“What Was Our Republican Leadership Thinking?”: Pretending To Care, The GOP Has A Decision To Make
Republicans Sens. John McCain, Kelly Ayotte, and Lindsey Graham kicked off the first in a series of public events yesterday, intended to highlight the apparent dangers of deep, automatic defense cuts due at the end of the year. The first event was in Ayotte’s home state of New Hampshire, where the lawmakers spoke at BAE Systems, which stands to lose thousands of jobs from reduced government spending.
At the event, McCain said:
“This was generated by Congress, and the president has a legitimate point when he says, ‘Well, Congress is the one that came up with this cockamamie idea, and so,’ as he said the other day, ‘let them wiggle out of it.’ Well, I understand that logic and there’s something to it.”
Yes, actually, there is. In fact, Graham told reporters yesterday, “What was our Republican leadership thinking when they agreed to the concept of sequestration?”
I’ve been wondering the same thing. McCain, Ayotte, and Graham are traveling from swing state to swing state, railing against the proposed defense cuts, which many Republicans blame on President Obama. But as the tour continues, is it too much to ask that the political world remember that these cuts were the GOP’s idea?
As we’ve discussed, as part of last year’s debt-ceiling deal, policymakers accepted over $1 trillion in cuts that would be implemented if the so-called supercommittee failed. Democrats weren’t completely willing to roll over — they wanted to create an incentive for Republicans to work in good faith.
Republicans agreed: if the committee failed, the GOP would accept defense cuts and Dems would accept non-defense domestic cuts. The committee, of course, flopped when GOP members refused to compromise, which put us on the clock for the automatic reductions that Republicans contributed to the very process they insisted upon.
So why blame Obama? He’s not the one who came up with the debt-ceiling crisis; he’s not the one who recommended the defense cuts; and he’s not the one who refused to compromise during the supercommittee talks.
Indeed, the larger question now is what Republicans prioritize more: defense spending or tax breaks.
Greg Sargent had a good item on this yesterday.
Republicans such as John McCain and Lindsey Graham have been touring swing states to highlight the looming sequester cuts to defense spending that are set to be triggered by the deficit supercommittee’s failure. They have said such cuts will be devastating to our national security, and have blamed Obama and Dems for the imminent threat.
At the same time, House Republicans will vote this week against the Democratic plan to extend tax cuts on all income over $250,000, because it doesn’t extend the cuts on all levels, including income higher than that.
So here’s the question: If the looming sequester cuts are such a threat to national security, why doesn’t that undermine Republican leverage in the discussions over what to do about the tax cuts?
Right. The looming, automatic cuts are inching closer to reality because Republicans refuse to consider some tax increases as a solution to the debt problem they sometimes pretend to care about. If GOP officials accepted new tax revenue, a deal could come together and these large defense cuts would simply be taken off the table.
But Republicans, at least for now, won’t budge — they want a larger agreement that would eliminate the need for deep Pentagon cuts and they want a deal that doesn’t require any increases on any one at any time.
McCain, among others, pushed the argument yesterday that it’s up to Obama to “lead” by bringing policymakers together and working out a solution. That sounds nice, but it’s foolish — the president has tried this repeatedly, but Republicans won’t compromise. Indeed, even now, McCain is urging Obama to work towards a compromise while McCain’s party simultaneously says it won’t compromise.
And so it’s the GOP that has a decision to make. While they decide, if they could stop blaming the White House for the Republicans’ own idea, it’d make the conversation a lot less ridiculous.
By: Steve Benen, The Maddow Blog, August 1, 2012
“Say It Ain’t So”: Face It Republicans, Reagan Was A Keynesian
There’s no question that America’s recovery from the financial crisis has been disappointing. In fact, I’ve been arguing that the era since 2007 is best viewed as a “depression,” an extended period of economic weakness and high unemployment that, like the Great Depression of the 1930s, persists despite episodes during which the economy grows. And Republicans are, of course, trying — with considerable success — to turn this dismal state of affairs to their political advantage.
They love, in particular, to contrast President Obama’s record with that of Ronald Reagan, who, by this point in his presidency, was indeed presiding over a strong economic recovery. You might think that the more relevant comparison is with George W. Bush, who, at this stage of his administration, was — unlike Mr. Obama — still presiding over a large loss in private-sector jobs. And, as I’ll explain shortly, the economic slump Reagan faced was very different from our current depression, and much easier to deal with. Still, the Reagan-Obama comparison is revealing in some ways. So let’s look at that comparison, shall we?
For the truth is that on at least one dimension, government spending, there was a large difference between the two presidencies, with total government spending adjusted for inflation and population growth rising much faster under one than under the other. I find it especially instructive to look at spending levels three years into each man’s administration — that is, in the first quarter of 1984 in Reagan’s case, and in the first quarter of 2012 in Mr. Obama’s — compared with four years earlier, which in each case more or less corresponds to the start of an economic crisis. Under one president, real per capita government spending at that point was 14.4 percent higher than four years previously; under the other, less than half as much, just 6.4 percent.
O.K., by now many readers have probably figured out the trick here: Reagan, not Obama, was the big spender. While there was a brief burst of government spending early in the Obama administration — mainly for emergency aid programs like unemployment insurance and food stamps — that burst is long past. Indeed, at this point, government spending is falling fast, with real per capita spending falling over the past year at a rate not seen since the demobilization that followed the Korean War.
Why was government spending much stronger under Reagan than in the current slump? “Weaponized Keynesianism” — Reagan’s big military buildup — played some role. But the big difference was real per capita spending at the state and local level, which continued to rise under Reagan but has fallen significantly this time around.
And this, in turn, reflects a changed political environment. For one thing, states and local governments used to benefit from revenue-sharing — automatic aid from the federal government, a program that Reagan eventually killed but only after the slump was past. More important, in the 1980s, anti-tax dogma hadn’t taken effect to the same extent it has today, so state and local governments were much more willing than they are now to cover temporary deficits with temporary tax increases, thereby avoiding sharp spending cuts.
In short, if you want to see government responding to economic hard times with the “tax and spend” policies conservatives always denounce, you should look to the Reagan era — not the Obama years.
So does the Reagan-era economic recovery demonstrate the superiority of Keynesian economics? Not exactly. For, as I said, the truth is that the slump of the 1980s — which was more or less deliberately caused by the Federal Reserve, as a way to bring down inflation — was very different from our current depression, which was brought on by private-sector excess: above all, the surge in household debt during the Bush years. The Reagan slump could be and was brought to a rapid end when the Fed decided to relent and cut interest rates, sparking a giant housing boom. That option isn’t available now because rates are already close to zero.
As many economists have pointed out, America is currently suffering from a classic case of debt deflation: all across the economy people are trying to pay down debt by slashing spending, but, in so doing, they are causing a depression that makes their debt problems even worse. This is exactly the situation in which government spending should temporarily rise to offset the slump in private spending and give the private sector time to repair its finances. Yet that’s not happening.
The point, then, is that we’d be in much better shape if we were following Reagan-style Keynesianism. Reagan may have preached small government, but in practice he presided over a lot of spending growth — and right now that’s exactly what America needs.
By: Paul Krugman, Op-Ed Columnist, The New York Times, June 7, 2012
“This Republican Economy”: A Policy Of Dreams, A Gigantic Con Game
What should be done about the economy? Republicans claim to have the answer: slash spending and cut taxes. What they hope voters won’t notice is that that’s precisely the policy we’ve been following the past couple of years. Never mind the Democrat in the White House; for all practical purposes, this is already the economic policy of Republican dreams.
So the Republican electoral strategy is, in effect, a gigantic con game: it depends on convincing voters that the bad economy is the result of big-spending policies that President Obama hasn’t followed (in large part because the G.O.P. wouldn’t let him), and that our woes can be cured by pursuing more of the same policies that have already failed.
For some reason, however, neither the press nor Mr. Obama’s political team has done a very good job of exposing the con.
What do I mean by saying that this is already a Republican economy? Look first at total government spending — federal, state and local. Adjusted for population growth and inflation, such spending has recently been falling at a rate not seen since the demobilization that followed the Korean War.
How is that possible? Isn’t Mr. Obama a big spender? Actually, no; there was a brief burst of spending in late 2009 and early 2010 as the stimulus kicked in, but that boost is long behind us. Since then it has been all downhill. Cash-strapped state and local governments have laid off teachers, firefighters and police officers; meanwhile, unemployment benefits have been trailing off even though unemployment remains extremely high.
Over all, the picture for America in 2012 bears a stunning resemblance to the great mistake of 1937, when F.D.R. prematurely slashed spending, sending the U.S. economy — which had actually been recovering fairly fast until that point — into the second leg of the Great Depression. In F.D.R.’s case, however, this was an unforced error, since he had a solidly Democratic Congress. In President Obama’s case, much though not all of the responsibility for the policy wrong turn lies with a completely obstructionist Republican majority in the House.
That same obstructionist House majority effectively blackmailed the president into continuing all the Bush tax cuts for the wealthy, so that federal taxes as a share of G.D.P. are near historic lows — much lower, in particular, than at any point during Ronald Reagan’s presidency.
As I said, for all practical purposes this is already a Republican economy.
As an aside, I think it’s worth pointing out that although the economy’s performance has been disappointing, to say the least, none of the disasters Republicans predicted have come to pass. Remember all those assertions that budget deficits would lead to soaring interest rates? Well, U.S. borrowing costs have just hit a record low. And remember those dire warnings about inflation and the “debasement” of the dollar? Well, inflation remains low, and the dollar has been stronger than it was in the Bush years.
Put it this way: Republicans have been warning that we were about to turn into Greece because President Obama was doing too much to boost the economy; Keynesian economists like myself warned that we were, on the contrary, at risk of turning into Japan because he was doing too little. And Japanification it is, except with a level of misery the Japanese never had to endure.
So why don’t voters know any of this?
Part of the answer is that far too much economic reporting is still of the he-said, she-said variety, with dueling quotes from hired guns on either side. But it’s also true that the Obama team has consistently failed to highlight Republican obstruction, perhaps out of a fear of seeming weak. Instead, the president’s advisers keep turning to happy talk, seizing on a few months’ good economic news as proof that their policies are working — and then ending up looking foolish when the numbers turn down again. Remarkably, they’ve made this mistake three times in a row: in 2010, 2011 and now once again.
At this point, however, Mr. Obama and his political team don’t seem to have much choice. They can point with pride to some big economic achievements, above all the successful rescue of the auto industry, which is responsible for a large part of whatever job growth we are managing to get. But they’re not going to be able to sell a narrative of overall economic success. Their best bet, surely, is to do a Harry Truman, to run against the “do-nothing” Republican Congress that has, in reality, blocked proposals — for tax cuts as well as more spending — that would have made 2012 a much better year than it’s turning out to be.
For that, in the end, is the best argument against Republicans’ claims that they can fix the economy. The fact is that we have already seen the Republican economic future — and it doesn’t work.
By: Paul Krugman, Op Ed-Columnist, The New York Times, June 3, 2012
“A Means, Not An End”: Austerity As A Bridge To Nowhere
Economic austerity is a dangerous, self-defeating intellectual fad. Perhaps I should say that’s what it was, given Sunday’s election results in Europe. Perhaps I should also say good riddance.
Voters in France, Greece and even Germany — a hotbed of the austerity cult — told their political leaders, in no uncertain terms, that boosting economic growth is more important than cutting government spending. Here in the United States, I hope that Democrats, at least, were paying attention; I fear that the addled ideologues who control the Republican Party will never get the message.
On Sunday, French voters elected Socialist Party candidate Francois Hollande as president, ousting center-right incumbent Nicolas Sarkozy in what amounted to a referendum on Sarkozy’s embrace of austerity.
Sarkozy and German Chancellor Angela Merkel agreed on a common policy of budget cuts and partial “reform” — a euphemism for “dismantling” — of the welfare state. This, they decided, was the way to return Europe to prosperity and save the European Union’s common currency, the euro, from collapse.
But on Sunday, even Merkel got a message from voters: Her party was punished in local elections in the northern German state of Schleswig-Holstein, where it appeared that a center-left, anti-austerity coalition would end up in control.
Also on Sunday, voters in Greece tried their best to say no to austerity. For them, sadly, it’s probably too late. The fiscal and debt crises there were so acute that the Greeks, from the start, have had only painful choices.
One obviously bad option would have been to withdraw from the euro, default on a mountain of debt and slowly climb back from a deep economic depression. Officials in Athens decided to go with a worse option — stay with the euro, impose draconian austerity, muzzle anyone who utters the word “default” — that also sent the country into a deep economic depression with no apparent way out.
Yes, one lesson from the Greek experience is that there are limits. There is a point at which deficits become too large, debt too crushing and social spending too generous. The lifestyle a nation enjoys must bear some relationship to what that nation produces.
But another clear lesson is that austerity has to be seen as a means, not an end. The goal is to recover from the massive blow inflicted by the global financial meltdown and return to prosperity. This may involve a measure of austerity — but definitely requires considerable economic growth, which should be policymakers’ first priority.
The reason is simple: If you can get the economy growing again, all other aspects of the crisis become more manageable. Debt and deficits shrink as a percentage of national output. Unemployment declines, as does the need for social spending.
But putting a chokehold on government spending at a time when economies are just sputtering back to life — as the austerity fetishists have tried to do in Europe, and as Republicans solemnly pledge to do in the United States — is monumentally self-defeating. Governments end up magnifying the constituent parts of the economic crisis, not minimizing them.
In Britain, the economy was growing when Prime Minister David Cameron took office two years ago. Adhering to the platform of his Conservative Party, Cameron took the austerity route with a host of gloom-and-doom budget cuts. Now unemployment is rising and the economy has slipped back into recession. Nice job, Tories.
That loud chorus of “Duh!” you just heard came from the many leading economists who have been screaming at political leaders for years now that we’ll never cut our way out of this economic slump and instead must grow our way out. It is obvious that deficits, debt loads and entitlement spending have to be brought under control — but equally obvious that the necessary adjustments should be made when the economy is going great guns, not when it’s gasping for air.
It should be noted that there are some economists who disagree. They argue that draconian cuts in government spending will somehow awaken the animal spirits of private-sector executives, entrepreneurs and financiers. They further argue that austerity is needed to combat the scourge of inflation, although the best term to describe inflation in today’s economy is “imaginary.”
Mitt Romney and the GOP subscribe to the pro-austerity view. They are, of course, entitled to their opinion, even if it happens to be wrong. I sincerely wish them all the electoral success their ideological allies are having across the Atlantic.
By: Eugene Robinson, Opinion Writer, The Washington Post, May 7, 2012
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