of government benefits — and for no good reason.
The demeaning of the poor doesn’t end there. Recipients of funds from the Temporary Assistance to Needy Families program will have their daily withdrawals, using the provided ATM cards, limited to $25 a day, not only creating needless inconvenience, but effectively transferring money from the poorest citizens in the state to banks in the forms of additional fees.
Brownback rose to prominence as more of a social conservative than a fiscal conservative. So it’s not surprising that Kansas is placing irrational legal burdens on women as well. Kansas passed a bill banning dilation and evacuation abortions (under the junk science name “dismemberment abortions.”) The procedure is safe — so there is no health-related justification for banning it — and is the most common one used for second-trimester abortions, which women have a constitutional right to obtain.
Even worse, the ban does not contain exceptions for rape, incest, or most threats to a woman’s health. The law puts women’s health at risk by interfering with the judgment of doctors in order to punish women for exercising their constitutional rights in a way Kansas legislators disapprove of.
Brownback’s attacks on basic justice and equality don’t end there. In 2007, Sebelius issued an order banning discrimination against LGBT state employees. Earlier this year, Brownback rescinded the order, creating a new standard under which state employees could be fired simply because of their sexual orientation. Brownback defended the order using the traditionally disingenuous “special rights” language so often employed by those who favor legal protection for bigotry: “This Executive Order ensures that state employees enjoy the same civil rights as all Kansans without creating additional ‘protected classes’ as the previous order did.”
This argument would make sense — if you think that gay and straight people are equally likely to be discriminated against because of their sexual orientation. In the actually existing world, Brownback’s measure does not guarantee civil rights to all Kansans, opening the door for discrimination against gays and lesbians based on their sexual orientation.
Under Brownback, Kansas has offered a concentrated form of what most national Republicans claim to want. Tax cuts for the wealthy, tax increases and reduced benefits for the poor, arbitrary interference with the reproductive freedom of women, and increased discrimination against gays and lesbians. Voters next November should ask themselves whether they want this ghastly agenda to be repeated on a national scale.
Editor’s note: A previous version of this article mistakenly asserted that Kansas recently banned dilation and extraction abortions, but these were already illegal.
By: Scott Lemieux, The Week, April 24, 2015
“Behold, The ‘Laffering Laughing’ Stock”: The Remarkable Persistence Of Crackpot Economics In The GOP
The most horrifying article you can read today is not about Ayatollah Khamenei’s troubling comments on the Iran nuclear deal, it’s this piece from Jim Tankersley of The Washington Post about how all the GOP presidential candidates are lining up to receive the wisdom of Arthur Laffer as they formulate their economic plans. This is the rough equivalent of doctors seeking to lead the American College of Pediatricians competing to see which one can win the favor of Jenny McCarthy. Behold:
As the 2016 GOP primary season takes off, Laffer is more in demand than ever before, with Republican candidates embracing tax-cut-for-the-rich policies even as they bemoan economic inequality. Candidates have been meeting with him in recent weeks, and on Friday in Nashville, he says, his schedule includes Rick Perry at 10 a.m., Ben Carson at noon, Jeb Bush at 1:15 p.m. and Bobby Jindal at 5. Dinner is scheduled with Ted Cruz. He has already met at least once with Wisconsin Gov. Scott Walker. …
Some time ago, Laffer recounted, he sat down with Sen. Rand Paul of Kentucky, who was hoping the economist would bless his flat-tax plan. Laffer critiqued it instead as having too many complicated, economy-distorting features. He recalled Paul expressing disappointment he couldn’t endorse it.
After that sit-down, Paul’s advisers kept calling Laffer, he said. When Paul announced his presidential run this week, he touted a tax plan far more in line with Laffer’s vision.
Laffer’s theory is that cutting taxes for the wealthy not only brings an explosion of economic growth but pays for itself; give millionaires and billionaires a break, and the resulting economic activity will be so spectacular that more revenue will come in despite the lower rates. Laffer reduced this idea to the famous “Laffer curve,” which he supposedly sketched on a napkin in 1974 and thereby seduced generations of Republican politicians. It took the perfectly sensible idea that if all income was taxed at 100 percent then no one would have any incentive to work, and turned that into a claim that virtually any reduction in the top rate will increase revenues—and the converse as well, that increasing the top rate will always reduce revenues and stifle growth.
If that were true, then the Clinton years would have been a period of dismal economic doldrums, followed by the glorious George W. Bush boom. In fact, Laffer’s theory has been as thoroughly disproven as phrenology or the notion that the stars are pinholes in the blanket Zeus laid across the sky; Republican economist Greg Mankiw famously referred to those who believe Laffer as “charlatans and cranks.” But in a world where Mike Huckabee convinces people that the Bible contains a secret cancer cure and baseball players wear titanium necklaces in the belief that doing so will align their humours or some such nonsense, there will always be a market for crackpottery, particularly the kind that offers a justification for the thing you already want to do.
And this is why Republicans continue to seek Arthur Laffer’s wisdom and repeat the completely, thoroughly, 100 percent false claim that cutting taxes for the wealthy will always increase revenue. They want those tax cuts for ideological and moral reasons, and when someone with a claim to expertise tells them that not only is there no cost but that such cuts will actually help the little people too, well that’s just too seductive for words. When the world shows them that cutting taxes on the wealthy actually reduces revenue, it doesn’t make them revise their belief that doing so is right and just, because that belief isn’t subject to the test of evidence.
Candidates get a lot of flack for having advisers or supporters who have committed various sins, even if there was no reasonable way the candidate could have been expected to know about or approve those sins, and they won’t have any impact on what the candidate would do if elected. We’ll spend days hounding a candidate because some consultant he hired sent out some offensive tweets five years ago, or because someone who endorsed him said something outrageous at a rally. But here we have a case in which candidates are voluntarily and knowingly asking for the advice and approval of one of America’s foremost economic quacks, specifically for the purposes of formulating policy that would affect every American’s life. Is anybody going to ask them what the hell they’re doing?
By: Paul Waldman, Senior Writer, The American Prospect, April 10, 2015
“A Truly Extraordinary Record Of Being Wrong”: In-Demand GOP Economist Says Kansas ‘Is Doing Fine’
The first big hint that Kansas Gov. Sam Brownback (R) was pursuing a dangerous economic course was when he hired economist Arthur Laffer to help shape the plan. Laffer, of course, rose to GOP prominence in the 1980s pushing the celebrated-but-wrong idea that tax cuts can pay for themselves.
The Washington Post profiles the conservative economist today and notes that his influence has not waned, despite the real-world effects of his policies. In fact, Laffer is evidently a go-to source for many of this year’s Republican presidential candidates.
No one has influenced Republican candidates’ thinking on the economy for the past four decades as much as Laffer, who is now 75. Laffer says he believes that limiting government and cutting tax rates, especially the rate levied on top earners, will unleash faster economic growth. Since he sold then-candidate Ronald Reagan on that prescription, every Republican presidential nominee has run on a Laffer-inspired economic platform.
As the 2016 GOP primary season takes off, Laffer is more in demand than ever before, with Republican candidates embracing tax-cut-for-the-rich policies even as they bemoan economic inequality. Candidates have been meeting with him in recent weeks, and on Friday in Nashville, he says, his schedule includes Rick Perry at 10 a.m., Ben Carson at noon, Jeb Bush at 1:15 p.m. and Bobby Jindal at 5. Dinner is scheduled with Ted Cruz. He has already met at least once with Wisconsin Gov. Scott Walker.
And this does not include the meeting Laffer has already had with Rand Paul, who asked him to look over a tax-cut plan the Kentucky Republican likes.
The conversation turned to Brownback’s radical experiment, and the Post’s article added this gem: “ ‘Kansas,’ Laffer declared over a five-hour lunch interview in Washington, ‘is doing fine.’”
“Fine,” I suppose, is a relative term. For those of us who care about the details, the economic plan Laffer created for Kansas has resulted in debt downgrades, weak growth, and state finances in shambles. It’s reached the point in which two Kansas public school districts are wrapping up the school year early because they don’t have the money needed to finish a full school year.
“Fine” probably isn’t the first word that comes to mind.
Paul Krugman added some helpful context to Laffer’s record.
Since the 1970s there have been four big changes in the effective tax rate on the top 1 percent: the Reagan cut, the Clinton hike, the Bush cut, and the Obama hike. Republicans are fixated on the boom that followed the 1981 tax cut (which had much more to do with monetary policy, but never mind). But they predicted dire effects from the Clinton hike; instead we had a boom that eclipsed Reagan’s. They predicted wonderful things from the Bush tax cuts; instead we got an unimpressive expansion followed by a devastating crash. And they predicted terrible things from the tax rise after Obama’s reelection; instead we got the best job growth since 1999.
And when I say “they predicted”, I especially mean Laffer himself, who has a truly extraordinary record of being wrong at crucial turning points. As Bruce Bartlett pointed out a few years ago, Laffer was even wrong during the Reagan years: he predicted that the Reagan tax hikes of 1982, which partially reversed earlier cuts, would cripple the economy; “morning in America” promptly followed. Oh, and let’s not forget his 2009 warnings about soaring interest rates and inflation.
Looking ahead, Krugman added the broader question is “why this always-wrong economic doctrine now has a stronger grip on the GOP than ever before.” That need not be a rhetorical question. Indeed, it should matter quite a bit to the voting public given that so many Republican presidential hopefuls – including the entire current top tier – are eager to bring their economic plans in line with Laffer’s discredited thinking.
Or put another way, a wide variety of national GOP candidates are looking at recent developments in Kansas and thinking, “How can I impose this model on the entire United States?”
It’s a bit like turning to discredited neoconservatives for guidance on foreign policy and national security. Oh wait….
By: Steve Benen, The Maddow Blog, April 10, 2015
“Republicans Return To Tax Cut Fantasyland”: Every Argument Republicans Have Made In Last 20 Yrs About Taxes Have Been Wrong
One surprising thing about the campaign Mitt Romney ran in 2012 was that cutting taxes, a theme you might have expected from someone of his profile, wasn’t at the center of it. Perhaps wary of getting painted, even more than he already was, as the representative of the rich, Romney proposed a tax cut plan that was, by Republican standards anyway, rather modest. But those were the bad old days—tax-cut fever is back in the GOP, with a vengeance. From Bloomberg’s Richard Rubin:
The campaign for the Republican nomination for president is poised to become a race to the biggest tax cut.
More than a dozen candidates are vying for attention from donors and the party’s base voters, and they aren’t letting the U.S. budget deficit get in their way.
Senator Marco Rubio of Florida kicked off the competition with his plan to boost economic growth by slashing taxes on investments, wages and business income. Even the plan’s proponents concede it would reduce tax collections by at least $1.7 trillion in the first decade, largely favoring the top 1 percent of Americans over the middle class.
Senator Rand Paul of Kentucky says he will propose the biggest tax cut in U.S. history. Rick Perry and Rick Santorum, both considering repeat presidential campaigns, ran on reducing taxes four years ago and would be expected to do so again.
The shrinking deficit—it’s less than half of what it was four years ago—creates an opening for Republicans to return to the tax-cut politics that propelled Ronald Reagan and George W. Bush into the White House.
“It focuses on the right question at the right time, which is: How will we grow more rapidly?” Douglas Holtz-Eakin, a Republican and former director of the Congressional Budget Office, said of the proposal Rubio released last week with Senator Mike Lee of Utah. Holtz-Eakin acknowledged that the tax cuts require spending reductions to keep the deficit in check.
Holtz-Eakin is not just wrong about that, but wrong in two separate ways. First, how we grow more rapidly is not at all the right question. The question everyone is asking now is how we spread the gains of a growing economy more widely. And second, even if the question were how to grow more, tax cuts would not be the answer.
You have to admire one thing about the Republican perspective on this issue: their unflagging insistence, despite a mountain of evidence to the contrary, that the best and perhaps only way to affect the economy is by adjusting the tax rate paid by wealthy people. Here’s a quick history review of the last two decades: In 1993, Bill Clinton signed a budget that included tax increases. Republicans unanimously said it would bring a “job-killing recession.” It didn’t; in fact, almost 23 million jobs were created during Clinton’s two terms. Then George W. Bush got elected and signed two rounds of enormous tax cuts. Republicans promised these cuts would super-charge the economy. They didn’t; job growth was weak throughout Bush’s term. Then at the end of 2012, the deal ending the “fiscal cliff” allowed the top income tax rate to revert back to what it had been during the Clinton years. Republicans grumbled that this increase would hamper job growth. That didn’t happen either; in the two years since, the economy has created 5 million jobs.
In other words, the Republicans’ essential theory about upper income taxes—increasing them destroys jobs and smothers growth, while cutting them explodes growth and creates huge numbers of jobs—is not just wrong, but demonstrably, obviously, spectacularly wrong. Yet they keep saying it.
The reason isn’t all that difficult to concern. For conservatives, cutting upper-income taxes isn’t a practical imperative, it’s a moral imperative. It’s just the right thing to do. Taxes are an inherent moral evil, and taxes on those who have proved their industriousness and virtue by being rich are the most profound moral evil of all. This is a very different argument from the practical one, which says that if we cut taxes for the wealthy then good things will happen to everyone as a consequence.
Republicans know that the moral argument has appeal to only a very small number of Americans, mainly those would benefit directly from upper-income tax cuts. So the practical argument is the one they must offer, even if it happens to be utterly false.
So here’s the question they ought to be asked: “Every argument Republicans have made in the last 20 years about taxes has turned out to be wrong. Now you’re saying if we cut upper-income taxes, it will produce terrific growth. Why would that be true now when it hasn’t been true before?”
By: Paul Waldman, Senior Writer, The American Prospect, March 13, 2015
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