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“Varieties Of Voodoo”: Undermining The Credibility Of The Progressive Economic Agenda

America’s two big political parties are very different from each other, and one difference involves the willingness to indulge economic fantasies.

Republicans routinely engage in deep voodoo, making outlandish claims about the positive effects of tax cuts for the rich. Democrats tend to be cautious and careful about promising too much, as illustrated most recently by the way Obamacare, which conservatives insisted would be a budget-buster, actually ended up being significantly cheaper than projected.

But is all that about to change?

On Wednesday four former Democratic chairmen and chairwomen of the president’s Council of Economic Advisers — three who served under Barack Obama, one who served under Bill Clinton — released a stinging open letter to Bernie Sanders and Gerald Friedman, a University of Massachusetts professor who has been a major source of the Sanders campaign’s numbers. The economists called out the campaign for citing “extreme claims” by Mr. Friedman that “exceed even the most grandiose predictions by Republicans” and could “undermine the credibility of the progressive economic agenda.”

That’s harsh. But it’s harsh for a reason.

The claims the economists are talking about come from Mr. Friedman’s analysis of the Sanders economic program. The good news is that this isn’t the campaign’s official assessment; the bad news is that the Friedman analysis has been highly praised by campaign officials.

And the analysis is really something. The Republican candidates have been widely and rightly mocked for their escalating claims that they can achieve incredible economic growth, starting with Jeb Bush’s promise to double growth to 4 percent and heading up from there. But Mr. Friedman outdoes the G.O.P. by claiming that the Sanders plan would produce 5.3 percent growth a year over the next decade.

Even more telling, I’d argue, is Mr. Friedman’s jobs projection, which has the employed share of American adults soaring all the way back to what it was in 2000. That may sound possible — until you remember that by 2026 more than a quarter of U.S. adults over 20 will be 65 and older, compared with 17 percent in 2000.

Sorry, but there’s just no way to justify this stuff. For wonks like me, it is, frankly, horrifying.

Still, these are numbers on a program that Mr. Sanders, even if he made it to the White House, would have little chance of enacting. So do they matter?

Unfortunately, the answer is yes, for several reasons.

One is that, as the economists warn, fuzzy math from the left would make it impossible to effectively criticize conservative voodoo.

Beyond that, this controversy is an indication of a campaign, and perhaps a candidate, not ready for prime time. These claims for the Sanders program aren’t just implausible, they’re embarrassing to anyone remotely familiar with economic history (which says that raising long-run growth is very hard) and changing demography. They should have set alarm bells ringing, but obviously didn’t.

Mr. Sanders is calling for a large expansion of the U.S. social safety net, which is something I would like to see, too. But the problem with such a move is that it would probably create many losers as well as winners — a substantial number of Americans, mainly in the upper middle class, who would end up paying more in additional taxes than they would gain in enhanced benefits.

By endorsing outlandish economic claims, the Sanders campaign is basically signaling that it doesn’t believe its program can be sold on the merits, that it has to invoke a growth miracle to minimize the downsides of its vision. It is, in effect, confirming its critics’ worst suspicions.

What happens now? In the past, the Sanders campaign has responded to critiques by impugning the motives of the critics. But the authors of the critical letter that came out on Wednesday aren’t just important economists, they’re important figures in the progressive movement.

For example, Alan Krueger is one of the founders of modern research on minimum wages, which shows that moderate increases in the minimum don’t cause major job loss. Christina Romer was a strong advocate for stimulus during her time in the White House, and a major figure in the pushback against austerity in the years that followed.

The point is that if you dismiss the likes of Mr. Krueger or Ms. Romer as Hillary shills or compromised members of the “establishment,” you’re excommunicating most of the policy experts who should be your allies.

So Mr. Sanders really needs to crack down on his campaign’s instinct to lash out. More than that, he needs to disassociate himself from voodoo of the left — not just because of the political risks, but because getting real is or ought to be a core progressive value.

 

By: Paul Krugman, Op-Ed Columnist, The New York Times, February 19, 2016

February 22, 2016 Posted by | Bernie Sanders, Economic Policy, Gerald Friedman, Progressives | , , , , , , , , , | 1 Comment

“The Electability Conundrum”: Scalia’s Death Only Reinforces The Need For Democrats To Choose Their Nominee Wisely

The death of Antonin Scalia has brought home two truths about the presidential race to voters in both parties. First, there may be no more important issue in the campaign than the Supreme Court (which some of us have been saying for some time). And second, if that’s true, then there may be no more important criterion in picking your party’s nominee than who has the best chance of winning in November.

Unfortunately, electability is a difficult thing to predict, no matter how much you know about politics. During the 2008 primaries, for instance, many intelligent Democrats believed there was no way that the voting public would ever elect an African American with a name like “Barack Hussein Obama.” Four years before, many Democrats thought that John Kerry was the most electable Democrat because Republicans couldn’t possibly attack the patriotism of a war hero, especially with a couple of draft-dodgers like George W. Bush and Dick Cheney at the top of their ticket. Neither of those assessments turned out to be correct.

Nevertheless, it’s an impossible question for partisans to ignore, given the stakes of the election. And just how high are they? Someone (usually someone running for president) will always say “This is the most important election of my lifetime,” and it’s easy to dismiss. After all, no matter what happens, the republic will survive. If you’re a Democrat, you can console yourself with the fact that it survived Ronald Reagan and George W. Bush, as much damage as they might have done; if you’re a Republican you can say the same about Bill Clinton and Barack Obama.

Nevertheless, there are some reasons why this election could be particularly consequential, particularly for Democrats. The first is the Supreme Court, and Scalia’s passing is only part of that story. When the next president is sworn in, Ruth Bader Ginsburg will be 83, Anthony Kennedy will be 80, and Stephen Breyer will be 80. What if Republicans succeed in keeping President Obama from seating a replacement, then a Republican is elected, and some or all of those three fall ill or retire? You could have a Court made up of seven relatively young conservative justices and only two liberals, Sonia Sotomayor and Elena Kagan. The days of liberals losing cases by a 5-4 margin would be but a happy memory, and the overturning of Roe v. Wade, the end of affirmative action, and the crushing of labor union rights would be only the beginning of a judicial scorched-earth campaign that would not only lay waste to rights liberals hold dear, but would keep doing so for decades to come.

And then there’s the matter of what a Republican president would be able to accomplish through legislation. If the GOP nominee wins in November, it will almost certainly also mean that Republicans have held on to the House and the Senate. That president might or not not be a radical conservative, though Donald Trump looks like the only contender with a chance who couldn’t be described that way. But Congress certainly will be radical. The Republican Party has been moving sharply to the right in recent years, and with unified control for the first time in a decade, it’s safe to say they will pretty much go nuts. Repealing the Affordable Care Act, slashing upper-income taxes, gutting the safety net, rolling back environmental regulations, passing federal restrictions on abortion—if it’s in any Republican’s fantasies, it’ll be able to pass through both houses and get signed by the president. And don’t think Democrats having the filibuster will stop that train; given the respect Republicans have shown for norms and traditions, do you think they’ll let that stand in their way?

So if you think electability ought to be part of your calculation, what do you need to consider? The Democratic primary makes it a little easier because there are only two candidates, but it’s still complicated. Here are the variables to consider:

  1. The reward to be gained from a Bernie Sanders presidency
  2. The reward to be gained from a Hillary Clinton presidency
  3. The chances of Sanders winning in November if he’s the nominee
  4. The chances of Clinton winning if she’s the nominee
  5. The consequences of a Republican victory in November

That’s not to mention how each Democrat would match up against any given Republican, which introduces another dimension of complexity. But here’s the basic calculation you have to make: Figure out whether, for your preferences, (1) is larger than (2) or vice-versa, and by how much; then figure out whether (3) or (4) is larger, and by how much; then weigh both of those figures against (5).

For instance, you might decide that Bernie Sanders’s presidency would be superior to Hillary Clinton’s, but Clinton has a higher chance of winning in November, and since a Republican presidency would be so dreadful, you’ll support Clinton even though you like Sanders better. Or you might decide that a Sanders presidency would be so good that even if Clinton might have a slightly better chance in November, it’s worth some measure of risk in nominating Sanders because the reward of him winning is so high.

The truth, of course, is that because we aren’t rational people we constantly construct post-hoc justifications for the choices we make. In this case, that means we’ll convince ourselves that whichever candidate we prefer is also the more electable one. While it might seem logical that Clinton has a higher chance of winning a general election than Sanders, I’ve yet to encounter a Sanders supporter who actually thinks so. They say that Clinton has her own electability problems (undoubtedly true), and that Sanders will bring in so many new voters that it will overcome the effect of the attacks Republicans will launch on him for his leftist views. Clinton supporters, on the other hand, find this argument laughable; they’ll tell you that Republicans will positively disembowel Sanders, and by the time they’re done with him he’ll seem like he’s too much of an extremist to get elected to the Burlington City Council.

I’ve also found that Sanders supporters are more likely to minimize the negative consequences of a Republican presidency. That might be because they don’t see as much of a difference between Clinton and the Republicans, but it’s also because they’re focused on the first variable, the potential rewards of a Sanders presidency. Clinton supporters, on the other hand, have no sweeping expectations from their candidate; for them, staving off disaster is more than enough reason to support her.

Even if your heart goes aflutter at Sanders’s mention of things like single-payer health care and free public college tuition, you’d have to grant that achieving those goals is anything but guaranteed even if he wins the White House. And most of what he would do doesn’t differ from what Clinton would do. That’s particularly true of the Supreme Court: Any Democratic president who had a chance to name a new justice would be choosing from the same pool of liberal jurists now serving in federal appeals courts or perhaps a few state supreme courts.

But even if you find the substantive differences between Clinton and Sanders to be enormous, it’s hard to see them as actually being bigger than the difference between them on one hand and the tsunami of change that will occur if a Republican is elected on the other. Which leaves Democratic voters with no choice but think hard about which candidate is more electable—even if there are no perfect answers to the question.

 

By: Paul Waldman, Senior Writer, The American Prospect, February 15, 2016

February 16, 2016 Posted by | Bernie Sanders, Democratic Presidential Primaries, Electability, Hillary Clinton, U. S. Supreme Court | , , , , , , , , , | 2 Comments

“Is Vast Inequality Necessary?”: Inequality Is Inevitable; The Vast Inequality Of America Today Isn’t

How rich do we need the rich to be?

That’s not an idle question. It is, arguably, what U.S. politics are substantively about. Liberals want to raise taxes on high incomes and use the proceeds to strengthen the social safety net; conservatives want to do the reverse, claiming that tax-the-rich policies hurt everyone by reducing the incentives to create wealth.

Now, recent experience has not been kind to the conservative position. President Obama pushed through a substantial rise in top tax rates, and his health care reform was the biggest expansion of the welfare state since L.B.J. Conservatives confidently predicted disaster, just as they did when Bill Clinton raised taxes on the top 1 percent. Instead, Mr. Obama has ended up presiding over the best job growth since the 1990s. Is there, however, a longer-term case in favor of vast inequality?

It won’t surprise you to hear that many members of the economic elite believe that there is. It also won’t surprise you to learn that I disagree, that I believe that the economy can flourish with much less concentration of income and wealth at the very top. But why do I believe that?

I find it helpful to think in terms of three stylized models of where extreme inequality might come from, with the real economy involving elements from all three.

First, we could have huge inequality because individuals vary hugely in their productivity: Some people are just capable of making a contribution hundreds or thousands of times greater than average. This is the view expressed in a widely quoted recent essay by the venture capitalist Paul Graham, and it’s popular in Silicon Valley — that is, among people who are paid hundreds or thousands of times as much as ordinary workers.

Second, we could have huge inequality based largely on luck. In the classic old movie “The Treasure of the Sierra Madre,” an old prospector explains that gold is worth so much — and those who find it become rich — thanks to the labor of all the people who went looking for gold but didn’t find it. Similarly, we might have an economy in which those who hit the jackpot aren’t necessarily any smarter or harder working than those who don’t, but just happen to be in the right place at the right time.

Third, we could have huge inequality based on power: executives at large corporations who get to set their own compensation, financial wheeler-dealers who get rich on inside information or by collecting undeserved fees from naïve investors.

As I said, the real economy contains elements of all three stories. It would be foolish to deny that some people are, in fact, a lot more productive than average. It would be equally foolish, however, to deny that great success in business (or, actually, anything else) has a strong element of luck — not just the luck of being the first to stumble on a highly profitable idea or strategy, but also the luck of being born to the right parents.

And power is surely a big factor, too. Reading someone like Mr. Graham, you might imagine that America’s wealthy are mainly entrepreneurs. In fact, the top 0.1 percent consists mainly of business executives, and while some of these executives may have made their fortunes by being associated with risky start-ups, most probably got where they are by climbing well-established corporate ladders. And the rise in incomes at the top largely reflects the soaring pay of top executives, not the rewards to innovation.

Don’t say that redistribution is inherently wrong. Even if high incomes perfectly reflected productivity, market outcomes aren’t the same as moral justification. And given the reality that wealth often reflects either luck or power, there’s a strong case to be made for collecting some of that wealth in taxes and using it to make society as a whole stronger, as long as it doesn’t destroy the incentive to keep creating more wealth.

And there’s no reason to believe that it would. Historically, America achieved its most rapid growth and technological progress ever during the 1950s and 1960s, despite much higher top tax rates and much lower inequality than it has today.

In today’s world, high-tax, low-inequality countries like Sweden are also both highly innovative and home to many business start-ups. This may in part be because a strong safety net encourages risk-taking: People may be willing to prospect for gold, even if a successful foray won’t make them quite as rich as before, if they know they won’t starve if they come up empty.

So coming back to my original question, no, the rich don’t have to be as rich as they are. Inequality is inevitable; the vast inequality of America today isn’t.

 

By: Paul Krugman, Op-Ed Columnist, The New York Times, January 15, 2016

January 18, 2016 Posted by | Economic Inequality, Tax Revenue, Taxes on the Wealthy | , , , , , , , , | Leave a comment

“Democracy Trumped”: Could Trump Actually Win The Election?

I’ve been having incessant conversations with friends, family, and colleagues about politics, and they all boil down to the same question. Could Donald Trump be our next president?

Here is an amalgam of the conversation. See which side you’re on:

—I think Trump might actually win.

—You mean the Republican nomination?

—No, I mean the election.

—Get serious. For starters, the Republican leaders would never allow that. They’d be much better off with Rubio-Kasich or Kasich-Rubio.

—Maybe they would. But there are no smoke-filled rooms anymore. Leaders don’t make these decisions. Primary voters do, and they love Trump. The more outrageous he is and the less connected to facts, the more his support grows.

—Yeah, but he’s a media phenomenon. He is such an egomaniac that he hasn’t even bothered to build an organization. He has no ground game. That’s why Cruz has pulled ahead on Iowa.

—Iowa is a special case because it’s a caucus state. In a society where people are increasingly disconnected from politics, Trump can motivate people just as a media candidate. If he needs an organization to get out his vote, he can buy one.

—He’s already peaked.

—Maybe, but under the new Republican rules that were put in place in 2014, all of the primaries after March 15 are winner-take-all. He only needs to come in first and he gets all of the state’s delegates, even if he has 25 percent of the vote and, say, the runner-up has 22 percent. The Republicans did this to get an early nominee. They didn’t foresee Trump.

—It’s still unlikely that he will get 50 percent of the delegates. If he gets less than 50 percent and it’s a brokered convention, all of the others will unite to prevent Trump from being the nominee.

—Think again. Trump may be a fool and a demagogue when it comes to actual policy, but one thing he’s good at is making deals. Suppose he comes into the convention with 45 percent of the delegates. All he has to do is offer the vice-presidential nomination to someone who controls at least 5 percent of the delegates, and he’s over the top. Can you imagine all of the other candidates, who really hate each other, somehow uniting to block Trump?

—Even if by some miracle he’s nominated, he can’t win. He has just alienated too many groups—women, blacks, Muslims, immigrants.

—That depends. If we have a few more terrorist incidents, or if some more skeletons come out of Hillary’s closet, all bets are off.

—Mainstream Republicans will vote for Hillary in droves.

—Yes, such as they are. But Hillary is not producing much enthusiasm, whereas Trump’s base is really fired up.

—But imagine the debates. This is complicated stuff. Hillary is so much better informed on the issues. He just makes it up.

—Right, but that doesn’t seem to hurt him. She is hawkish for a Democrat, but there is no way she will be tougher than Trump. And the fact that this is very complicated stuff and Hillary really understands the complexity—that doesn’t necessarily play to her advantage. A lot of voters want simple. And there is one more element.

—What’s that?

—Trump is already the most populist of the Republican candidates, and the most appealing to working-class voters. He doesn’t hate government the way the others do. You can count on him to move left after he is nominated, posing as the defender of Social Security and Medicare, and demanding higher taxes on the rich. Hillary, long allied with Wall Street, is less than an ideal opponent. She may take some Republican votes, but he may take more Democratic ones.

—That’s sobering. Do you happen to know the rules for emigrating to Canada?

 

By: Robert Kuttner, The American Prospect, December 29, 2015

January 2, 2016 Posted by | Democracy, Donald Trump, Establishment Republicans, GOP Voters | , , , , , , | 4 Comments

“Sam Brownback’s Kansas Disaster Is Getting Even Worse”: Conservative Policies Are Both A Moral And Practical Disaster

Politics is all too often couched in terms of morality and ethics, rather than simple right and wrong. What I mean by that is that reasonable people can come to different moral value judgments about ethical dilemmas: is it more moral to ensure that everyone has access to a social safety net even if some people game the system, or is it more moral to ensure that people keep all their private property and never have to give it up to someone less hardworking than themselves?

But it’s important to remember that it’s not just about empathy and ethics. It’s about what works and what doesn’t. And every day in every way, we are learning that conservative approaches simply don’t work–not in terms of social policy, and certainly not in terms of economic policy.

Exhibit A in the utter failure of conservative dogma is Sam Brownback’s trainwreck in Kansas. Here are the latest figures, courtesy of Yael Abouhalkah in the Kansas City Star:

This has been a bad week for Gov. Sam Brownback and others who believe his massive income tax cuts are going to dramatically boost employment in the state. A new report Friday showed that Kansas had lost a whopping 4,300 jobs in July from a month earlier.

The unemployment rate climbed for the fourth straight month, up to 4.6 percent, according to the federal Bureau of Labor Statistics. And look at this disastrous note: The Sunflower State now has 1,700 fewer jobs than it did at the start of 2015.

One more fact from the latest report shows that Kansas has added a puny 5,600 total jobs in the last year — from July 2014 to July 2015. The new information shows that the tax cuts that have drained the Kansas treasury of hundreds of millions of dollars the past two years are not working to attract employers and jobs.

Keep in mind that Kansas’ atrocious performance has nothing to do with the state of the midwest or the manufacturing sector generally, because both manufacturing and Kansas’ neighbors are actually doing pretty well comparatively:

Meanwhile, Missouri celebrated much better news in the latest BLS report. The Show-Me State gained 11,900 jobs in July, and now has added 30,900 for 2015. Yes, that’s without the huge tax cuts that Brownback and Co. put in place.

Earlier this week, a separate report showed Kansas is missing out on the growth in manufacturing employment, which is happening across much of the rest of America. One key statistic: Kansas lost 39,000 manufacturing jobs during the recession but has added just 4,000 since it ended.

All this as Brownback’s tax cuts are destroying what remains of the state’s educational system and social services. Brownback and his allies suffer under the delusion that supply-side economics really works, and that if they cut taxes enough on rich people and businesses that there will be an explosion of jobs and economic growth. That’s not just immoral because it increases inequality and hurts the poor. It’s as wrong as 2+2=5. In all but the most extreme cases, cutting taxes on the rich does nothing to create jobs, but slashing the salaries of teachers and cutting welfare benefits means less consumer demand, which in turns drives the economy into recession. The immorality would at least be somewhat tolerable if the ideology functioned at a broad utilitarian level, but it doesn’t.

Conservative policies are both a moral and practical disaster.

 

By: David Atkins, Political Animal Blog, The Washington Monthly, August 22, 2015

August 23, 2015 Posted by | Kansas, Sam Brownback, Supply Side Economics | , , , , , , | 3 Comments

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