How Olympia Snowe’s “Moderation” Hurt The Economy
One of the big stories of this recession is the massive decline in public-sector employment. In order to weather the economic storm, states and localities have cut jobs for teachers, firefighters, police, and other public servants. As The New York Times reports, this has also trickled down to higher education, where public colleges have cut training for valuable jobs and professions:
Technical, engineering and health care expertise are among the few skills in huge demand even in today’s lackluster job market. They are also, unfortunately, some of the most expensive subjects to teach. As a result, state colleges in Nebraska, Nevada, South Dakota, Colorado, Michigan, Florida and Texas have eliminated entire engineering and computer science departments. […]
This squeeze is one result of the states’ 25-year withdrawal from higher education. During and immediately after the last few recessions, states slashed financing for colleges. Then when the economy recovered, most states never fully restored the money that had been cut. The recent recession has amplified the problem.
You might remember that in 2009, Maine Senator Olympia Snowe pressed for Democrats to reduce the size of the bill by $100 billion as a condition for securing her support. There was no particular reason for shaving that much off of the bill—it was just a nice, round number that she liked. And because she occupied the important pivot point in the Senate, Democrats couldn’t do much to limit her cuts.
The problem, besides the fact that the smaller the stimulus the less effective it would be, is that her cuts came directly from aid for states and localities. Aid that could have saved public jobs as the recession continued, and aid that might have kept colleges from cutting valuable training.
In a lot of ways, this sums up the problem with Snowe’s vaunted moderation—it had no point. It was moderation for the sake of moderation, and more often than not (as with the Bush tax cuts, for example), it resulted in bad policy. Her retirement might be bad for Senate comity, but as far as actual lawmaking is concerned, it strikes me as a good thing.
By: Jamelle Bouie, The American Prospect, March 2, 2012
The GOP Magical World Of Voodoo ‘Economists’: Repeal The 20th Century
If you came up with a bumper sticker that pulls together the platform of this year’s crop of Republican presidential candidates, it would have to be:
Repeal the 20th century. Vote GOP.
It’s not just the 21st century they want to turn the clock back on — health-care reform, global warming and the financial regulations passed in the wake of the recent financial crises and accounting scandals.
These folks are actually talking about repealing the Clean Air Act, the Clean Water Act and the Environmental Protection Agency, created in 1970s.
They’re talking about abolishing Medicare and Medicaid, which passed in the 1960s, and Social Security, created in the 1930s.
They reject as thoroughly discredited all of Keynesian economics, including the efficacy of fiscal stimulus, preferring the budget-balancing economic policies that turned the 1929 stock market crash into the Great Depression.
They also reject the efficacy of monetary stimulus to fight recession, and give the strong impression they wouldn’t mind abolishing the Federal Reserve and putting the country back on the gold standard.
They refuse to embrace Darwin’s theory of evolution, which has been widely accepted since the Scopes Trial of the 1920s.
One of them is even talking about repealing the 16th and 17th amendments to the Constitution, allowing for a federal income tax and the direct election of senators — landmarks of the Progressive Era.
What’s next — repeal of quantum physics?
Not every candidate embraces every one of these kooky ideas. But what’s striking is that when Rick Perry stands up and declares that “Keynesian policy and Keynesian theory is now done,” not one candidate is willing to speak up for the most important economic thinker of the 20th century. Or when Michele Bachmann declares that natural selection is just a theory, none of the other candidates is willing to risk the wrath of the religious right and call her on it. Leadership, it ain’t.
I realize economics isn’t a science the way biology and physics are sciences, but it’s close enough to one that there are ideas, principles and insights from experience that economists generally agree upon. Listening to the Republicans talk about the economy and economic policy, however, is like entering into an alternative reality.
Theirs is a magical world in which the gulf oil spill and the Japanese nuclear disaster never happened and there was never a problem with smog, polluted rivers or contaminated hamburger. It is a world where Enron and Worldcom did not collapse and shoddy underwriting by bankers did not bring the financial system to the brink of a meltdown. It is a world where the unemployed can always find a job if they really want one and businesses never, ever ship jobs overseas.
As politicians who are always quick to point out that it is only the private sector that creates economic growth, I found it rather comical to watch the governors at last week’s debate duke it out over who “created” the most jobs while in office. I know it must have just been an oversight, but I couldn’t help noticing that neither Mitt Romney nor Perry thought to exclude the thousands of government jobs included in their calculations — the kinds of jobs they and their fellow Republicans now view as economically illegitimate.
And how wonderfully precise they can be when it comes to job numbers. Romney is way out front when it comes to this kind of false precision. His new economic plan calculates that President Obama would “threaten” 7.3 million jobs with the ozone regulation that, in fact, the president had just canceled. By contrast, Romney claims his own plan will create 11 million jobs in his first term — not 10, not 12, but 11 million.
When you dig into such calculations, however, it turns out many are based on back-of-the-envelope extrapolations from industry data that totally ignore the dynamic quality of economic interactions.
One recent example comes from the cement industry, which now warns that new regulations limiting emissions of sulfur dioxide and nitrogen oxide could close as many as 18 of the 100 cement plants in the United States, resulting in the direct loss of 13,000 jobs.
Then again, where do you think all those customers of the 18 plants will get their cement? Do you think they might get some of it from the other 82 plants, which in turn might have to add a few workers to handle the additional volume? Or that a higher price for cement might induce somebody to build a modern plant to take advantage of the suddenly unmet demand? Or perhaps that higher prices for cement will lead some customers to use another building material produced by an industry that will have to add workers to increase its output? And what about the possibility that the regulation will encourage some innovative company to devise emissions-control equipment that will not only allow some of those plants to remain open but generate a few thousand extra jobs of its own as it exports to plants around the world.
Such possibilities are rarely, if ever, acknowledged in these “job-scare studies.” Also left out are any estimates of the benefits that might accrue in terms of longer, healthier lives. In the Republican alternative universe, it’s all costs, no benefits when it comes to government regulation. As they see it, government regulators wake up every morning with an uncontrollable urge to see how many jobs they can destroy.
If consistency is the hobgoblin of small minds, then these Republican presidential candidates are big thinkers, particularly on fiscal issues.
In the Republican alternative universe, allowing an income tax cut for rich people to expire will “devastate” the U.S. economy, while letting a payroll tax cut for working people to expire would hardly be noticed. Cutting defense spending is economic folly; cutting food stamps for poor children an economic imperative.
My favorite, though, is a proposal, backed by nearly all the candidates along with the U.S. Chamber of Commerce, to allow big corporations to bring home, at a greatly reduced tax rate, the more than $1 trillion in profits they have stashed away in foreign subsidiaries.
“Repatriation,” as it is called, was tried during the “jobless recovery” of the Bush years, with the promise that it would create 500,000 jobs over two years as corporations reinvested the cash in their U.S. operations. According to the most definitive studies of what happened, however, most of the repatriated profits weren’t used to hire workers or invest in new plants and equipment. Instead, they were used to pay down debt or buy back stock.
But fear not. In a new paper prepared for the chamber, Republican economist Douglas Holtz-Eakin argues that just because the money went to creditors and investors doesn’t mean it didn’t create jobs. After all, creditors and shareholders are people, too — people who will turn around and spend most of it, in the process increasing the overall demand for goods and services. As a result, Holtz-Eakin argues, a dollar of repatriated profit would have roughly the same impact on the economy as a dollar under the Obama stimulus plan, or in the case of $1 trillion in repatriated profit, about 3 million new jobs.
It’s a lovely economic argument, and it might even be right. But for Republican presidential candidates, it presents a little problem. You can’t argue, at one moment, that putting $1 trillion of money in the hands of households and business failed to create even a single job, and at the next moment argue that putting an extra $1 trillion in repatriated profit into their hands will magically generate jobs for millions.
It took a while, but even Richard Nixon came around to declaring himself a Keynesian. Maybe there is still hope for Perry and the gang.
Out Of The Shadows: Bush And Cheney Remind Us How We Got Into This Mess
Thank you, George W. Bush and Dick Cheney, for emerging from your secure, undisclosed locations to remind us how we got into this mess: It didn’t happen by accident.
The important thing isn’t what Bush says in his interview with National Geographic or what scores Cheney tries to settle in his memoir. What matters is that as they return to the public eye, they highlight their record of wrongheaded policy choices that helped bring the nation to a sour, penurious state.
Questions about whether President Obama has been combative enough in dealing with the Republican opposition — or sufficiently ambitious in framing his progressive agenda — seem trivial when viewed in this larger context. Obama is tackling enormous problems that took many years to create. His presidential style is important insofar as it boosts or lessens his effectiveness, but its importance pales beside the generally righteous substance of what he’s trying to accomplish.
It was the Bush administration, you will recall, that sent the national debt into the stratosphere and choked off federal revenue to the point of asphyxiation. Bush and Cheney decided to fight two wars without even accounting — let alone paying — for them. Rather than raise taxes to cover the cost of military campaigns in Afghanistan and Iraq, Bush opted to maintain unreasonable and unnecessary tax cuts.
So far, the wars and the tax cuts have cost the Treasury between $4 trillion and $5 trillion. If Bush had just left income tax rates alone, nobody except Ron Paul would be talking about the debt.
My aim isn’t to attack Bush but to attack his philosophy. When he was campaigning for the White House in 2000, the government was anticipating a projected surplus of roughly $6 trillion over the following decade. Bush said repeatedly that he thought this was too much and wanted to bring the surplus down — hence, in 2001, the first of his two big tax cuts.
Bush was hewing to what had already become Republican dogma and by now has become something akin to scripture: Taxes must always be cut because government must always be starved.
The party ascribes this golden rule to Ronald Reagan — conveniently forgetting that Reagan, in his eight years as president, raised taxes 11 times. Reagan may have believed in small government, but he did believe in government itself. Today’s Republicans have perverted Reagan’s philosophy into a kind of anti-government nihilism — an irresponsible, almost childish insistence that the basic laws of arithmetic can be suspended at their will.
The Bush administration also pushed forward Reagan’s policy of deregulation — ignoring, for example, critics who said the ballooning market in mortgage-backed securities needed more oversight. When the 2008 financial crisis hit, Bush did regain his faith in government long enough to throw together the $800 billion TARP bailout for the banks. But he failed to use the leverage of an aid package to exact reforms that would ensure that the financial system served the economy, rather than the other way around.
Faced with similar circumstances, would today’s Republican leadership react at all? Or is it the party’s view that the proper role of government would be to stand aside and watch the world’s financial system crash and burn?
This is a serious question. Just a few weeks ago, the Republican majority in the House threatened to force the United States government to default on its debt obligations — a previously unthinkable act of brinkmanship. Everything is thinkable now.
The Bush administration took Reagan’s tax-cutting, government-starving philosophy much too far. Today’s Republican Party takes it well beyond, into a rigid absolutism that would be comical if it were not so consequential.
We face devastating unemployment. Many conservative economists have joined the chorus calling for more short-term spending by the federal government as a way to boost growth. But the radical Republicans don’t pay attention to conservative economists anymore. The Republicans’ idea of a cure for cancer would be to cut spending and cut taxes.
Perhaps they’re just cynically trying to keep the economy in the doldrums through next year to hurt Obama’s chances of reelection. I worry that their fanaticism is sincere — that one of our major parties has gone completely off the rails. If so, things will get worse before they get better.
Having Bush and Cheney reappear is a reminder to step back and look at what Obama is up against. You might want to cut him a little slack.
Leader Of A Cadre Of Children: It Sucks To Be John Boehner
Mea culpa.
I confess that I have often picked on, made fun of, and generally disparaged Speaker of the House John Boehner only to now find myself feeling a measure of remorse for having done so.
It turns out that Speaker Boehner may be the only semi-reasonable man left in the Republican Party.
Yes, I know that Boehner has himself to blame for the role he played in opening the doors of Congress to the unyielding and unreasonable Members swept into office by the Tea Party rebellion in 2010. Yes, Boehner has spent far too many years cozying up to Wall Street and protecting the interests of big business at the expense of the middle class.
And just in case you’re wondering, I have not forgotten that John Boehner has long been quick to condemn the White House for the jobs crisis while doing absolutely nothing to assist in creating policy that would help solve the problem. Boehner has been a continuing impediment to growing American jobs by working with Obama on infrastructure legislation or any other valuable stimulus that could make a big difference for the many who are suffering from extended unemployment.
Still, you have to admit that it sucks to be John Boehner.
Imagine if you had to make decisions regarding the successful operation of your own home and your three year old, five year old and two year old each had a full vote in the decisions that are ultimately taken.
Say it’s time to buy the new family car. The two eldest of the three kids decide that the only sensible vehicle to purchase would be an ice cream truck filled to the top with Good Humor ice cream bars and, as an added option, comes with the happy song that streams from the scratchy PA system perched on the roof.
From the point of view of children of such an age, this choice makes total sense.
Yet, when the grown-ups must point out that such a purchase would neither be practical nor in the best interest of the family and cast their votes for a new, American made family minivan, it is left to the two year old to break the tie.
That can’t be good.
Welcome to John Boehner’s world – a world where he is the leader of a cadre of children who have yet to mature to the point where they warrant election to the post of school hall monitor let alone the halls of Congress.
As David Brooks wrote in his New York Times column earlier this week complaining about the GOP’s inability to just say yes to a good deal on the deficit-
That’s because the Republican Party may no longer be a normal party. Over the past few years, it has been infected by a faction that is more of a psychological protest than a practical, governing alternative.
The members of this movement do not accept the logic of compromise, no matter how sweet the terms. If you ask them to raise taxes by an inch in order to cut government by a foot, they will say no. If you ask them to raise taxes by an inch to cut government by a yard, they will still say no.
The members of this movement do not accept the legitimacy of scholars and intellectual authorities. A thousand impartial experts may tell them that a default on the debt would have calamitous effects, far worse than raising tax revenues a bit. But the members of this movement refuse to believe it.” Via New York Times
I don’t know about your experience, but what Brooks describes sounds an awful lot like my own kids before they were old enough to reason and make adult decisions.
If these immature Members of Congress were not enough of a problem for an old school deal maker like Boehner, the Speaker has to contend with a scheming GOP Majority Leader in Eric Cantor who waits behind every door with a dagger aimed squarely at his boss’s heart.
I wouldn’t bet against Cantor’s ultimate success in playing Brutus to Boehner’s Caesar as the Speaker remains caught between a Ba-rack and a Tea Party with nowhere to turn to get out of the mess.
Speaker Boehner knows the debt ceiling must be raised and has been willing to publicly say so as recently as this morning. He also knows that Congress must take great care to do nothing to further stifle the struggling economy just as he realizes all too well that he will need Democratic votes to get whatever deal he cuts with the President through the House as he won’t be able to count on his own Members.
This leaves Boehner to walk an impossible line between doing what he believes is necessary for the nation he is charged with governing and those who would ride the country into the ground in order to protect wealthy industries from losing a few unnecessary tax subsidies or, even worse, support keeping the economy mired in quicksand in order to better evict Barack Obama from the White House.
E.J. Dionne summed it up this way –
I’d actually feel bad for Boehner — an old-fashioned sort who’d normally reach for a deal — if he and his party had not shamelessly stoked the Tea Party to win power. The GOP is now reaping the whirlwind, and Boehner may be forced to choose between his country and his job. Via Washington Post
Unlike Dionne, I actually do feel badly for Boehner as he tries to make a deal and still hold onto his job. And I will feel more than badly for the entire nation should we find ourselves with Eric Cantor sitting in the seat of the Speaker of the House of Representatives.
Whether you sympathize with the man or, like Dionne, believes he is just getting what’s coming to him, you have to to agree on one thing –
It truly does suck to be John Boehner.
By: Rick Ungar, The Policy Page, Forbes, July 8, 2011
Political “Idjits”: Is the GOP Bound for A ‘Political Jonestown’?
Once upon a time the Republican Party included a few widely-respected leaders who valued reason and flexibility — names like Eisenhower, Javitz, Weicker and a few others come to mind. Hell, Nixon was a paragon of sanity compared to some of the loons running the GOP asylum now. if this sounds overstated, read Richard Cohen’s Sunday WaPo column “A Grand Old Cult,” in which he explains:
To become a Republican, one has to take a pledge. It is not enough to support the party or mouth banalities about Ronald Reagan; one has to promise not to give the government another nickel. This is called the “Taxpayer Protection Pledge,” issued by Americans for Tax Reform, an organization headed by the chirpy Grover Norquist. He once labeled the argument that an estate tax would affect only the very rich “the morality of the Holocaust.” Anyone can see how singling out the filthy rich and the immensely powerful and asking them to ante up is pretty much the same as Auschwitz and that sort of thing….Almost all the GOP’s presidential candidates have taken this oath, swearing before God and Grover Norquist to cease thinking on their own, never to exercise independent judgment and, if necessary, to destroy the credit of the United States, raise the cost of borrowing and put the government deeper into the hole.
Cohen notes the role of revisionist history and denial in the Republicans’ increasingly unhinged worldview:
…The hallmark of a cult is to replace reason with feverish belief. This the GOP has done when it comes to the government’s ability to stimulate the economy. History proves this works — it’s how the Great Depression ended — but Republicans will not acknowledge it.The Depression in fact deepened in 1937 when Franklin D. Roosevelt tried to balance the budget and was ended entirely by World War II, which, besides being a noble cause, was also a huge stimulus program. Here, though, is Sen. Richard Shelby mouthing GOP dogma: Stimulus programs “did not bring us out of the Depression,” he recently told ABC’s Christiane Amanpour, but “the war did.” In other words, a really huge stimulus program hugely worked. Might not a more modest one succeed modestly? Shelby ought to follow his own logic.
‘Logic’ may not be the best word to describe GOP thinking in the second decade of the 21st century. Cohen notes a similar pattern of denial with respect to Republican policies on abortion and global warning, and adds,
…Independent thinkers, stop right here! If you believe in global warming, revenue enhancement, stimulus programs, the occasional need for abortion or even the fabulist theories of the late Charles Darwin, then either stay home — or lie.This intellectual rigidity has produced a GOP presidential field that’s a virtual political Jonestown. The Grand Old Party, so named when it really did evoke America, has so narrowed its base that it has become a political cult. It is a redoubt of certainty over reason and in itself significantly responsible for the government deficit that matters most: leadership. That we can’t borrow from China.
The problem for Democrats is that, when Republicans become irrational proponents of discredited ideas and failed polices, there is not much incentive for Dems to up their game. Dems are not being challenged to respond to good arguments so much as tantrums by intellectually-constipated ideologues. The public gets cheated out of an enlightening debate and everybody loses.
What puzzles is why all of the Republicans have guzzled the Koolaid. Why hasn’t it dawned on the party’s brighter bulbs, perhaps Senator Lugar or, maybe Scott Brown or Huntsman that “Hmm, I could really separate myself from the pack of idjits by taking things to a more rational level”? All indications are that the public would like to see a little more flexibility from Republicans.
There may well come a point when the Republicans’ impressive party discipline starts to look like pointless obstructionism to swing voters. The public can see that, so far only one party is compromising. If sanity prevails, the Republicans’ unspoken meme that “we’re 100 percent right, and they’re 100 percent wrong, so we won’t give an inch” can’t play much longer without diminishing returns.
By: J. P. Green, The Democratic Strategist, July 5, 2011
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