“Focusing On The Wrong Things”: Why We Should Stop Obsessing About The Federal Budget Deficit
I wish President Obama and the Democrats would explain to the nation that the federal budget deficit isn’t the nation’s major economic problem and deficit reduction shouldn’t be our major goal. Our problem is lack of good jobs and sufficient growth, and our goal must be to revive both.
Deficit reduction leads us in the opposite direction—away from jobs and growth. The reason the “fiscal cliff” is dangerous (and, yes, I know—it’s not really a “cliff” but more like a hill) is because it’s too much deficit reduction, too quickly. It would suck too much demand out of the economy.
But more jobs and growth will help reduce the deficit. With more jobs and faster growth, the deficit will shrink as a proportion of the overall economy. Recall the 1990s when the Clinton administration balanced the budget ahead of the schedule it had set with Congress because of faster job growth than anyone expected—bringing in more tax revenues than anyone had forecast. Europe offers the same lesson in reverse: Their deficits are ballooning because their austerity policies have caused their economies to sink.
The best way to generate jobs and growth is for the government to spend more, not less. And for taxes to stay low—or become even lower—on the middle class.
(Higher taxes on the rich won’t slow the economy because the rich will keep spending anyway. After all, being rich means spending whatever you want to spend. By the same token, higher taxes won’t reduce their incentive to save and invest because they’re already doing as much saving and investing as they want. Remember: they’re taking home a near record share of the nation’s total income and have a record share of total wealth.)
Why don’t our politicians and media get this? Because an entire deficit-cutting political industry has grown up in recent years—starting with Ross Perot’s third party in the 1992 election, extending through Peter Petersen’s Institute and other think-tanks funded by Wall Street and big business, embracing the eat-your-spinach deficit hawk crowd in the Democratic Party, and culminating in the Simpson-Bowles Commission that President Obama created in order to appease the hawks but which only legitimized them further.
Most of the media have bought into the narrative that our economic problems stem from an out-of-control budget deficit. They’re repeating this hokum even now, when we’re staring at a fiscal cliff that illustrates just how dangerous deficit reduction can be.
Deficit hawks routinely warn unless the deficit is trimmed we’ll fall prey to inflation and rising interest rates. But there’s no sign of inflation anywhere. The world is awash in underutilized capacity As for interest rates, the yield on the ten-year Treasury bill is now around 1.26 percent—lower than it’s been in living memory.
In fact, if there was ever a time for America to borrow more in order to put our people back to work repairing our crumbling infrastructure and rebuilding our schools, it’s now.
Public investments that spur future job-growth and productivity shouldn’t even be included in measures of government spending to begin with. They’re justifiable as long as the return on those investments – a more educated and productive workforce, and a more efficient infrastructure, both generating more and better goods and services with fewer scarce resources – is higher than the cost of those investments.
In fact, we’d be nuts not to make these investments under these circumstances. No sane family equates spending on vacations with investing in their kids’ education. Yet that’s what we do in our federal budget.
Finally, the biggest driver of future deficits is overstated—rising health-care costs that underlie projections for Medicare and Medicaid spending. The rate of growth of health-care costs is slowing because of the Affordable Care Act and increasing pressures on health providers to hold down costs. Yet projections of future budget deficits haven’t yet factored in this slowdown.
So can we please stop obsessing about future budget deficits? They’re distracting our attention from what we should be obsessing about—jobs and growth.
BY: Robert Reich, The American Prospect, November 21, 2012
“The Twinkie Manifesto”: Economic Growth And Economic Justice Are Not Incompatible
The Twinkie, it turns out, was introduced way back in 1930. In our memories, however, the iconic snack will forever be identified with the 1950s, when Hostess popularized the brand by sponsoring “The Howdy Doody Show.” And the demise of Hostess has unleashed a wave of baby boomer nostalgia for a seemingly more innocent time.
Needless to say, it wasn’t really innocent. But the ’50s — the Twinkie Era — do offer lessons that remain relevant in the 21st century. Above all, the success of the postwar American economy demonstrates that, contrary to today’s conservative orthodoxy, you can have prosperity without demeaning workers and coddling the rich.
Consider the question of tax rates on the wealthy. The modern American right, and much of the alleged center, is obsessed with the notion that low tax rates at the top are essential to growth. Remember that Erskine Bowles and Alan Simpson, charged with producing a plan to curb deficits, nonetheless somehow ended up listing “lower tax rates” as a “guiding principle.”
Yet in the 1950s incomes in the top bracket faced a marginal tax rate of 91, that’s right, 91 percent, while taxes on corporate profits were twice as large, relative to national income, as in recent years. The best estimates suggest that circa 1960 the top 0.01 percent of Americans paid an effective federal tax rate of more than 70 percent, twice what they pay today.
Nor were high taxes the only burden wealthy businessmen had to bear. They also faced a labor force with a degree of bargaining power hard to imagine today. In 1955 roughly a third of American workers were union members. In the biggest companies, management and labor bargained as equals, so much so that it was common to talk about corporations serving an array of “stakeholders” as opposed to merely serving stockholders.
Squeezed between high taxes and empowered workers, executives were relatively impoverished by the standards of either earlier or later generations. In 1955 Fortune magazine published an essay, “How top executives live,” which emphasized how modest their lifestyles had become compared with days of yore. The vast mansions, armies of servants, and huge yachts of the 1920s were no more; by 1955 the typical executive, Fortune claimed, lived in a smallish suburban house, relied on part-time help and skippered his own relatively small boat.
The data confirm Fortune’s impressions. Between the 1920s and the 1950s real incomes for the richest Americans fell sharply, not just compared with the middle class but in absolute terms. According to estimates by the economists Thomas Piketty and Emmanuel Saez, in 1955 the real incomes of the top 0.01 percent of Americans were less than half what they had been in the late 1920s, and their share of total income was down by three-quarters.
Today, of course, the mansions, armies of servants and yachts are back, bigger than ever — and any hint of policies that might crimp plutocrats’ style is met with cries of “socialism.” Indeed, the whole Romney campaign was based on the premise that President Obama’s threat to modestly raise taxes on top incomes, plus his temerity in suggesting that some bankers had behaved badly, were crippling the economy. Surely, then, the far less plutocrat-friendly environment of the 1950s must have been an economic disaster, right?
Actually, some people thought so at the time. Paul Ryan and many other modern conservatives are devotees of Ayn Rand. Well, the collapsing, moocher-infested nation she portrayed in “Atlas Shrugged,” published in 1957, was basically Dwight Eisenhower’s America.
Strange to say, however, the oppressed executives Fortune portrayed in 1955 didn’t go Galt and deprive the nation of their talents. On the contrary, if Fortune is to be believed, they were working harder than ever. And the high-tax, strong-union decades after World War II were in fact marked by spectacular, widely shared economic growth: nothing before or since has matched the doubling of median family income between 1947 and 1973.
Which brings us back to the nostalgia thing.
There are, let’s face it, some people in our political life who pine for the days when minorities and women knew their place, gays stayed firmly in the closet and congressmen asked, “Are you now or have you ever been?” The rest of us, however, are very glad those days are gone. We are, morally, a much better nation than we were. Oh, and the food has improved a lot, too.
Along the way, however, we’ve forgotten something important — namely, that economic justice and economic growth aren’t incompatible. America in the 1950s made the rich pay their fair share; it gave workers the power to bargain for decent wages and benefits; yet contrary to right-wing propaganda then and now, it prospered. And we can do that again.
By: Paul Krugman, Op-Ed Columnist, The New York Times, November 19, 2012
“An Apocalyptic Cult”: The GOP’s Biggest Problem Is Itself
“How ya like me now?” — Barack Obama
OK, so Obama didn’t really say that, but surely he must have thought it behind a private smile at some point Tuesday night.
There are no smiles among the Republicans, however, only a pressing question: Can the GOP fix itself? Can a party whose appeal is wholly white and mainly male learn to appeal to a rainbow electorate which is neither? Especially after it has spent so many years denigrating that rainbow, drawing lines in the sand, placing chips on its shoulder.
There are hopeful signs that our long national hissy fit may at last be over. House Speaker John Boehner was making conciliatory noises about resolving the economic impasse the day after the election. Some of the party’s most prominent voices, including Florida Sen. Marco Rubio, have been speaking of the need for the GOP to broaden its appeal. So maybe the adults are finally returning home.
But the place is a wreck, because the kids (looking at you, Michele Bachmann and Herman Cain) have been having quite the party. And repairing it is going to be a long and difficult process.
In the first place, any sudden GOP outreach to those it spurned while courting angry older white men must unavoidably appear conniving, self-conscious and self-serving. And once you get past the problem of appearances, there is the simple question of what it will take to undo the damage the party has inflicted upon itself with those groups.
How long will it be before gay men and lesbians are willing to forgive and forget that the party has routinely demeaned their relationships and impugned their moral fitness?
How long will it take before Hispanics are willing to let bygones be bygones with a party that spoke of “self-deportation” and cheered the notion of a border fence to electrocute undocumented Mexican workers?
And how much time must go by before African-Americans are willing to look past the GOP’s unrelenting and deeply personal disrespect toward the nation’s first African-American president, its insistence on treating him as some foreign Other who, in John Sununu’s memorably tawdry phrase, must “learn how to be an American”?
All that said, the biggest question here is not whether the GOP can transform itself, but whether it can even try. At this point, the Republicans are less a traditional political party than what disenchanted former GOP staffer Mike Lofgren has called an “apocalyptic cult.”
And cults are remarkably fact-resistant. Cultists live in a reality of their own construction and, far from being chastened by it, they thrive on rejection. So while the grownups in the party may be reading the writing on the demographic wall and believe it calls on them to abandon extremism, there is every reason to believe the rest of the party will think that writing requires them to double down on it instead.
Indeed, even as Rubio and Boehner were talking sense, party icons were talking the same old craziness. Donald Trump called for revolution in the wake of Obama’s re-election. Ted Nugent called Obama supporters “pimps, whores … welfare brats” and “soulless fools.” Bill O’Reilly said people voted for Obama because he will “give them things.”
And so on.
This, then, is the dilemma Republicans have created for themselves by their own short-sightedness. It was all well and fine to embrace angry white male extremism so long as white male extremism was able to deliver elections. That day is passing and the party awakens in a new America, desperately needing to change but quite possibly prevented from doing so by the very craziness it has so long cultivated.
Ain’t that a kick in the head? For years, the party has won elections by inventing enemies for angry white men to fear. But at this point, the GOP has no bigger enemy than itself.
By: Leonard Pitts, Jr., The National Memo, November 12, 2012
“It’s Time To Grow Up Now”: An Idea For Our Conservative Friends
First, in 2008, back at the Guardian, you told me what an inexperienced loser Obama was, in addition to all the more nefarious things, and how there was no chance on earth he’d ever beat Hillary.
Then he did, and you said well, those Democrats are insane anyway, but now it’s a general, and that man will never be elected president.
After he won, you said that was a fluke and aberration, and he was doomed to be a failure and a one-termer, and I was in dreamland if I even began to think otherwise.
And now here we are, the morning after quite frankly an easy reelection. The race wasn’t always easy, of course, but the margin was. Eight of nine battleground states. Won the popular vote by nearly two percent. Won. Going. Away.
And now I’m sure you’ll have a list of other excuses. I’m sure Fox and Friends is providing a list of them now.
Here’s an idea. Why don’t you consider accepting the notions that: he is legitimately the president; that your party is right now, for whatever reason, a minority party (actually, I’d be interested in seeing you all debate the whys and wherefores of that, and by “debate” I don’t mean deciding whether it’s the media’s fault or Nate Silver’s); that the economy is in fact improving, and you might as well now cheer for it to improve, cheer every job; and that your party has some soul-searching to do, and that does mean just nominating a “true conservative” next time.
It’d be nice to hear sincere, self-critical reflections from you instead of the usual bombast. America rejects you, rejects your view of Obama, rejects your policies. Are you ready to grow up now and have real conversations about the substance of things?
By: Michael Tomasky, The Daily Beast, November 7, 2012
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