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“Definitive Proof Of Failure Of Supply-Side Economics”: Kansas’ Experiment In Right-Wing Economics Is Still Failing Miserably

Every few weeks I feel it’s important to return to the ongoing disaster in Sam Brownback’s Kansas. It doesn’t get nearly as much play as it should in the media, which is unfortunate because Kansas’ experience is definitive proof of the failure of supply-side, Laffer-curve-based economic theory.

Under the leadership of Brownback and one of the most conservative legislatures in America, Kansas dramatically slashed the tax rates of Kansas’ wealthy and its corporations. According to ideology, the cuts should have jumpstarted Kansas’ economy and led to rapid growth that created jobs and helped the tax cuts pay for themselves. Of course, nothing of the sort happened.

The effect was disastrous, a slow-rolling series of budget shortfalls followed by cuts to essential services like education and roads, which only slowed the economy further. A series of punitive and regressive sin taxes on tobacco and other goods were instituted to make up for the cuts to the tax rates of the wealthy, which of course only further undermined consumer spending.

Officials in Kansas have tried to blame the problems on a slow national economy, but that is hogwash. Say what you will about the unequal distribution in gains from national economic growth, there is no doubt that the national economy is performing well by traditional metrics. It is not doing so in Kansas. Moreover, Kansas’ neighboring states are doing far better than it is.

It’s not local economic variations. Kansas’ troubles really are directly the fault of its tax cuts. They didn’t boost the economy–they slowed it down.

And now Kansans are paying the price. Even more cuts are coming, including devastating cuts to road maintenance through thefts from its already plundered Department of Transportation. These cuts to transportation (totaling over $2 billion in a small state!) are leading to deferred maintenance that will, of course, be incredibly expensive to deal with at a time when borrowing costs will likely be far higher than they are now.

This is on top of the damage Brownback is already doing to the state’s K-12 and university education systems, causing good teachers and professors to flee to more hospitable states. It’s a complete disaster.

The nation’s eyes should be trained on Kansas. This is what happens when you put Republicans in charge with the freedom to pursue their economic ideology. It’s not just a moral train wreck in terms of inequality and shared prosperity. It doesn’t even work to keep the lights on and make the trains run on time. Conservative economic orthodoxy is completely dysfunctional for running governments and society because it’s built on assumptions that aren’t true: rich people don’t create jobs, cutting their taxes doesn’t stimulate growth, cutting government services doesn’t “free up” capital to be spent on private sector growth, etc. What actually happens is that the rich simply hoard more money, corporations build up savings in their balance sheets, government cuts damage public confidence and infrastructure, and regular people don’t have as much money to spend, which dries up the consumer confidence and spending that is the real driver of job and economic growth.

 

By: David Atkins, Political Animal Blog, The Washington Monthly, July 3, 2016

July 5, 2016 Posted by | Kansas, Sam Brownback, Supply Side Economics | , , , , , , | Leave a comment

“Ahistorical”: Trump And Clinton Are Telling Two Radically Different Stories About The Economy. Only One Is Based In Reality

In this weekend’s New York Times Magazine, there’s an interview with President Obama in which he assesses his economic legacy, and as you might expect, he has a complicated view of things. He thinks his administration did an excellent job pulling us out of the Great Recession: “I actually compare our economic performance to how, historically, countries that have wrenching financial crises perform. By that measure, we probably managed this better than any large economy on Earth in modern history.” But he wishes he had been able to pass more infrastructure spending: “it was the perfect time to do it; low interest rates, construction industry is still on its heels, massive need.”

Obama also makes an argument about what Republicans propose to do on the economy that gets directly to the competing stories that the two parties are going to be presenting to the American public this fall.

Even if a contest between Donald Trump and Hillary Clinton may be more focused on personality than your typical presidential campaign, it’s still the case that the outcome of the election will be determined in significant part by which of these economic stories the voting public finds more persuasive. And each story has two parts: a description of the American economy as it is now, and a proposal for what the candidate would like to do and how that plan will change things. Here’s Obama’s assessment of the Republicans’ second part:

“If you look at the platforms, the economic platforms of the current Republican candidates for president, they don’t simply defy logic and any known economic theories, they are fantasy,” Obama said. “Slashing taxes particularly for those at the very top, dismantling regulatory regimes that protect our air and our environment and then projecting that this is going to lead to 5 percent or 7 percent growth, and claiming that they’ll do all this while balancing the budget. Nobody would even, with the most rudimentary knowledge of economics, think that any of those things are plausible.”

You won’t be surprised to hear that I happen to agree with him on this, though I’d describe how ridiculous it is in somewhat stronger terms. I can’t stress this enough: Republicans argue that if we just cut taxes on the wealthy and reduce regulations on corporations, then the economy will explode in a supernova of prosperity for all. You can call this belief ahistorical, or unsupported by facts, or baseless or implausible, but if you want to be frank you’d have to say that it’s absolutely lunatic.

But let’s put this in context of the stories the two candidates will be telling. Here’s Donald Trump’s economic story:

The economy is an absolute nightmare. Americans are living in such misery that they’re practically eating their own shoes in order to survive. If we cut taxes on the wealthy, reduce regulations on corporations, renegotiate trade agreements, and deport all illegal immigrants, then our economy will be spectacular and working people will experience American greatness again.

And here’s Hillary Clinton’s economic story:

The economy is doing pretty well, and a lot better than it was eight years ago when the Republicans were in charge, but it could be even better. If we pass some worker-focused measures like increasing the minimum wage, stronger overtime protections and guaranteeing equal pay, and make infrastructure investments, then our economy will improve for everyone.

Trump’s story is the same one other Republicans tell, with the addition of the idea that “bad deals” on trade have had a crippling effect on the country. For the moment we’ll put aside the merits of Trump’s claim that imposing enormous tariffs on Chinese goods will cause all those jobs sewing clothing and assembling electronics to come pouring into the United States, but the political question around Trump’s story is whether people will believe his over-the-top description of both what’s happening now and the transformation he will be able to produce.

We’ve known for some time that voters’ perceptions of the economy are colored by partisanship: to simplify a bit, when there’s a Democrat in the White House, Republican voters will say that the economy is doing poorly and Democratic voters will say it’s doing great; when there’s a Republican president, the opposite is true.

For instance, in 2012 when Barack Obama was running for reelection, 49 percent of Democrats told the National Election Studies that the economy had gotten better in the previous year, while only 17 percent said it had gotten worse. On the other hand, nine percent of Republicans said it had gotten better, while 56 percent said it had gotten worse. Go back to 2004 when George W. Bush was running for reelection, and we see the reverse: 43 percent of Republicans said the economy had gotten better and 22 percent said it had gotten worse, while only 10 percent of Democrats said it had gotten better and 63 percent said it had gotten worse.

So obviously, people aren’t just reacting in an objective way to what they see around them. At the same time, there is a reality that can eventually poke its way through the veil partisans place over their eyes. In 2008, when the economy was in a catastrophic decline, everyone in both parties agreed on what was happening (94 percent of Democrats and 88 percent of Republicans said it had gotten worse).

Times like 2008 are rare, though. Today, the objective reality is a lot closer to the way Democrats describe it, in large part because they aren’t offering an extreme version of their truth. If Obama and Clinton were more rhetorically similar to Donald Trump, they’d be saying that this is the greatest economy in the history of human civilization, everybody has a terrific job, and there’s so much prosperity that the only question any American has is whether to spend their money on everything they could ever want or just roll around in it like Scrooge McDuck.

But they aren’t saying that. Instead, they’re attempting the tricky balancing act of emphasizing the progress Obama has made while acknowledging the long-term weaknesses in the economy. Both of those things are real. Since the bottom of the Great Recession early in Obama’s first term, the economy has added 14 million jobs, and unemployment is now at 5 percent. On the other hand, income growth has been concentrated at the top and Americans still feel uncertain about their economic futures.

Donald Trump has chosen to pretend that the good things about the American economy don’t exist, and weave a laughable fantasy about what his policies will produce (“I will be the greatest jobs president that God ever created”). Can he convince voters — particularly those in the middle who might be persuaded to vote for either candidate — to believe it? I guess we’ll see.

 

By: Paul Waldman, Senior Writer, The American Prospect; Contributor, The Plum Line Blog, The Washington Post, April 28, 2016

April 29, 2016 Posted by | Donald Trump, Economy, Hillary Clinton | , , , , , , , , | 1 Comment

“Donald Trump Is Dead Wrong”: America Is A Fabulously Rich And Great Nation

America isn’t broke. Nor is it on the verge of a government debt crisis (whatever “crisis” even means for a nation whose debt is printed in a currency that is both its own and the world’s reserve). America is not in decay, and the last thing the U.S. should do is rashly withdraw from a dangerous world because of those mistaken beliefs.

This should be especially clear after the Belgium terror attacks.

Yet retreat is just what Donald Trump seems to be proposing. In an interview with The Washington Post editorial board Monday, Trump questioned the U.S. role in NATO and presence in Asia due to the financial burden they require:

I mean, we pay billions — hundreds of billions of dollars to supporting other countries that are in theory wealthier than we are. … When you look at the kind of money that our country is losing, we can’t afford to do this. Certainly we can’t afford to do it anymore…. I think we were a very powerful, very wealthy country. And we’re a poor country now. [Trump]

Looks like we finally found something Trump is in favor of off-shoring: America’s security.

Now, it’s certainly legitimate to evaluate the mission and cost of America’s overseas military commitments and posture. But that’s a different thing than scrapping our military alliances — or threatening to do so as some ham-handed budget negotiating tactic. Leading the free world, reassuring allies, and deterring aggression have little overlap with the skills needed to drive a hard bargain with a potential tenant in Trump Tower.

And yet, Republicans might give Trump’s defense policy ideas more of a hearing than they deserve because of their persistent debt fears. After all, it’s mainstream GOP economic thought that U.S. finances are precarious. How could they not be given the $19 trillion federal debt — $22 trillion if you include state and local government? These are figures Trump always mentions, as do many Republican politicians. They provide handy justification for arguing we can’t afford to invest in science, repair and upgrade our infrastructure, or bolster wages for low-income workers.

But here’s the thing: The U.S. is far from a poor nation. American households entered 2016 with a net worth of nearly $87 trillion, according to the Federal Reserve. To put that ginormous number in some context, China’s private wealth has been estimated at $23 trillion. Even if you factor in America’s debt-laden public sector and China’s large state-owned companies, the U.S. still has a $45 trillion wealth edge.

There are other ways of looking at national wealth that also show America’s riches. The value of U.S. intellectual capital has been estimated at around $9 trillion, with the value of the intangible assets — such as patents, copyrights, and general business methods — at nearly $15 trillion. And given Trump’s appreciation of brands — he generously values his own at $3 billion — you would think the businessman would appreciate America’s, which has been valued at close to $20 trillion.

Maybe all this wealth is one reason global financial markets don’t seem so worried about the U.S. debt. Well, that and the U.S. tax burden being one of the lowest in the developed world. The dollar is strong, and interest rates are low, as are inflation expectations. None of this is to say the U.S. should be a spendthrift in either defense or social spending. Without entitlement reform, Medicare and Social Security will require massive tax increases to keep their promises. Yet Trump would leave them untouched, vowing implausibly to fix their fiscal problems through higher economic growth alone.

The U.S. isn’t bankrupt. Our pockets aren’t empty. We aren’t a pauper nation.

But, of course, you can’t promise to make America great again without arguing that it currently isn’t.

 

By: James Pethokoukis, The Week, March 23, 2016

March 27, 2016 Posted by | Donald Trump, Economic Policy, Foreign Policy, National Security | , , , , , , , , , | 1 Comment

“A President Can’t Go Ordering Folks Around”: Clinton Is Running For President. Sanders Is Doing Something Else

It is amazing how little the Democratic race has really changed over the last several months. Hillary Clinton is the odds-on favorite to win the nomination. Sen. Bernie Sanders (Vt.) is leading a revolt from the left. Sanders speaks to white ideological liberals and young Democrats. Clinton speaks to practically everyone else in the party — and, as “Saturday Night Live” pointed out, provides a refuge for moderates terrified of the other options this election year. Nothing in Sunday night’s debate changed any of this, which nets out to a loss for Sanders.

Down in the polls in advance of Tuesday’s major contest in Michigan, Sanders needs the race to take a dramatic turn before Clinton wins another populous state. Yet rather than attempting to advance onto new ground in Sunday’s debate, Sanders simply entrenched himself on his same narrow patch of ideological turf. Either he knows he probably will not win the nomination and he figures he should just keep making his point while everyone is still watching, or he believes that his problem is that not enough people have heard him say the same things over and over again.

In fact, much of the debate revolved around the same basic argument between practicality and ideology that emerged the first time the two faced off on the debate stage, when Clinton declared, “I’m a progressive, but I’m a progressive who likes to get things done.”

Early in the debate, Clinton criticized Sanders for voting against the 2009 auto industry bailout. Sanders said that the auto bailout was folded into a larger bill that also bailed out the financial industry. He argued that “the billionaires” should have bailed out themselves, by which he means that Congress should have accepted his politically ludicrous plan to raise taxes in the middle of a recession. Clinton responded that Sanders chose purity over the public good. “You have to make hard choices when you’re in a position of responsibility,” she said. “If everybody had voted the way he did, I believe the auto industry would have collapsed.” Not only the auto industry. If Congress refused to respond practically to a moment of profound national crisis, it would have made the economic panic much, much worse and ruined many more ordinary people.

Later in Sunday’s debate, Clinton proposed doubling the amount of money the country invests in transportation infrastructure — which, despite bipartisan support for fixing up the nation’s roads and rails, would be a big legislative lift. “I’m trying to do this in a way that will gain support and be affordable,” she said. Moderator Don Lemon then asked Sanders to explain why his plan, which is twice as large as Clinton’s, is not “yet another example of a costly plan that will never get through Congress,” given that President Obama struggled to get a much smaller infrastructure proposal through. Sanders merely restated the case for much more spending and said he would target corporate tax dodgers to pay for it, ignoring the question of whether either proposal would be politically plausible.

Finally, the two candidates talked about fracking, an issue on which there is an obvious, sensible middle ground that Sanders predictably scorned. Clinton listed off a series of requirements she would impose on domestic fracking operations, such as limiting methane emissions and insisting on standards that would prevent water contamination. This is not so different from the Obama administration’s wholly reasonable position, which is to allow the industry to employ people and sell product while minimizing the environmental risks. Sanders simply said that he wants to ban fracking, and he dismissed the Democratic governors who want to see well-regulated fracking proceed in their states.

At least the detour onto fracking forced the candidates to speak about an issue that has not gotten much attention this campaign, even if the candidates’ positions simply reconfirmed their general approaches to policy. Mostly, Sanders steered the conversation back to his core concerns — Wall Street, campaign finance, a massive public jobs program and single-payer health care — and made his usual pitch. Clinton, meanwhile, ran for president. “A president can’t go ordering folks around,” she said at one point. “Our system doesn’t permit that.” It’s nice to know at least one candidate on either side is keeping that in mind.

 

By: Stephen Stromberg, Opinion Writer, The Washington Post, March 7, 2016

March 8, 2016 Posted by | Bernie Sanders, Democratic Primary Debates, Hillary Clinton | , , , , , , , , , | Leave a comment

“Republicans Could Not Have Done Anything Wrong”: Rubio Inexplicably Applauds Snyder’s Handling Of Flint Scandal

In recent months, the Republican presidential field hasn’t paid a whole of attention to the crisis in Flint, Michigan. In mid-January, with the national spotlight shining on the man-made disaster, Marco Rubio was asked for his perspective – and he had no idea what the reporter was talking about.

Six weeks later, the topic came up in last night’s debate, held in Detroit, where Fox News’ Bret Baier reminded the GOP candidates that Bernie Sanders and Hillary Clinton “have both been to Flint. They are both running ads in this state focusing on that, focusing on supporting Flint and fixing the problems, showing images of people in Flint thankful that they’re there.”

The co-moderator asked Rubio, “Without getting into the political blame game here, where are the national Republicans’ plans on infrastructure and solving problems like this? If you talk to people in this state, they are really concerned about Flint on both sides of the aisle. So why haven’t GOP candidates done more or talked more about this?”

The Florida senator’s response was one of the evening’s more unsettling answers. Here’s his answer in its entirety.

“Well, I know I’ve talked about it, and others in our campaign have talked about it, and other candidates have talked about it, as well. What happened in Flint was a terrible thing. It was systemic breakdown at every level of government, at both the federal and partially the – both the state and partially at the federal level, as well.

“And by the way, the politicizing of it I think is unfair, because I don’t think that someone woke up one morning and said, ‘Let’s figure out how to poison the water system to hurt someone.’

“But accountability is important. I will say, I give the governor credit. He took responsibility for what happened. And he’s talked about people being held accountable and the need for change, with Governor Snyder.

“But here’s the point: This should not be a partisan issue. The way the Democrats have tried to turn this into a partisan issue, that somehow Republicans woke up in the morning and decided, ‘Oh, it’s a good idea to poison some kids with lead.’ It’s absurd. It’s outrageous. It isn’t true. All of us are outraged by what happened. And we should work together to solve it. And there is a proper role for the government to play at the federal level, in helping local communities to respond to a catastrophe of this kind, not just to deal with the people that have been impacted by it, but to ensure that something like this never happens again.”

Hmm. So, Flint was an accident; Rick Snyder deserves credit for his handling of the crisis; let’s be sure to blame the feds; and Democratic rhetoric is even more upsetting than the disaster itself. Got it.

New York’s Jon Chait wrote an important rejoinder: “Asked to avoid the blame game and offer specific solutions to urban-infrastructure problems, Rubio is unable. He conceives of the question entirely in partisan terms. He attacks the notion that Republicans consciously decided to poison children, thereby ruling out any possibility of government negligence as self-evidently preposterous. He has nothing resembling a specific idea on the issue, only the firm conviction that Republicans could not have done anything wrong.”

As unsettling as the debate exchange was, it offered real insights into how Rubio sees the world. Six weeks ago, the senator couldn’t be bothered to know what the Flint scandal was. Last night, he recognized the crisis, but only through an electoral prism. Rubio starts with the premise he finds ideologically satisfying – Republicans are correct and free of wrongdoing – and then works backwards … until he can find a way to condemn Democrats.

Rubio simply cannot stop thinking in partisan political terms. By all appearance, he doesn’t even know how. For all of the media’s assurances about Rubio being “whip smart,” the young senator simply lacks the wherewithal to consider policy questions in substantive ways.

The Republican was asked, “[W]here are the national Republicans’ plans on infrastructure and solving problems like this?” This prompts Rubio to reference the agreed-upon talking points; (1) Flint, sad; (2) Snyder, good; (3) Democrats, bad. The growing evidence of neglect, incompetence, and possibly criminal misdeeds surrounding the governor’s office? For Rubio, none of this matters.

The assembled audience applauded, but given the reality, they should have cringed.

 

By: Steve Benen, The Maddow Blog, March 4, 2016

March 5, 2016 Posted by | Flint Water Crisis, Lead Poisoining, Marco Rubio, Rick Snyder | , , , , , | 1 Comment

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