Since the seventh anniversary of the American Recovery and Reinvestment Act – the “stimulus” – was this week, it was a good time to ask, “Who Do You Want In The White House When The Next Recession Comes?”
On Friday, Ed Dolan, writing in Nouriel Roubini’s EconomMonitor, answers: Definitely not Marco Rubio.
Dolan fleshes out the argument that our post made earlier this week about the kind of economic decision-making any rational person would want to have in the White House in the event of an economic downturn. And he concludes that in the case of Rubio (and other Republicans, for Dolan notes Rubio’s views are “widely shared” within the GOP), “the federal government would be legally bound to allow the economy to drift rudderless onto the rocks.”
That’s because Rubio – and for that matter all of the Republican presidential candidates – don’t have a firm grasp of Economics 101.
If you remember your basic college econ course, you’ll know that the first line of defense against a recession is fiscal policy. When the economy goes into a slump, spending rises on unemployment compensation, food stamps, and other benefits. At the same time, tax receipts, which are linked to income, decrease. Because the spending increase plus the tax decrease automatically cushion the slump, economists call them automatic stabilizers.
If you’re a true Keynesian, automatic stabilizers aren’t enough. You add some discretionary fiscal stimulus in the form of road projects and maybe a temporary tax rebate. If the timing is right, that softens the recession even more and speeds the recovery.
But Rubio, as Dolan notes, is a staunch supporter of a balanced budget amendment to the Constitution. (So is Ted Cruz, Jeb Bush, Ben Carson and John Kasich.)
It sounds like a sensible idea, until you think about it. But then, you see that the idea of balancing the federal budget every year is nuts. It would mean that when the economy went into a slump, pulling tax revenues down, Congress would have to enact across the board emergency spending cuts to keep a deficit from emerging. The cuts would quickly hit jobs and household budgets. Consumer spending would fall, firms would cut output to fight ballooning inventories. Without the automatic stabilizers, a mild recession would turn into a tailspin.
But Rubio would not stop there, Dolan goes on to write. Rubio also wants to constrain the ability of the Federal Reserve to stimulate job creation – one half of its dual mandate to keep both unemployment and inflation low.
Here is what [Rubio] said about the Fed in this week’s South Carolina town hall:
That’s not the Fed’s job to stimulate the economy. The Fed is a central bank, it is not some sort of overlord of the economy. They’re not some sort of special Jedi Counsel that can decide the best things for us.
The Fed is a central bank. Their job is provide stable currency and I believe they should operate on a rules based system. They would have a very simple rule that determines when interest rates go up and when interests rates go down.
So just what is this “simple rule” Rubio is talking about? He provides the details elsewhere. His rule would replace the Fed’s dual mandate with a single mandate to prevent inflation. The Fed would be required to raise rates to stop inflation during a boom, but it would be barred from doing anything when unemployment soars during a recession.
That is why it behooves us to ask pointed questions of the presidential candidates about what they would do if the U.S. faced an economic downturn on their watch. Chances are, if they are reading from the same economic playbook that Marco Rubio uses, they would turn the next recession into the next Great Depression.
By: Isaiah J. Poole, Editor of OurFuture.org, Campaign For America’s Future, February 19, 2016
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February 22, 2016
Posted by raemd95 |
Balanced Budget Amendment, Economic Policy, GOP Presidential Candidates, Marco Rubio | Automatic Stabilizers, Depression, Economic Recovery, Federal Reserve, Fiscal Discretionary Stimulus, Inflation, Jobs, Recession, Wage Stagnation |
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Campaigning for president requires one to come up with policy proposals, a need that from time to time produces innovative and promising ideas. But it also produces some extraordinarily dumb ones, as Marco Rubio is now demonstrating. Here’s his latest plan to fix what’s wrong with Washington:
Shortly after 11 a.m. on the East Coast, Sen. Marco Rubio’s presidential campaign alerted the media to their candidate’s latest position, inspired by the Founding Fathers and by Congress’s seeming inability to pass conservative legislation.
“One of the things I’m going to do on my first day in office is I will put the prestige and power of the presidency behind a constitutional convention of the states,” Rubio said as he campaigned in Iowa. “You know why? Because that is the only way that we are ever going to get term limits on members of Congress or the judiciary and that is the only way we are ever going to get a balanced-budget amendment.”
With this, Rubio manages to combine a promise for something that will never happen with a spectacularly terrible idea.
We’ll start with the constitutional convention. There are two ways an amendment to the Constitution can be proposed: when two-thirds of both houses of Congress vote to do so, or when two-thirds of the states call for a convention to propose amendments. Rubio is saying that because you couldn’t get super-majorities in Congress to support his three ideas, he wants to push for the states to assemble a convention to offer these amendments.
The first thing to understand is that the president has nothing to do with this process. What Rubio is promising is that in between trying to pass his tax cuts and outlaw abortion and repeal Obamacare and wage war on the Islamic State, he’ll use the bully pulpit to advocate for a constitutional convention. So President Rubio will give a speech or two about it? Mention it in the State of the Union? That’s fine, but at best it might bring the chances of getting two-thirds of the states to sign on from approximately zero to ever slightly more than zero. Getting a constitutional convention might be a bit easier than assembling two-thirds majorities in Congress, but not by much.
So he can’t make these constitutional amendments happen. But what about the amendments themselves? Term limits for judges is the only one that might not be all that problematic, but it’s a little hard to tell what the problem is that Rubio is trying to solve. Lifetime tenure for judges is supposed to insulate them from momentary political concerns, but in practice it turns out that there’s plenty of politics on the bench. Presidents pick nominees they hope will reflect their own political values, and most of the time they’re right, with an occasional exception here and there. Some have suggested that the Supreme Court could use more turnover, so there should be a limit of some long but not endless stretch for justices (18 years is one common number). That might be fine, but it’s hard to see what kind of transformation in American justice would result from limiting all federal judges’ terms. If anything, the nominating and confirmation process would become even more political, since you’d need more judges.
But that’s the least bad of these ideas. The next is term limits for Congress, an idea that fell out of favor for a while and Rubio now wants to bring back. But what is it supposed to accomplish? Is Washington going to run more smoothly with more members who don’t know how to pass legislation? We’ve seen a huge influx of new members (mostly Republicans) in the last few congressional elections, and they haven’t exactly been committed to making government work. To the contrary, they’re the ones who care least about having a functioning government and are more likely to be nihilistic extremists who want to shut down the government, default on the national debt and govern by crisis.
Rubio is smart enough to know that the myth of the citizen legislator unsullied by contact with sinister lobbyists, who comes to Washington armed with nothing but common sense and a strong moral fiber and cleans up government, is just that — a myth. But he also knows that saying “Kick all the bums out!” is an easy way to pander to voters’ most simplistic and uninformed impulses.
I’ve saved the worst for last: a balanced-budget amendment. It has long been a popular item on the conservative wish list, but if you put it into practice, it would be an absolute disaster.
The childish way of thinking about it is that a requirement that the government spend no more than it takes in every year would impose fiscal discipline and make government live within its means. But in truth it would require radical cutbacks in everything government does — which means not only the programs Republicans don’t like anyway, but also the ones they do like. In the last half century, through Republican and Democratic presidencies and Republican and Democratic Congresses, we’ve had only five years when the government’s budget was balanced (four of which came during the boom of the Clinton years). Without the ability to issue bonds to cover each year’s shortfall, we’d be left without the ability to do what’s necessary to serve all of our many public needs.
Consider what would happen during an economic downturn if we had a balanced-budget amendment. What you want in that situation is for government to step in and help people — by providing things like food stamps and unemployment compensation to keep people from falling into truly desperate situations of hunger and homelessness, and also to do what it can to spur job creation and keep the recession from being worse than it would otherwise be.
But in a recession, tax revenue also falls, because people are losing jobs and incomes are plummeting; as an example, between 2008 and 2009, the federal government’s revenues declined by more than $400 billion. With a balanced-budget requirement in place, just at the moment when government’s help is needed most, not only would it be powerless to do anything to mitigate the toll of the recession, it also would be required to impose brutal budget cuts, pulling money out of the economy and making things even worse. If Rubio got his way, every recession the country experienced would be deeper, longer and more punishing.
Some conservatives say, “Nearly every state has a balanced-budget amendment, so why can’t the federal government have one too?” But that’s actually another reason why a federal balanced-budget amendment would be so dangerous. When a recession hits, states have no choice but to cut back, slashing needed services and firing workers just when their economies are suffering. At those times, the federal government can step in to limit the damage, boosting the hundreds of billions of dollars it already provides in aid to the states. As it happens, many of the states run by Republicans are the ones most dependent on federal government aid. In 2012, according to the Tax Foundation, the federal government picked up 31.5 percent of all state budgets, including 44 percent of Louisiana’s, 45 percent of Mississippi’s and 41 percent of Tennessee’s. So in places where Republicans are denouncing the federal government in the loudest terms, without the federal government’s help their state finances would utterly collapse.
The good news is that none of what Rubio is advocating for will ever happen. But advocating for constitutional amendments is what you do when you don’t have the stomach for actual governing. It’s certainly seductive — we’ll just change the Constitution, and that will sweep away all the messiness that comes with politics. But it’s a fantasy. Unfortunately, there are still plenty of presidential candidates who don’t respect the voters enough to tell them that passing laws and solving problems is difficult and complicated, and to get what you want to you have to slog your way through it. That’s not an inspiring campaign message, but it’s the truth.
By: Paul Waldman, Senior Writer, The American Prospect; Contributor, The Plum Line Blog, The Washington Post, December 31, 2015
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January 1, 2016
Posted by raemd95 |
Congress, Constitution, Governing, Marco Rubio | Balanced Budget, Constitutional Convention, Government Shut Down, Judiciary, media, Recession, SCOTUS, Tax cuts, Term Limits |
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It’s universally acknowledged that Jeb Bush has fallen the furthest and fastest of any Republican in the primary race for president. It’s sad the former frontrunner has come to this: calling frontrunner Donald Trump “a jerk.”
How pedestrian.
Then again, the Bush men – Jeb, his brother George W. and their father George H.W. – can be famously inept with words. That is not the least of their sins and one reason Jeb is a room-emptier of a candidate. (He says he will “campaign my heart out.”) He has not made news in a good way – I mean, with something original, witty, smart or sparkling. Not one laugh has crossed state lines. Perhaps his best riposte came in the last debate, stating Trump can’t “insult his way to the presidency.” We’ll see.
The petulant preppie’s charm deficit has thrust his harsh substance into sharper relief for critics like me. As we know by now, Jeb Bush strongly opposes women’s reproductive rights; that as governor of Florida he dismissed large swathes of state employees; and that he has almost the same list of foreign policy “experts” as his brother, President George W. Bush. He rashly declared early on, “My brother kept us safe,” which gave Trump his first stinging salvo.
The fact is, 9/11 happened on his brother’s watch and defined his stay in the White House as a “war president.” America is still trying to awaken from the nightmare of Bush’s misbegotten wars, especially the Iraq invasion which took a serpentine trail to the birth of the Islamic State group. But Bushes are loyal team players and Jeb would never undermine George’s judgment. That cuts to the core of the Bushes: Winning is in the end about them, not us. It’s like a giant game of horseshoes in Kennebunkport, Maine, site of the waterfront family compound.
Jeb did one surprising thing, though. He made me freshly appreciate his brother George’s political talent, a long time coming. Suddenly, I saw the twinkle in his eye, his carriage, his presence, his range of expression. He is much more compelling as a leader than his brother, never mind (for a moment) his ruinous war record abroad. and on the Katrina front at home.
Ironically, the younger George’s time in office did much the same. I appreciated his father “Poppy’s” presidency so much more than I ever did during the son’s presidency. The elder George, who I thought of as a tonedeaf elitist with a mean streak, suddenly appeared as a wise statesman with the so-called “vision thing.” He had the vision not to start a “kill Saddam in Iraq” campaign after winning the war in Kuwait with a truly multinational coalition. How great was that? He did not cross that line in the sand.
The older Bush also handled German reunification and the end of the Cold War like an old foreign policy hand, which he actually was. Not a shot was fired in anger. The recession happening at home was his undoing in running for re-election in 1992, as he sensed it would be. The governor of Arkansas with the golden tongue, young enough to be his son, proved the man of the people.
But two Bush presidents are plenty, thanks, Jeb. As Jane Austen would say, your family has delighted us long enough.
By: Jamie Stiehm, U. S. News and World Report, December 21, 2015
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December 22, 2015
Posted by raemd95 |
George H. W. Bush, George W Bush, GOP Presidential Candidates, Jeb Bush | Donald Trump, Foreign Policy, ISIS, Recession, Reproductive Choice, Women's Health |
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Congress is about to pass a package that will keep the government operating through next September. And in order to sweeten the deal for conservative Republicans who would rather not spend money to have the government operate, they’ll also be voting on a $680 billion package of tax cuts. These bills contain both things Republicans want (like allowing oil exports, extending a research and development tax break for businesses, and delaying the “Cadillac Tax” in the Affordable Care Act) and things Democrats want (like extending the child tax credit and the Earned Income Tax Credit).
But whether you’re happy with the overall balance of line items in the bill, one thing’s for sure: it will increase the deficit rather substantially.
While there are some Republicans complaining about that, what they’re really mad about is the things they didn’t get, like banning Planned Parenthood from getting Medicaid reimbursements. In short, what mattered for both sides was the substantive details, and to some degree the politics (i.e. Republicans not wanting to suffer the fallout from another shutdown crisis).
Let’s be honest: despite all their talk about what we’re handing to the next generation and how government should balance its books just like a family does, when it comes down to actually making choices, Republicans are no more concerned about deficits than Democrats are. Crying about the deficit is a tool they use to constrain policies they don’t like. When it comes to the policies they do like, how much the government will have to borrow to fund them is barely an afterthought. So can we stop pretending they actually care about deficits?
There’s no denying that Republicans have wielded the fear of deficits and debt with extraordinary effect. They often convince the public that deficits are a serious problem that needs addressing, because most voters have only the vaguest understanding of how the government operates, and words like “debt” become a stand-in for “the economy.” And they have allies among those sometimes referred to as the Very Serious People in Washington, who gravely intone that government can’t do things like mitigate the effects of a recession if doing so will add to the debt. But when Republicans actually have to make choices, there’s a simple calculus at work: the programs they don’t support anyway, like food stamps or Medicaid, should be cut because we just can’t afford them. But the programs they do support, like military spending, not to mention tax cuts that will increase the deficit? Well, we just have to do those things, because they’re necessary.
Consider that the biggest Democratic policy initiative in recent years was the Affordable Care Act, which was completely paid for through taxes and budget cuts within Medicare. The ACA not only didn’t increase the deficit, it decreased it. The biggest Republican policy initiatives in recent years, on the other hand, were the Bush tax cuts and the Iraq War. The former cost somewhere between $2 trillion and $3 trillion (see here and here), while the latter cost around $2 trillion. There was no attempt to pay for either one, meaning the cost was just added to the deficit.
And why wasn’t there an attempt to pay for them? The simple answer is that when Republicans have something they want to do, they do it. Trying to pay for what you want to do just complicates things (as the authors of the ACA could testify). When George W. Bush took office, they wanted to cut taxes, particularly on the wealthy, so they did. They wanted to invade Iraq, so they did. If any Republican said, “It would be nice to do this, but it’s going to increase the deficit, so we shouldn’t,” they would have been laughed out of the room. And all those Republicans who today say that they don’t think Bush was a real conservative because he didn’t curtail spending? If you don’t remember them loudly objecting at the time, that’s because they didn’t.
The main reason Republicans are free to set aside concerns about the deficit right now is that it has dropped so dramatically over Barack Obama’s presidency, so it’s much harder to argue that it’s an urgent problem. The deficit peaked at $1.4 trillion in 2009, Obama’s first year in office, when the country was still in the depths of the Great Recession. By 2014 it had fallen to $484 billion, a decline of two-thirds. It went from 9.8 percent of GDP in 2009 down to 2.8 percent of GDP in 2014.
There are multiple reasons why, including sequestration, the improving economy, and the tax increases Obama negotiated. But if you want to grant presidents credit or blame for what happens with the deficit on their watch, in the last forty years, Presidents Obama and Clinton reduced the deficit as a proportion of GDP, President Carter kept it almost exactly where it was, and Presidents Bush the Younger, Bush the Elder, and Reagan increased the deficit. Notice a pattern?
And all the Republicans running for president have tax plans that would send the deficit into the stratosphere. They wave away the consequences by saying that they’ll come up with some package of (yet unspecified) budget cuts, or even better, that despite all historical evidence, this time cutting taxes will lead to such an explosion of economic growth that the deficit will actually fall (this is known as a belief in the “Tax Fairy”). But the truth is that they just want to cut taxes, and if one of them becomes president, that’s what he’ll do. And nobody on the Republican side will care what it does to the deficit.
By: Paul Waldman, Senior Writer, The American Prospect; Contributor, The Plum Line Blog, The Washington Post, December 17, 2015
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December 18, 2015
Posted by raemd95 |
Deficits, GOP, Gross Demostic Product, Tax Cuts | Affordable Care Act, Cadillac Tax, Conservatives, Defense Spending, George W. Bush, Iraq War, Planned Parenthood, Recession, Sequestration |
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The Republican-led Congress has just 12 days before the nation’s debt ceiling has to be raised. If lawmakers fail to meet their responsibilities, the country won’t be able to pay its bills, we’ll default on our debts, the full faith and credit of the United States will be in jeopardy, and the economic consequences will be severe.
At this point, congressional Republicans appear to be divided into two groups. The first, which includes the GOP leadership, knows it must raise the debt ceiling, but this faction has no idea how to complete the simple task. The second, which includes far-right members in both chambers, wants to hold the debt ceiling hostage, threatening to crash the economy on purpose unless Democrats meets their demands, but this faction hasn’t bothered to fill out the ransom note.
So far, markets aren’t panicking, because everyone is working from the assumption that Republicans won’t deliberately create a recession for no reason – though anything’s possible.
What’s striking, though, is how little work is getting done. We’re 12 days away from a dangerous deadline – Congress is only in session for 7 of those 12 days – and Congress isn’t even trying to move towards a resolution yet. Instead, the GOP-led House spent time yesterday on something called the “Default Prevention Act.”
With the potential for an unprecedented federal default two weeks away, House Republicans on Wednesday plan to pass legislation not to avert disaster, but rather to manage it, channeling daily tax collections to the nation’s creditors and Social Security recipients if the government’s borrowing limit is not lifted.
Let’s put this in everyday terms. Imagine a gang told you they plan to burn down your town unless their demands are met. You’re skeptical and tell the gang to go away. But the gang members stick around and say, “Before we burn down your town, let’s start making plans to prioritize which parts of the town you might want to rescue before we turn violent.”
That, in a nutshell, is what the “Default Prevention Act” is all about – the gang members passed a bill yesterday to prioritize which bills they’ll allow the United States to pay, and which bills will get burned by their fire.
The problem, of course, is that all of this is completely insane.
What we’re talking about is a plan in which Republicans try to manage the fire from their own arson, “channeling daily tax collections to the nation’s creditors and Social Security recipients” after they refuse, on purpose, to raise the debt ceiling.
And why would GOP lawmakers prioritize the nation’s creditors and Social Security recipients? On the former, because so much of the global economy rests on U.S. Treasury bonds, a deliberate default risks crashing financial systems across the planet. That would be … catastrophically bad.
On the latter, congressional Republicans don’t want to be responsible for cutting off Social Security checks for millions of American seniors, right in time for the holidays.
The “Default Prevention Act” is, by this measure, misnamed. It would prevent the nation from defaulting on some debts, while encouraging the nation to default on others.
Making matters just a little worse, Slate’s Jordan Weissmann explained that the GOP plan appears to be illegal and literally impossible to implement.
[E]ven if the government could borrow to pay bondholders and seniors, crossing the debt limit would still be plenty apocalyptic. Treasury’s computers still might not be capable of prioritizing its obligations, in which case we’d still end up failing to pay some bondholders despite Congress’s intentions.
The mere threat of such an accidental default could cause markets to seize. If the Treasury did successfully keep money flowing to its lenders, meanwhile, the government still wouldn’t be able to cover all of its other costs, and thus would be forced to implement massive, immediate spending cuts to other programs, likely dragging the U.S. and probably the rest of the world into a recession.
He’s referring, of course, to a recession that could easily be avoided by simply raising the debt ceiling – a simple, procedural vote that costs nothing.
Tick, tock.
By: Steve Benen, The Maddow Blog, October 22, 2015
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October 24, 2015
Posted by raemd95 |
Debt Ceiling, Default Prevention Act, Economy | Global Economy, GOP Leadership, Government Default, Government Shutdown, Recession, Republicans, Social Security |
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