"Suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself."
- Mark Twain
As I settled in this afternoon awaiting a coming ice storm (the first of these just missed us last night) and curious about what's going on in Egypt where around 2 million people were demonstrating today for Hosni Mubarak's resignation (in a speech this afternoon he said he would not run for reelection and would be out of office by the Fall... as you might guess, this does not seem good enough for the demonstrators who want him out now) I wondered what was happening on C-Span 2.
I thought I'd watch the Senate debate the FAA Funding Bill and what do you think happened? Senate Republicans have attempted to repeal last year's sweeping health care law via an amendment to a FAA funding, proposed by the beloved Minority Leader Mitch McConnell (R-Ky.) Not since the Earth's creation some 6000+ years ago, when men and dinosaurs peaceably shared the world, have I heard such idiocy.
Once more since arriving on Capitol Hill, the new Republican dominated House of Representatives and the newly reinforced Republican Senate minority has equivocated on the topic of spending cuts. By now we are all well aware that the Republicans have abandoned the goal of cutting $100 billion dollars this fiscal year and likewise, they have failed to produce a pro rata spending reduction plan to address that shortened year. We all remember that taxes, debt reduction and spending cuts were in the forefront of the Republican agenda for the 2010 elections as these headlines from conservative sources show: "Tax, Spending Cuts Top GOP Campaign-year 'Pledge" or "Tax, spending cuts lead Republican campaign manifesto" Needless to say, You get the idea.
Okay so what then happened to all of the bold talk about taking on entitlements and spending? When faced with having to answer that question on national television Mitch McConnell echoed the reluctance that Speaker of the House John Boehner had previously stated. As if by magic, Senate Minority Leader Mitch McConnell appearing on "Meet the Press" danced around the question that Republicans seemed obviously reluctant to come out with bold measures to tackle deficit spending as the following exchange between Senator McConnell and host David Gregory reveals:
"MR. GREGORY: Well, that's very interesting because I've also detected a great deal of caution on the part of Republicans who, who campaigned on the idea of spending cuts. And yet, when it comes to a program like Social Security--it was Speaker Boehner who told a group of us this week, "Well, look, we need to spend more time defining the problem before we get in the boat with the president here and say that we've got to make long-term changes." Is that your view?
SEN. McCONNELL: Well, look, we have, we have two problems here. It's our annual deficit, completely out of control. We're going to send the president a lot less--we're going to allow him to sign onto a lot less spending than he recommended the other night and that he's likely to send us in the budget. Then with, with regard to long-term unfunded liabilities, the entitlements, Speaker Boehner's correct, you cannot do that on a partisan basis. President Bush tried doing that in 2005 with regard to Social Security's problems. And by the way, the announcement this week that Social Security's gone into deficit, it will run a $45 billion deficit this year and for as far as the eye can see. Look, entitlement reform can only be done on a bipartisan basis. It's happened before. Reagan and Tip O'Neill fixed Social Security in '83. Reagan and the Democratic House did tax reform in '86.
MR. GREGORY: So, but if the president were to say, "OK, Leader McConnell, if, if you're prepared to deal with some revenue increases, we can also deal with some benefit cuts. Let's take a balanced approach to Social Security," you could support that?
SEN. McCONNELL: Look, you know, you've tried this before. I, I'm not going to negotiate the deal with David Gregory. I'd be happy to negotiate it...
MR. GREGORY: I keep hoping you'll change your mind.
SEN. McCONNELL: I'd be happy to try to negotiate the deal, and Speaker Boehner would too, with the president and the vice president and others.
MR. GREGORY: But does the president have to go first before you'll take on entitlement reform?
SEN. McCONNELL: We have to go together. We have to go together. The American people are asking us to tackle these problems. I think the president needs to be more bold. We're prepared to meet--I've got a lot of new members, and Speaker Boehner does as well, who came here to tackle this big problem. We were waiting...
MR. GREGORY: But you're saying, "Be bold on entitlements and Republicans will meet you halfway"?
SEN. McCONNELL: We're happy to sit down and talk about entitlement reform with the president. We know Social Security is in trouble. It was just announced by CBO this week. We know Medicare is on an unsustained path. They took a half a trillion dollars out of it to fund this healthcare program that they enacted. Look, we need to get serious about this."
As the above commentary reveals, what we have before us is a Republican leadership cadre that has already deviated from the rhetoric of the campaign trail by putting the ball in Barack Obama's court by stressing that it is the duty of the President to come up with "bold" proposals on deficit and spending reduction as per Senator McConnell's commentary above. But wasn't that what the Republicans ran on in the first place? For all of the rhetoric of 2010 can't they showcase their own bold ideas on "Meet the Press", America's premier Sunday morning political talk show? Likewise, Speaker Boehner's comment that Republicans "need to spend more time defining the problem" also seems to ring hollow, coming from a guy who on this very show said before the 2010 elections that the G.O.P. had spent the past last year listening to "the American people."
Correct me if I'm wrong but didn't the Republicans present themselves as the people who had this problem figured out and who knew what to do to get this country back on the right track, which oddly enough they got us off of in the first place when they squandered a trillion dollar plus surplus and launched two wars while cutting taxes, a historical first for the United States? They had the opportunity to put that surplus into the Social Security system or to use it to pay down the national debt as they were advised to do by Alan Greenspan, yet they chose to do otherwise. Now when elected to produce bold public policy to address our fiscal problems they plead for "more time" and look a president much maligned by them for "bold" proposals!
What's also semi-comical is Mr. McConnell's new found affinity for bipartisan cooperation. Isn't it a bit curious that they very guy who said it was his goal to see that Barack Obama be a one term president, now openly solicits the President's support and cooperation? Is this borne of a realization that the Republicans can't possibly meet their agenda alone? Is this a maneuver concocted to throw a curve ball at the Tea Party crowd as there has been little beyond rhetoric on the part of the G.O.P. when it comes to deficit reduction specifics? We've all heard about Congressman Paul Ryan's "Roadmap for America" yet it's a document that few in the Republican Party had signed onto in the run up to 2010.
In the final analysis it seems that the bold rhetoric of the campaign trail has now faded in the harsh winter of political reality. Hence the old adage, "talk is cheap." Now that they are in a position of power in Washington, the Republicans will have to finally translate their rhetoric into policy, thus far they have done little but dance around the tough issues and meet tough questions with clever rhetorical replies. How long will that last before their constituents hit the streets and demand some form of accountability from those who went to Washington to turn back the tide of Obama "the Socialist."
Sometimes there are simply no words to describe the behaviour of Mitch McConnell's band of merry misanthropes - also known as much of the US Senate Republican Caucus. The level of pathological callousness, a nihilistic streak that would make Friedrich Nietzsche blush, the willingness to put an AR-15 to the head of the nearest vulnerable group if they don't get every last dime of the mud-bath tax credit for the likes of Kim Kardashian.
You've seen these clowns in action. You know what I'm talking about.
They diagnose patients via Youtube. They block votes on everything that doesn't involve water boarding someone or gutting mine safety standards. They turn bathroom stalls in Minnesota airports into tourist destinations.
Yet, this latest stunt, well, this one even shocked me. Senator McConnell's boisterous brood decided that it was too expensive to fund healthcare for 9/11 first responders. That's right, the guys and gals who ran into cascading buildings, brick bonfires and smoldering ash, many of whom - the ones lucky enough to get out alive - developed respiratory illness and cancer for their troubles.
Sicknesses no doubt brought about by their sloth, atheism and at least occasional voting for Democrats.
So "offsets" had to be found to pay for $6 to $7 bn in life-saving funds. Yes, we just added $858 bn in red ink to our budget because somewhere a campaign contributor needed pocket change for the latest yacht shoe, but those in need of less than 1 per cent of that amount for the deleterious results of heroism?
As of this morning it seems that Obama is ready to deal with the Right... extend the Bush tax cuts for a couple of years in exchange for one year's extension of Unemployment funding. The tax cut deal is tentative. It hasn't gone through Congress yet (although McConnell is probably dribbling with laughter in his office), but it probably will.
I recently wrote that I believe a number of unavoidable "train wrecks" will occur between the Tea Party and the Republican Party. When it comes to these "train wrecks" it's not a matter of if, it's a matter of when. The first of these are taking shape before anyone even arrives on Capitol Hill to take a seat in the new Congress. The first two issues of contention will be who gets the committee chairs and the attempt to "repeal and replace" Obamacare.
Tea Party-endorsed candidates accounted for almost half of the House seats picked up by the G.O.P. and members of the movement are expecting to play more than second fiddle to Republican veterans in the 112th Congress. A recent article on these newcomers and their expectations revealed: "The large number of incoming Tea Party-backed candidates has empowered Republicans aligned with the grass-roots activists to try to expand their power in Congress. Representative Michele Bachmann, a Minnesota Republican and a favorite of the movement that seeks limited government, announced yesterday on Facebook that she will seek a leadership post in the party's House caucus." While committee chairmanships may be the expectation of the newly elected Tea Party backed members, the reality will be quite different. You see the incoming Speaker of the House, John Boehner is not exactly an ideologue or a fan of the movement. Moreover, the process for securing committee chairmanships takes place within the personal politics of the House and not on the set of Fox News or on the campaign trail, which is to say that the workings of Congress have not changed even if the Tea Party has come to Washington. As such, it's more than likely that the new occupants of the various committee chairmanships have already been selected and it's not likely that you will find too many Tea Party people among them. Representative Steve King, an Iowa Republican who is supporting Bachmann said: "party leaders want to pack the leadership team with their picks. That means there's not someone on the inside circle who's going to be the voice of constitutional conservatives. That would be a shame, since they are the ones who gave us this majority." If this in fact turns out to be the "new normal" on Capitol Hill, was the claim made that the Tea Party Movement has been used for its votes and its efforts farfetched or is it likely to be an accurate assessment of an unfolding reality?
The second stumbling block on the road to 2012 will be the issue of what to do about Obamacare. Many who ran as first time candidates and who received the Tea Party endorsement signed a pledge that states: "I pledge, if elected, to vote for all bills which seek to repeal the health care bill, HR 3590, signed into law on March 23, 2010." Likewise, existing Republicans who sought re-election signed a similar statement in order to obtain the movement's endorsement and support. In "A Pledge to America"; the G.O.P. committed to:" to "repeal and replace" Obamacare should their party gain control of the U.S. Congress." However, without control of the Senate and in the face of an Obama veto, this was an unrealistic aspiration to begin with. That unrealistic goal has already led Senate Minority Leader Mitch McConnell to back away from any such idea. As McConnell said yesterday during a speech at the Heritage Foundation.: "We may not be able to bring about straight repeal in the next two years, and we may not win every vote against targeted provisions, even though we should have bipartisan support for some...But we can compel administration officials to attempt to defend this indefensible health spending bill and other costly, government-driven measures, like the stimulus and financial reform." Well, it doesn't take a seasoned political analyst to see that this will run right into what the Tea Party Movement's adherents want and expect. Just yesterday the co-founder of the Tea Party Patriots, Mark Meckler was on national television speaking on what he believes the American people want and what the Tea Party wants to deliver: a total roll back of the Obama agenda. "They are not in a mood for compromise", said Meckler of both the movement's rank and file and the larger electorate. Well as it may more than likely turn out, those who are unwilling to compromise may be the ones who are ultimately disappointed and not vice versa.
Republicans have not even popped the corks of their celebratory champagne bottles yet and already there is a anti-Tea Party coup in the works the goal of which is to torpedo the presidential aspirations of Sarah Palin before her campaign even gets underway. A damming article from Politico which broke just yesterday revealed a concerted if uncoordinated effort taking shape among Republican leaders to see that Palin does not secure the 2012 Republican nomination for president. Quoting Politico:"Interviews with advisers to the main 2012 presidential contenders and with other veteran Republican operatives make clear they see themselves on a common, if uncoordinated, mission of halting the momentum and credibility Palin gained with conservative activists by plunging so aggressively into this year's midterm campaigns...There is rising expectation among GOP elites that Palin will probably run for president in 2012 and could win the Republican nomination, a prospect many of them regard as a disaster in waiting..."There is a determined, focused establishment effort ... to find a candidate we can coalesce around who can beat Sarah Palin," said one prominent and longtime Washington Republican. "We believe she could get the nomination, but Barack Obama would crush her." Thus it would appear that the trains are already on the track for what will be the first train wreck between the G.O.P. esthablishment and the Tea Party Movement.You can add to this developing drama the existing controversy between Ms. Palin and Tea Party star Joe Miller, the current Alaska Senatorial contender whom Palin backed against Lisa Murkowski only to have Miller short change Palin when it came time to endorse her presidential aspirations. This G.O.P. esthablishment - Tea Party friction has been below the surface since the movement gained traction during the 2009 health care reform debates. Appearing on Fox News with Greta Van Sustern in the summer of 2009, Rush Limbaugh was nothing if not emphatic in his denunciation of the Republican leadership and the veiled contempt that they have for the Tea Party Movement generally and Sarah Palin in particular. Tensions only grew more intense as the Tea Party Movement knocked off several Republican veterans and hand picked contenders during primary season. Thereafter the movement went on to put a number of Republicans not currently running for re-election on notice that they too were in the movement's cross hairs.
In an interview with the National Journal, Senate Republican Leader, Mitch McConnell said: "The single most important thing we want to achieve is for President Obama to be a one-term president," Is McConnell's rhetoric aimed at placating the Tea Party or does he actually believe that in the depths of the Great Recession, this is the single most important goal for a victorious Republican Party? What happened to the never-ending Republican cry: "Where are the jobs?" What became of all of the talk of reducing the size of government, of tax policy and talk about how to "grow the economy."? Now on the brink of victory the Republican elites have shown their hand and it consists first and foremost of political priorities aimed at winning the 2012 presidential election and making sure that Sarah Palin isn't around to screw things up. What happened to the G.O.P's big effort to "listen to the American people" this past summer? Thus we see just how important the dire state of the economy is to the elites who fashion Republican political strategy. Have McConnell and his lieutenants already misread the election's outcome, taking it to mean that they have a mandate in spite of the fact that they are polling at lower favorability ratings then the Democrats that are about to be turned out of office? Have they misread a vote of protest for an endorsement of the Republican Party line which it can't possibly be given the G.O.P.s historically low standing among voters? That said, how long would it be before the voters come down with that old sinking feeling of buyer's remorse? Surely if the immediate follow on to the midterm elections is the out break of an intra-party civil war within the G.O.P. what else could a weary and disgruntled electorate feel but buyer's remorse, dismay and disgust. The election's outcome will certainly cause the Democrats to circle the wagons and try to regroup for 2012. But it already seems like the G.O.P. and the Tea Party are in the process of circling the rifles into a circular firing squad and that can't be good at a time like this when the country is desperately in need of solutions to deep seated problems of long standing. The final question from all of this is: Has the Republican Party gotten more than it bargained for in its marriage of convenience with the Tea Party and is it too late to unwind the relationship before it tears the G.O.P. to shreds in an intraparty conflict that could end the Republican Party as we presently know it?
In two previous articles, "Maintain Tax Cuts for the Rich? Americans Don't Seem to Buy the Conservative Argument" and the "Efficacy of Tax Cuts Is now Questioned" I laid out two basic premises. One was that a majority of the American people did not buy into the conservative argument that tax cuts had to be maintained for the richest among us. The second was that the use of tax cuts in this type of economic downturn had been called into question by some very prominent economists and that those same economists just happen to be on the right side of the political spectrum. The notion that tax cuts are of little use in this particular economic environment received further support last week with the publishing of the findings of the nonpartisan Congressional Budget Office from which the following conclusions were drawn: " The concept of lower taxes is so appealing to voters that many embrace them as an economic cure-all... But economic research suggests that tax cuts, though difficult for politicians to resist in election season, have limited ability to bolster the flagging economy because they are essentially a supply-side remedy for a problem caused by lack of demand.
The nonpartisan Congressional Budget Office this year analyzed the short-term effects of 11 policy options and found that extending the tax cuts would be the least effective way to spur the economy and reduce unemployment. The report added that tax cuts for high earners would have the smallest "bang for the buck," because wealthy Americans were more likely to save their money than spend it....Neither of those options, though, would do as much to stimulate the economy as offering direct payments to the unemployed and Social Security recipients or reducing the payroll taxes of workers, the study found...So while the decision on whether to extend the tax cuts will have a lasting impact on the deficit and on how the nation's tax burden is distributed, economists and tax experts say it is unlikely to offer much immediate relief for high unemployment and sluggish growth... It may have some small impact along the margins, but firms don't hire based on tax breaks; they hire based on demand," said Roberton Williams, a senior fellow at the nonpartisan Tax Policy Center. "So a lot of the tax breaks are likely to be rewarding people and companies for what they were going to do anyway."
As a footnote to the above, it's also of note that another prominent conservative has come to criticize the notion that tax cuts would be economically effective today. David Frum, a former Bush speechwriter and Fellow at the ultra conservative American Enterprise Institute, in an interview on NPR's Marketplace said the following:" The recession began when all the Bush tax cuts were fully in effect. And yet, it's suggested that re-enacting the tax cuts will somehow cure the crisis that those same tax cuts failed to prevent." Don't get me wrong, Frum is not endorsing the Obama Administration or its economic policies, not by a long shot. What he is saying, that is relevant to my premise is that those who are banking on tax cuts to pull us out of the current predicament are sadly mistaken as to their usefulness. Many would argue that tax cuts can only work if they are coupled with spending cuts, but to think that the government could reign in spending in the midst of this type of downturn requires a quantum leap of faith that would come with the notion that removing one of the only simulative elements remaining in the economy would somehow not cause the recession to worsen. This point was further underlined recently on Meet the Press. When pressed by moderator David Gregory, the Republican Minority leader, Mitch McConnell, declined to commit to spending cuts if the GOP took control of Capitol Hill. The bottom line is this: those on the far right fringe who parrot 18th and 19th Century economic concepts seem to strangely factor out the social chaos that would result from an ideology that was better suited for the world of Charles Dickens than the globalized world of today. The Republicans who hope to capture Capitol Hill in a few short weeks know this as well that's why they are reluctant to go on the record and say otherwise.
A corollary argument that is used to support the extension of tax cuts to those families earning over $250,000.00/year is that idea that if this tax break is eliminated, that job creation will suffer. Here again there seems to be little in the way of empirical evidence to support this claim. A recent article; "Tax Increases Would Hit Few Small Businesses"; summarized the findings of the IRS and it's Joint Committee on Taxation as follows: "Despite that emotional appeal, Internal Revenue Service statistics indicate that only 3 percent of small businesses would be subject to the higher tax, and many studies of previous tax increases suggest that it would have minimal impact on hiring... According to the Joint Committee on Taxation, 97 percent of all businesses owners do not earn enough to be subject to the higher rates, which would be levied on income of over $200,000 for individuals and $250,000 for families...But much of the research over the last two decades has found that increases in top tax rates can lead to an increase in the formation of small businesses, as wealthy individuals apparently begin start-ups to avail themselves of the more generous tax breaks offered to businesses... Higher taxes may lead individuals to seek self-employment because the opportunities for tax evasion and avoidance are greater," according to a report released this month by the nonpartisan Congressional Research Service, which surveyed more than 20 studies on the effects of taxes on hiring."
Thus it seems that the hue and cry about the dangers to job creation at the level of small business may in fact be greatly exaggerated after all, yet one more political football flying about amidst all of the misconceptions that relate to the issues of tax policy and it's applicability in the midst of the worst downturn since the 1930s. It's important to note that I am not against tax cuts per se; it's just that they are not and never have been a cure all too economic ills. That said; the monotonous reiteration of the sanctity of tax cuts in this particular environment seems to amount to nothing more than the political posturing of those who are at a loss for good ideas as to what we need to do to repair the damage done over the past thirty years of deregulation and bubble economics.
With regard to the fact that most Americans don't support extending tax cuts to the wealthiest, the latest New York times/CBS poll supports what the last Gallup Poll showed: "The poll found that 53 percent of Americans say Mr. Obama's proposal to increase taxes on households earning $250,000 or more is a good idea, and 38 percent say it is a bad idea." Thus once again as was previously pointed out, the disappointment and anxiety of rank and file Americans does not translate into empathy for the woes of the most fortunate among us.
2)New York Times/CBS News Poll September 15, 2010http://documents.nytimes.com/new-york-timescbs-news-poll-new-york-timescbs-news-poll-mood-of-the-country-as-midterms-approach?ref=politics 3)
We constantly hear the monotonous refrain from the right that now is not the time to raise taxes, even for the richest Americans, citing that this will somehow threaten the weak and halting recovery. Yet a composite number of 59% of the American people either favor the expiration of tax cuts for the wealthiest or a roll back of the Bush era tax cuts entirely as per the latest Gallup Poll. But oddly enough, it's not just the folks on Main Street who feel this way; it's also the sentiment of a few prominent thinkers on the right hand side of the political spectrum.
Take former Reagan OMB Director and economist David Stockman for example. He has emphatically been critical of the gains made by the richest Americans of late: "I find it unconscionable that the Republican leadership, faced with a 1.5 trillion deficit, could possibly believe that good public policy is to maintain tax cuts for the top 2 percent of the population who, after all, have benefited enormously from this phony boom we've had over the last 10 years as a result of the casino on Wall Street." Stockman reinforced this point a few days later in an article entitled Four Deformations of the Apocalypse: "It is not surprising, then, that during the last bubble (from 2002 to 2006) the top 1 percent of Americans - paid mainly from the Wall Street casino - received two-thirds of the gain in national income, while the bottom 90 percent - mainly dependent on Main Street's shrinking economy - got only 12 percent. This growing wealth gap is not the market's fault. It's the decaying fruit of bad economic policy." Not to be missed is the opinion of Alan Greenspan who likewise has been critical of the G.O.P's stance on eliminating tax breaks for those who need them the least. To wit: "Now Mr. Greenspan is wading into the most fierce economic policy debate in Washington - what to do with the tax cuts adopted, in large part because of his implicit backing, under President George W. Bush - with a position not only contrary to Republican orthodoxy, but decidedly to the left of President Obama. ... Asked whether higher taxes in 2011 could choke off the nascent recovery, Mr. Greenspan replied: "It is risky, but the choice of not doing it is far riskier."
Taking the above into consideration the next question is: Will it be a winning strategy for the G.O.P. to continue to support tax breaks for the richest Americans when the support for that policy is not supported by a majority of those polled? In the long haul, I believe it's a losing proposition for the G.O.P. to carry on about the well being of a relatively few in our society when so many are still having such a difficult time. There's also the undeniable element of partisan politics in all of this. One can only ask the following question: If the leadership of the Republican Party is so up in arms over the Obama Administration's proposal to adjust the tax level of the richest Americans back to levels in effect during the Clinton Administration, then were was their opposition to Ronald Reagan who presided over tax rates that were higher during his administration than those in existence during the Clinton Administration? Well, you can bet your bottom dollar that this is one discussion that neither Mitch McConnell nor John Boehner is going to be too anxious to have on the Sunday morning talk show circuit.
Tax policy and tax cuts in particular are elements central to the Republican Party's economic philosophy. Republicans have made tax cuts one of their primary tools for fighting the Great Recession and returning America to prosperity. When advocating cuts, many on the Right have waxed nostalgic for the Reagan era tax cuts and their supposed economic benefits. The "record" of those cuts is held up as a justification for extending the Bush tax cuts beyond their expiration date and likewise for cutting taxes generally. All of this as an ideological counterpoint to what the Obama Administration has done in addressing the current downturn. Thus when economists who describe themselves as free market advocates, Libertarians, Republicans and even conservatives call extending the Bush era tax cuts into question one can only take note and inquire further as to why those whom we would expect to endorse tax cuts count themselves among the opposition.
Opposition to extending the tax cuts of the Bush Administration falls generally into two different schools of thought. In one camp you have people like Alan Greenspan and David Stockman the former Director of OMB during the Reagan years, both of whom argue that tax cuts are being supplemented by foreign borrowing and are as such unwarranted. In another camp you have people like Bill Gross of PIMCO and former Bush Administration economist Glenn Hubbard who support more federal spending due to the severity of the current downturn. Appearing on Meet the Press on August 1st Greenspan voiced opposition to the idea of tax cuts combined with continued borrowing. He reinforced this point in a New York Times interview the next week that stated: "Mr. Greenspan is calling for the complete repeal of the 2001 and 2003 tax cuts, brushing aside the arguments of Republicans and even a few Democrats that doing so could threaten the already shaky economic recovery." Greenspan went on to point out that tax cuts are appropriate when the government is running a surplus and that his original support of tax cuts was combined with other economic requirements that were ignored by economic policy makers within the Bush Administration. A far more scathing condemnation of the Republican Party, it's economic performance and it's fixation with tax cuts was voiced by David Stockman in two separate pieces: "Bush Tax Cuts Will Make U.S. Bankrupt" and "Four Deformations of the Apocalypse". Quoting Stockman: "Yes, there was a good idea that in certain circumstances, lower tax rates will encourage economic activity and savings. But when you make it a religion, when you make it a catechism and you say you cut taxes no matter what the circumstance, what the season, what the condition, then I think the whole idea has been perverted...I find it unconscionable that the Republican leadership faced with a 1.5 trillion deficit could possibly believe that good public policy is to maintain tax cuts for the top 2 percent of the population who, after all, have benefited enormously from this phony boom we've had over the last 10 years as a result of the casino on Wall Street." Stockman goes on to analyze the four deformations of the American economy that he says resulted from Republican policies that abrogated the Bretton Woods Agreement, the exportation of jobs overseas, the hyper-growth of the financial sector and the explosion of public debt. Yet it is in addressing the growth of public debt that Stockman is especially harsh in analyzing the Republican policies both during the Reagan era and beyond. Again to the author: "This debt explosion has resulted not from big spending by the Democrats, but instead the Republican Party's embrace, about three decades ago, of the insidious doctrine that deficits don't matter if they result from tax cuts."
The alternate point of view is put forth by those who see the economy as being so structurally unsound that no amount of tax cuts will help and that only massive public works projects and spending on retraining will provide the necessary remedial aid the economy requires. Bill Gross the fixed income guru of PIMCO was interviewed for an article in the New York Times by Nelson Schwartz, "Jobless and Staying that Way" with the following takeaway: "Despite his long-held belief in free markets, smaller government and lower taxes, Mr. Gross said politicians must recognize that this time, "government is part of the solution." He added, "In the new-normal world, there are structural problems, which require structural solutions... Mr. Gross believes that it's time for the government to spend tens of billions on new infrastructure projects to put people to work and stimulate demand." Quoting Gross: "We think the coma will last for years unless government policy changes to restimulate the private sector and bring unemployment down," In the same camp is former Bush economic advisor Glenn Hubbard who stresses a new, expanded role for the government in addressing the problem of structural unemployment. He talks about a "new normal," where economic growth is too slow to bring down the unemployment rate which in turn requires the government to be more actively involved in mitigating problems that now emerge as the result of globalization. In Hubbard's words: "If there is a new normal, it's more about the labor market than G.D.P. "We have to help people face a new world."
In contrast, the Republican Party continues to talk about the current downturn as if it were a garden variety economic contraction that could be dealt with through tools and policies related thereto. It continues to advocate tax cuts as if they would somehow create consumer demand where it currently doesn't exist. Conservatives have repeatedly pointed to the Reagan era tax cuts as a prime example of the efficacy of such measures in stimulating demand and at the same time they have ignored the massive Reagan era stimulus provided by military spending. In a recent article titled "Unemployment: What Would Reagan Do? Henry Olsen of the American Enterprise Institute talked extensively of Reagan's tax cuts but mentioned not a word of his spending. To paraphrase the source "Reaganomics" below: "Reagan very significantly increased public expenditure, primarily the Department of Defense, which rose from $267.1 billion in 1980 to $393.1 billion in 1988." That meant that "defense spending went from being 22.7% to 27.3% of total public spending. In order to cover new federal budget deficits, the United States borrowed heavily both domestically and abroad, raising the national debt from $700 billion to $3 trillion, and the United States moved from being the world's largest international creditor to the world's largest debtor nation." Beyond spending for military goods, Reagan expanded the size of the federal government creating a new cabinet level department and presiding over a federal workforce that was larger when he left office than it was when he arrived. Economist Robert Reich points out the fallacy of the Reagan era tax cuts as follows:" Unfortunately for supply-siders, history has proven them wrong again and again. During almost three decades spanning 1951 to 1980, when America's top marginal tax rate was between 70 and 92 percent, the nation's average annual growth was 3.7 percent. But between 1983 and start of the Great Recession, when the top rate was far lower -- ranging between 35 and 39 percent -- the economy grew an average of just 3 percent per year. Supply-siders are fond of claiming that Ronald Reagan's 1981 cuts caused the 1980s economic boom. In fact, that boom followed Reagan's 1982 tax increase." An analysis from the Center on Budget and Policy Priorities argues that "history shows that the large reductions in income tax rates in 1981 were followed by abnormally slow growth in income tax receipts, while the increases in income-tax rates enacted in 1990 and 1993 were followed by sizeable growth in income-tax receipts." Specifically, the analysis calculated that the average annual growth rate of real income-tax receipts per working-age person was 0.2% from 1981 to 1990 and a much higher 3.1% from 1990 to 2001. Thus if you want to find the wellspring of economic growth in the Reagan era you won't find it in tax policy, ironically it can be found in simulative spending for military hardware and the growth in federal employment.
In their constant baying "Where are the jobs?" the Republican leadership on Capitol Hill has ignored the fact that the present downturn is far more severe than their rhetoric would allow. In analyzing the current downturn Sara Murray points out:" GDP was revised down in seven of the 12 quarters of 2007, 2008 and 2009, primarily because consumer spending grew more slowly and home building fell more sharply than previously estimated...The overall depth of the latest recession surpassed that of any other downturn since the late 1940s. GDP fell by 4.1% from the fourth quarter of 2007, when the recession officially began, to the second quarter of 2009, when many economists believe it ended. The previous estimate for the peak-to-trough decline was 3.7%...The new data show that the worst of the recession came in the last quarter of 2008." With economic utilization rates down by 30% across much of the economy and manufacturing output off 28% in the U.S. and 23% worldwide and with services down significantly as well, it was more than evident that tax cuts could not restart the world economy and that is why they were not a major element in the initial policy response in any major economy. The value of government action has been outlined by Jon Hilsenrath as follows: "Most mainstream economists agree on some points: The U.S. economy needed some kind of fiscal help in 2009 as the financial system teetered and the Federal Reserve pushed interest rates near zero. The deficit has to be reined in eventually, in part by restraining the growth of spending on health and other benefits. And developing a long-term plan to do so now would reduce risks of a future financial market calamity and help hold interest rates down... But today, neither side can say with certainty whether the latest stimulus worked, because nobody knows what would have happened in its absence...One big issue: Lessons about fiscal policy in normal times aren't necessarily applicable to today, when the Fed has cut interest rates to zero and unemployment remains high. Skeptics of fiscal stimulus traditionally argue that government borrowing crowds out private investment and pushes up long-term interest rates. True, says Obama adviser Lawrence Summers, but not at times like these...When private-sector lending was drying up and the credit markets froze, "government investment and creation of demand for consumers was a form of alternative financing, not a threat to private investment," Likewise, David Wessel author of "In Fed We Trust" notes: "Government, which did fail to head off the crisis, saved us from an even worse outcome... But we know now that the economy was imploding in late 2008. We know now with detail how paralyzed financial markets were, and how rotten were the foundations of some big banks. We know now that even after all the Fed has done, we still risk devastating deflation... So the short answer has to be: Yes, it would have been far worse had the government failed to act." The factors that affect unemployment predate the Obama Administration as the economic downturn started roughly a year before he took office and you can see unemployment starting to rise in the last quarter of 2008. One could make the argument that the stimulus has been far less effective in getting people back to work than one would hope, but there is little reason or historical evidence at hand to lead to the conclusion that we would have done better by employing tax cuts. Some conservatives would point to Calvin Coolidge's tax policies in fighting the 1920-1921 downturn as evidence that these policies work, but in doing so the avoid the influence of sharp tariffs that were also part and parcel of his response and the negative chain reaction that ensued worldwide as a result. Besides, what was the follow on act to the Roaring 20s, the Great Depression.
In analyzing the effect of the controversy surrounding stimulus verses tax cuts on the recessionary economy, Jon Hilsenrath states:" Tax cuts haven't been a cure-all. President Bush tried $168 billion of tax rebates in 2008, and a recession ensued anyhow. Economists note that households tend to save temporary tax cuts or use them to pay down debt, so they don't provide much short-term stimulus." Hilsenrath goes on to point out that one third of the Obama stimulus was in the form of tax cuts. This fact has also been pointed out by Steve Weisman of the Petersen Institute for International Economics who has stated that the tax cuts included in the stimulus have had zero simulative effect. There is now evidence that business is starting to spend money on capital goods regardless of the specifics of tax policy. Nomura Securities economist David Resler calculates "that businesses didn't spend enough in 2009 on new equipment to offset the wear and tear on their existing equipment...Mr. Resler estimates that even with the recent sharp increases in capital spending, the total capital stock is still $100 billion less than it was two years ago. That suggests that capital spending could continue to grow strongly the rest of the year." Mr. Greenspan himself added that the relationship between taxation and growth was still not well understood. "I don't think anybody can know exactly what the impact of these taxes is on G.D.P.," he said, referring to gross domestic product, the broadest measure of output. "We put them through econometric models that have a very poor record forecasting recession. Conclusions based on such models must be suspect." The fact of the matter is that companies spend money on replacement and expansion when they see an economic reason to do so, not primarily as a result of tax policy. While tax incentives for plant and equipment can be helpful, they alone are not enough to give rise to business spending if there is a perceived lack of demand for a firm's goods or services. After all, companies still have to lay out millions of dollars in expenditure and why would they do so if they have idle capacity to the tune of 30%?
So the question is this; if so many influential people are pointing to the lack of effectiveness of tax cuts in this particular economic environment, why do Republicans cling so desperately to the idea? As I have said in earlier articles, I believe that, in a large part, the G.O.P. is at the point of ideological exhaustion and is sorely lacking when it comes to new and compelling ideas. It is basically, with few exceptions, pushing old wine in old bottles. Their one big exception is Congressman Paul Ryan's " A Roadmap For America's Future", which contains a number of tax reform ideas and advocates for a privatization of Social Security, a tall order to fill in this environment and one that Republicans could not pull off during the Bush Administration when they had control of the presidency and both houses of Congress. Ryan's plan has been picked apart by Economist Paul Krugman for what he claims are its faulty assumptions. One is Ryan's claim that based on OMB estimates; his policies would cut the budget deficit in half by 2020. Krugman's critique is as follows: "But the budget office has done no such thing. At Mr. Ryan's request, it produced an estimate of the budget effects of his proposed spending cuts - period. It didn't address the revenue losses from his tax cuts... The nonpartisan Tax Policy Center has... Its numbers indicate that the Ryan plan would reduce revenue by almost $4 trillion over the next decade. If you add these revenue losses to the numbers... you get a much larger deficit in 2020, roughly $1.3 trillion. And that's about the same as the budget office's estimate of the 2020 deficit under the Obama administration's plans...The Tax Policy Center finds that the Ryan plan would cut taxes on the richest 1 percent of the population in half, giving them 117 percent of the plan's total tax cuts... Even as it slashed taxes at the top, the plan would raise taxes for 95 percent of the population...Finally; let's talk about those spending cuts. In its first decade, most of the alleged savings in the Ryan plan come from assuming zero dollar growth in domestic discretionary spending, which includes everything from energy policy to education to the court system. This would amount to a 25 percent cut once you adjust for inflation and population growth. How would such a severe cut be achieved? What specific programs would be slashed? Mr. Ryan doesn't say."
There is a curious lack of candor and directness among Republican leaders making the rounds on the political talk show circuit when it comes to detailing specifics. Appearing on the Bloomberg network, Senator Mitch McConnell (R-KY) declined to outline what comprised the G.O.P.'s political or economic platform for the 2010 election cycle saying he "did not want to scoop himself". A week later in an August 8th Meet the Press interview, John Boehner (R-OH) would not provide specifics on the same topic choosing to talk around the issue by saying that the G.O.P. was "still listening to the American people." That's a sharp contrast to Mr. Boehner's comments on Meet the Press this past January when he said: "Leadership is about standing on principles and offering alternative policy solutions" The fact of the matter is that if they were in power now, they would most likely have favored simulative spending as well as there is no historical evidence that tax cuts alone, or as a primary strategy, has ever pulled an economy out of a downturn as deep as this one. They certainly can't harken back to the business friendly 19th century America as taxes then were low or nonexistent on economic activity as well as personal incomes. And interestingly enough, Senator McConnell appearing again on Meet the Press, 22nd of August, was unwilling or unable to come up with an answer as to how to pay for extending the Bush era tax cuts as well as answer the question of the viability of Congressman Ryan's Roadmap. As per the moderator, David Gregory's take on the Ryan plan: "it lays out some Draconian steps to balance the budget, to cut spending in both Social Security and Medicare. I'm wondering why it is if Republican leaders are so serious about cutting the deficit and cutting spending, why there aren't more than 13 cosponsors in the United States Congress for this plan?" Somehow the new found fiscal rectitude of the G.O.P. seems to ring hollow when you consider that much of the present Republican leadership on Capitol Hill are the same culprits who took this country from surplus to deficit and endorsed a military misadventure that has by now cost over one trillion dollars that would have been better spent here fighting the downturn.
Perhaps it is this lack of compelling new ideas in the midst of the worst downturn since the 1930s that has led the G.O.P. to basically avoid policy specifics and let the far right media fringe do much of the talking for the Party. Perhaps that is why so little is known about the ideas of a Paul Ryan, he can't be heard over the roar and din of the fanatics on the far Right and the political theater of people like Newt Gingrich, Rush Limbaugh, Glenn Beck and the rest of the entertainers on the right who pawn themseleves off as legitimate news analysts. Perhaps that is why many of its leading figures have been so enmeshed in the Ground Zero Mosque controversy or perhaps why they have let the "Birther Mania" run wild and unabated. After all, if you don't have compelling ideas to offer voters in general, you're left with having to rile up the base and keep them engaged no matter what the method or the reasoning. Columnist David Brooks addresses this as part and parcel of the lack of civil public discourse currently gripping the nation in his latest op-ed "Case of Mental Courage":"Many conservatives declare that Barack Obama is a Muslim because it feels so good to say so. Many liberals would never ask themselves why they were so wrong about the surge in Iraq while George Bush was so right. The question is too uncomfortable...There's a seller's market in ideologies that gives people a chance to feel victimized. There's rigidity to political debate. Issues like tax cuts and the size of government, which should be shaped by circumstances (often it's good to cut taxes; sometimes it's necessary to raise them), are now treated as inflexible tests of tribal purity." While the Republican Party will surely make gains in the 2010 election cycle, it will be a function of the natural progression of electoral cycles rather than the start of a renaissance. We are now in a brave new world of globalized economic competition where military power may very well play a diminished role. No amount of tax cutting will help us in combating the cost of production in China and the Far East. We are in need of bold new ideas and to date, the Republicans have largely offered an agenda of obstruction and out of date economic concepts that proved lacking in the 19th Century as well as in 2008. Generally the voters still blame the Bush Administration for the current economic disaster and the G.O.P. remains at historic lows in favorability ratings. In spite of the fact that some 30% of the voters identify as conservative, the long term demographics are trending against the G.O.P. and its core philosophy and at some point it will either have to redefine its reason for being or it will have to accept a role as the default party of American politics.
AUGUST 11, 2010.Grim Voter Mood Turns Grimmer: Pessimism Rises on Economy and War; Bad Reviews for Both Democrats and GOPhttp://online.wsj.com/article_email/SB10001424052748704901104575423674269169684-lMyQjAxMTAwMDEwMTExNDEyWj.html#articleTabs%3Dinteractive
As expected the Republicans in the Senate said no to those whose livelihoods they gutted when they controlled Washington. Forget the fact that men like Mitch McConnell and yes, Ben Nelson who is a Republican and should get out of our party soaked up huge salaries while soaking the middle-class with policies that decimated them while enriching Corporate fatcats and the Chinese Communists. Of course the whole Republican Party, Mitch McConnell and Ben Nelson want you to forget. What they do not want is to bear any of the responsibility of their actions both in the past and now as working Americans who paid the price from Republicans and Corporate Democrats and the robber-barons in Corporate America getting fat, crashing the economy, and getting bailed out.
It looks as if election-year strategies are trumping any actual problem-solving by Republican lawmakers. In the midst of one of the worst unemployment crises in U.S. history, Senate Republicans killed a jobs bill last Thursday by a 56-40 vote.
It looks as if election-year strategies are trumping any actual problem-solving by Republican lawmakers. In the midst of one of the worst unemployment crises in U.S. history, Senate Republicans killed a jobs bill last Thursday by a 56-40 vote.
I wrote the other day about all the ironies abounding in the elections, especially Mitch McConnell's protégé being destroyed by the tea partiers while Mitch was in DC taking care of Wall Street's business. But the irony doesn't stop with electoral or legislative politics at all. Now Glenn Beck, of all people, is attacking poor people who are losing their homes for having the gall to protest against the bankers.
Remember, Beck is the same guy who has been cheering the tea partiers on, urging anti-Obama forces to protest vehemently and loudly every single chance they get. But when people who are losing their homes after getting mistreated by Bank of America dare to protest, he gets all squeamish. Suddenly, they become dangerous "mobs" threatening children.
Beck and his banker buddies sure do have glass jaws. There was no violence at this protest, no threats of violence, no hint of it: just a bunch of folks protesting bankers who have destroyed millions of jobs and cost millions of people their homes by their recklessness.
Once upon a time there was a man named Mitch McConnell.
Now Mitch, more than any other politician in his province, knew how to win elections. He would ask rich people to give him lots and lots of money. He would then take the money and use it to trick poor people into voting for him. After he won, he would help the rich people make even more money. The rich people were very grateful, and Mitch was very happy.
When Mitch's friends in other provinces saw how happy Mitch was, they asked him to be their leader. "Help us win elections and be happy like you," they said. So Mitch became their leader. Sure enough, the rich people began giving Mitch's friends lots of money, and Mitch's friends won lots of elections. They were all very happy.
Then, one day, everyone throughout the land suddenly stopped making money. The rich people soon made it all back, but the poor people grew even poorer. They became angry, which frightened the rich people. "The poor people are misguided," they said to Mitch. "Don't they know that if it weren't for us, they wouldn't have so much as a crust of bread? Help us help more of your friends get elected, so we can make more money, so the poor people can have a crust of bread."
Now it happened that in Mitch's province, one of his old friends -- his name was Jim -- had gone funny in the head. Mitch knew that no matter how much money the rich people gave this man, the poor people would not vote for him anymore. So Mitch ordered one of his newer friends -- his name was Trey -- to take the rich people's money and use it to get himself elected.
Meanwhile, the poor people in Mitch's province were still very angry. They were so angry that a few of them went almost as funny in the head as Mitch's old friend Jim. They were called "Teabaggers", and they didn't like Trey. They liked a man named Rand.
Now Rand talked crazy talk, and Mitch knew that no matter how angry the poor people had become, they would never, ever vote for Rand. He was too crazy. Nevertheless, the Teabaggers were persistent, and they used Mitch's own rules to make Trey go away so that Rand might try to get himself elected.
So, in the end, Mitch had to ask the rich people to give Rand money, even though Rand couldn't win. And Mitch had to pretend he liked Rand, even though he didn't. And Mitch had to defend Rand's crazy talk, even though he couldn't.
And that's why Mitch had nightmares for months and months and months. It was all because of Rand and the Teabaggers.
It got so bad that Mitch almost forgot that he looked like a turtle. But that's another story.
As the government continues to pursue the case of Omar Khadr, it's becoming clear why the administration chose to try this case in a military commission rather than a regular civilian federal court: a civilian federal court judge would likely throw the case out.
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