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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

“All Hands On Deck!”: A Trump Presidency Would Sink All Boats

Hello, investors. Come join the foreign policy experts in daily panic attacks over what a President Donald Trump would mean for your world. What does one do about a candidate whose tax plan would send America into the fiscal abyss — who flaps lips about not making good on the national debt?

Should we be investing in the makers of Xanax and Klonopin? And on the personal side, are there enough benzodiazepines to go around?

We’re not talking just about the very rich. Anyone with a retirement account or a small portfolio has something to lose. The economic consensus is that a Trump presidency would sink all boats. And that certainly applies to Trump’s own economically struggling followers in the least seaworthy craft.

“Most Rust Belt working-class Americans don’t get it,” Bob Deitrick, CEO of Polaris Financial Partners in Westerville, Ohio, told me. “The working class thinks he’s going to stick it to the elites.”

The facts: The Trump tax plan would deliver an average tax cut of $1.3 million to those with annual incomes exceeding $3.7 million. The lowest-income households would get $128. (No missing zeros here.)

Folks in the middle would see federal taxes reduced by about $2,700, which sounds nice but would come out of their own hide. Medicare and other programs that benefit the middle class would have to be slashed. So would spending on science research, infrastructure and services essential to the U.S. economy.

Or we could skip the very deep spending cuts and see the national debt balloon by nearly 80 percent of gross domestic product, calculation courtesy of the Tax Policy Center.

Some might think that Trump’s tax plan — including the repeal of the federal tax on estates bigger than $5.43 million — would impress the income elite, but they would be wrong. In a recent poll of Fortune 500 executives, 58 percent of the respondents said they would support Hillary Clinton over Trump.

Most in this Republican-leaning group are undoubtedly asking themselves: What good is a fur-lined deck chair if the ship’s going down?

Then there are the others.

“Do middle-class Americans have any idea what could happen to the economy or the stock market if our president ever vaguely suggested defaulting on the national debt?” Deitrick asked. (His clients tend to be upper-middle-class investors.)

He recalls the summer of 2011, when a congressional game of chicken over raising the federal debt ceiling led to the possibility of a default. The Dow lost 2,400 points in a single week. And taxpayers were hit with $1.3 billion in higher borrowing costs that year alone.

Trump said on CNN that he is the “king of debt,” which in practice means he frequently doesn’t honor it. That’s why many major lenders shun him, talking of “Donald risk.”

Speaking of, Trump famously said in a Trump University interview, “I sort of hope (the real estate market crashes), because then people like me would go in and buy.”

But he also predicted that the real estate market would not tank — shortly before it did. Perhaps he never figured out there was a housing bubble. Or it was part of a clever scheme to peddle real estate courses with brochures asking, “How would you like to market-proof your financial future?”

Imagine a whole country taking on “Donald risk.”

The business community runs on stability. It can’t prosper under a showman who says crazy things and denies having said them moments later. A Trump presidency promises more chaos than a Marx Brothers movie — and you can believe it would be a lot less fun.

 

By: Froma Harrop, The National Memo, June 7, 2016

June 7, 2016 Posted by | Donald Trump, Economic Policy, Economy | , , , , , , , , | Leave a comment

“Everywhere And Nowhere”: Trump Is Waging An Assault On The Entire Structure Of Our Democracy. Now What?

Donald Trump and Paul Ryan had their much-anticipated meeting on this morning, and while Ryan did not endorse Trump (yet), they issued a joint statement talking about their “many areas of common ground.” Speaking afterward to reporters, Ryan said, “It was important that we discussed our differences that we have, but it was also important that we discuss the core principles that tie us together,” and that “Going forward we’re going to go a little deeper in the policy weeds to make sure we have a better understanding of one another.”

This is a fool’s errand, not just for Ryan but for us in the media as well. And it poses a profound challenge to democracy itself.

Just in the last couple of days, something has changed. Perhaps it should have been evident to us before, but for whatever reason it was only partially clear. The pieces were there, but they didn’t fit together to show us how comprehensive Trump’s assault on the fundamentals of American politics truly is.

And that has left the media — whose job it is to report what’s happening and describe it to the citizenry in a coherent way that enables them to make a reasonable decision — at loose ends. We simply don’t know how to cover a candidate like this. We need to figure it out, and quickly.

The foundation of democratic debate is policy, issues, the choices we make about what we as a nation should do. That’s what the government we create does on our behalf: it confronts problems, decides between alternatives, and pursues them. That’s also the foundation of how we in the press report on politics. Yes, we spend a lot of time talking about the personalities involved, but underneath that are competing ideas about what should be done. Should we raise taxes or lower them? Spend more or spend less? Make abortions easier or harder to get? Give more people health coverage or fewer? How do we combat ISIS? How should we address climate change? How can we improve the economy? How can we reduce crime? What sort of transportation system do we want? Which areas should government involve itself in, and which should it stay out of?

We all presume that these questions (and a thousand more) are important, and that the people who run for office should take them seriously. We assume they’ll tell us where they stand, we’ll decide what we think of what they’ve said, and eventually we’ll be able to make an informed choice about who should be the leader of our country.

Donald Trump has taken these presumptions and torn them to pieces, then spat on them and laughed. And so far we seem to have no idea what to do about it.

Let me briefly give an illustration. On the question of the minimum wage, Trump has previously said he would not raise it. Then Sunday he said he did want to raise it. Then in a separate interview on the very same day he said there should be no federal minimum wage at all, that instead we should “Let the states decide.” Then yesterday he said he does want to increase the federal minimum wage.

So when you ask the question, “Where does Donald Trump stand on the minimum wage?”, the answer is: everywhere and nowhere. He has nothing resembling a position, because what he said today has no relationship to what he said yesterday or what he’ll say tomorrow. And we’re seeing it again and again. Will he release his tax returns? Yes, but then no, but then yes and no. Does he want to cut taxes for the wealthy? His plan says yes, his mouth sort of says no, but who knows? What about his promise for “a total and complete shutdown of Muslims entering the United States” that so thrilled his supporters? Now he says it’s “only a suggestion.”

We assume that with an appropriately tough and smart interview, one or more of us in the media will eventually pin Trump down on any particular issue, and then we’ll have our answer and he can be judged accordingly. But that won’t happen.

So because we don’t know what else to do, we’re trying to hold him to the standards we use for every other candidate: what does he propose, and how reasonable are those proposals? For instance, Politico attempted to take a serious look at Trump’s policy statements, and concluded that “Trump bounces across the political spectrum,” but “Many of his proposals are either unrealistic in terms of executive power or would run into a brick wall with Congress, making a Trump administration borderline impotent on the very issues that are driving his supporters to the polls.”

We should give them credit for trying, but the problem is that if you want to evaluate Trump’s positions, you can only do so based on what they’ve been up until the moment you’re making the judgment. But if he gets asked about the same issues tomorrow, the odds that he’ll take the same position are essentially random, like a coin flip.

The problem isn’t that Trump’s positions don’t add up to a coherent ideology along the liberal-conservative spectrum, it’s that you can’t even call them “positions,” because you can never be sure which of them he’ll hold next week, much less if he eventually becomes president.

And remember, that’s really the point of the campaign: to figure out what kind of president each of the contenders would be. There’s always some measure of uncertainty, since we don’t know exactly what crises the next president will confront or what kind of manager he or she would be. But with every other person who ran this year, an informed observer could tell you 90 percent of what they would do if they eventually became president. You might love or hate Hillary Clinton, but we can all come to at least a basic agreement about the policies she’ll pursue. At this point, can anybody say what Trump would do as president? About anything?

It’s important to be clear that Trump isn’t just a “flip-flopper.” When that charge has been leveled in the past, whether against a Democrat or Republican, it was because they had one position (or set of positions) and then changed them. Even if the critique was animated by the concern that they might change again in the future, at any given moment you knew where they stood. You might judge them too opportunistic, or like their previous position more than their current one. But there was a progression and a logic to where they stood, and the assumption was that whatever their position was, they’d act on it.

This is the way we’ve tried to explain Trump, assuming that there’s some kind of linear progression to what he says about issues: he was in one place appealing to primary voters, and there are things he might change to appeal to general election voters. But it’s clear now that that was a mistake, because that’s now how this works with him.

That leaves us unable to talk about Trump and issues in the way we normally would. And this is a serious problem. The basic issue divides between the parties comprise one of the key foundations on which we build our explanations of politics. They structure the arguments and the contest for power, they give meaning to the whole game. They’re the reason all of this silliness matters, because at the end of it we’ll be choosing a new government, led by one individual who will make choices that affect all of us in profound ways.

It’s clear now that Donald Trump may be unique in American history — not just in his inexperience, not just in his ignorance, not just in his bombast, and not just in his crypto-fascist appeal. He’s unique in that he doesn’t care in the least about the the things that politics and government are all about, and he won’t even bother to pretend he does. I’ll confess that I don’t know where this leaves us in the media, and how we should approach his candidacy from this point forward in order to help the public understand it. But that may be the most important question we need to answer right now.

 

By: Paul Waldman, Senior Writer, The American Prospect; Contributor, The Plum Line Blog, The Washington Post, May 12, 2016

May 14, 2016 Posted by | Democracy, Donald Trump, Media, Policy | , , , , , , , | 2 Comments

“Fear And Racism Taking The Place Of Policy”: Donald Trump; The Epitome Of Post-Policy Nihilism

Fair warning: over the next six months you’re not likely to find me writing much about Donald Trump’s proposed “policies.” Over the last few days there has been a lot of talk about whether or not the presumptive Republican nominee does/doesn’t support raising the minimum wage and lower taxes on the uber-wealthy. Remember that time when he said that women who get abortions should be punished? In less than 24 hours he had reversed course. Now he’s saying that his proposal to ban all Muslims from entering the United States was just a “suggestion.” And one of his advisors said that he will consider changes to Medicare and Social Security. Next thing you know, that whole border wall that Mexico is going to pay for will be nothing more than a distant memory.

All of this was pretty well explained by something an anonymous source told Politico.

“He doesn’t want to waste time on policy and thinks it would make him less effective on the stump,” the Trump source said. “It won’t be until after he is elected but before he’s inaugurated that he will figure out exactly what he is going to do and who he is going to try to hire.”

None of this has anything to do with Trump pivoting towards the center for the general election. Way back in January he told Bill O’Reilly, “The voters want unpredictability.”

There are two things that Donald Trump knows really well: (1) how to play the media in order to get maximum exposure (these flip-flops generate tons of coverage), and (2) what his base of supporters want to hear. I’ll give you a clue…it’s not about policies.

Back in 2013, Steve Benen came up with the perfect way to describe the current iteration of Republicanism: post-policy nihilism. After the disastrous Bush administration, it was demonstrated that Republican policies – both foreign and domestic – were complete and utter failures. In response, rather than re-think those policies, conservative leaders drafted a plan of total obstruction to anything President Obama and the Democrats attempted to do. In order to get their base on board with that plan, they fanned the flames of fear and racism…that is what took the place of actual policies.

It should therefore come as no surprise to anyone that the current presumptive Republican presidential nominee is running a post-policy campaign based on fear and racism. It is why none of the other contenders for the Republican nomination could ever lay a hand on him. Their choice was to either defend the failed policies of the Bush administration or challenge the fear and racism that animated his supporters – either option was doomed to fail.

What we’ll be witnessing in this election is someone running to be the leader of the free world who is the epitome of post-policy nihilism. That’s why I wrote yesterday that his response to a question about whether or not he regretted saying that John McCain wasn’t a war hero was so revealing. At first he flip-flopped on what he’d said previously. Then came this:

You do things and you say things. And what I said, frankly, is what I said. And some people like what I said, if you want to know the truth. There are many people that like what I said. You know after I said that, my poll numbers went up seven points.

Over the next six months Donald Trump will ensure that journalists who attempt to take what he says about policy seriously are sent running around in circles. Proposing actual policies is not the game he is playing – and neither are his supporters.

 

By: Nancy LeTourneau, Political Animal Blog, The Washington Monthly, May 12, 2016

May 13, 2016 Posted by | Donald Trump, Fearmongering, GOP, Racism | , , , , , , , | Leave a comment

“The Making Of An Ignoramus”: Making America Great Again Means Running The Country Like A Failing Casino

Truly, Donald Trump knows nothing. He is more ignorant about policy than you can possibly imagine, even when you take into account the fact that he is more ignorant than you can possibly imagine. But his ignorance isn’t as unique as it may seem: In many ways, he’s just doing a clumsy job of channeling nonsense widely popular in his party, and to some extent in the chattering classes more generally.

Last week the presumptive Republican presidential nominee — hard to believe, but there it is — finally revealed his plan to make America great again. Basically, it involves running the country like a failing casino: he could, he asserted, “make a deal” with creditors that would reduce the debt burden if his outlandish promises of economic growth don’t work out.

The reaction from everyone who knows anything about finance or economics was a mix of amazed horror and horrified amazement. One does not casually suggest throwing away America’s carefully cultivated reputation as the world’s most scrupulous debtor — a reputation that dates all the way back to Alexander Hamilton.

The Trump solution would, among other things, deprive the world economy of its most crucial safe asset, U.S. debt, at a time when safe assets are already in short supply.

Of course, we can be sure that Mr. Trump knows none of this, and nobody in his entourage is likely to tell him. But before we simply ridicule him — or, actually, at the same time that we’re ridiculing him — let’s ask where his bad ideas really come from.

First of all, Mr. Trump obviously believes that America could easily find itself facing a debt crisis. But why? After all, investors, who are willing to lend to America at incredibly low interest rates, are evidently not worried by our debt. And there’s good reason for their calmness: federal interest payments are only 1.3 percent of G.D.P., or 6 percent of total outlays.

These numbers mean both that the burden of the debt is fairly small and that even complete repudiation of that debt would have only a minor impact on the government’s cash flow.

So why is Mr. Trump even talking about this subject? Well, one possible answer is that lots of supposedly serious people have been hyping the alleged threat posed by federal debt for years. For example, Paul Ryan, the speaker of the House, has warned repeatedly about a “looming debt crisis.” Indeed, until not long ago the whole Beltway elite seemed to be in the grip of BowlesSimpsonism, with its assertion that debt was the greatest threat facing the nation.

A lot of this debt hysteria was really about trying to bully us into cutting Social Security and Medicare, which is why so many self-proclaimed fiscal hawks were also eager to cut taxes on the rich. But Mr. Trump apparently wasn’t in on that particular con, and takes the phony debt scare seriously. Sad!

Still, even if he misunderstands the fiscal situation, how can he imagine that it would be O.K. for America to default? One answer is that he’s extrapolating from his own business career, in which he has done very well by running up debts, then walking away from them.

But it’s also true that much of the Republican Party shares his insouciance about default. Remember, the party’s congressional wing deliberately set about extracting concessions from President Obama, using the threat of gratuitous default via a refusal to raise the debt ceiling.

And quite a few Republican lawmakers defended that strategy of extortion by arguing that default wouldn’t be that bad, that even with its access to funds cut off the U.S. government could “prioritize” payments, and that the financial disruption would be no big deal.

Given that history, it’s not too hard to understand why candidate Trump thinks not paying debts in full makes sense.

The important thing to realize, then, is that when Mr. Trump talks nonsense, he’s usually just offering a bombastic version of a position that’s widespread in his party. In fact, it’s remarkable how many ridiculous Trumpisms were previously espoused by Mitt Romney in 2012, from his claim that the true unemployment rate vastly exceeds official figures to his claim that he can bring prosperity by starting a trade war with China.

None of this should be taken as an excuse for Mr. Trump. He really is frighteningly uninformed; worse, he doesn’t appear to know what he doesn’t know. The point, instead, is that his blithe lack of knowledge largely follows from the know-nothing attitudes of the party he now leads.

Oh, and just for the record: No, it’s not the same on the other side of the aisle. You may dislike Hillary Clinton, you may disagree sharply with her policies, but she and the people around her do know their facts. Nobody has a monopoly on wisdom, but in this election, one party has largely cornered the market in raw ignorance.

 

By: Paul Krugman, Op-Ed Columnist, The New York Times, May 9, 2016

May 11, 2016 Posted by | Debt Crisis, Donald Trump, Economic Policy | , , , , , , , , | Leave a comment

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