Posts tagged ‘Bruce Bartlett’

Econ 101 for Republicans

Republican economic theory (theology?) relies on two beliefs or tenants. The first is that if you cut taxes there will be new investment by businesses and corporations, and with that, jobs and wage growth. The second is that this increased economic activity will actually grow the treasury’s coffers, paying for themselves. This effect when applied to the impacts of a tax cut is called dynamic scoring. See, the tax cut will cost x, but the result will be y additional income to the treasury or so the theory goes. The first one could be true in certain circumstances and the second one is demonstrably false. But that is what their whole approach to the economy is made up of. Oh sure fewer regulations, but that is really a subset of the first tenant and when you add the secondary costs, like damage to environment, death and dismemberment, and loss of rights for workers, the cost are usually more than the benefits.

Let’s go after the first tenant, cutting taxes creates jobs and stimulates the economy. Well there are times when that actually helps, not as much as actual increases in government spending (a tax cut has the same effect on balance sheet of the Treasury as increased government spending), but it helps and it can be faster than government spending. Economic theory and practice have shown us that after a recession or even during one, with high unemployment, making money available to corporations and businesses in the form of a tax cut does stimulate growth. It is a tool Republicans favor because they don’t believe in direct government spending in things we need like infrastructure and R&D, and want to give it to corporations and businesses (and people) to decide for themselves.

Two things you need to ask yourself here. First are we coming out of a recession, and how high is unemployment? The answer which conservative economist Bruce Bartlett gave us the other day was neither apply as corporations are already awash in record profits, and the unemployment numbers tell us we are almost at full employment. Second, one thing we know for sure is money given to the middle and lower classes is generally spent, while money given to wealthy is much less effective. Where was the emphasis in the current tax bill? Oh, the wealthy. There are great debates about whether direct spending by government is far more effective in these times to create real demand through jobs and wages. But we have some empirical data from Governor Brownback and the Kansas experience where they slashed taxes, little change in jobs or wages, and the state went into massive debt, defunding education to help balance the books.

The bottom line on the first tenant, is that if used judiciously at the appropriate time in the economy (not now) it might help. But considering the infrastructures needs across the country, the money would have a much higher multiplication factor (return on investment; every $1 spent creates say $1.5 of increased activity in the economy), and we would create jobs, higher wages, and invest in our future. The money they are going to spend paying off their wealthy donors, in other words, is going into a big hole.

Okay, tenant number two, that cutting taxes pays for itself (dynamic scoring) is fairly straight forward, it has never worked. Oh sure there might me some increased revenue if the tax cuts were properly targeted to the middle class, but nowhere near the income to make up for the spending. “Assessing the House version of the plan and accounting for the economic growth its tax cuts would induce, the analysts found that growth would offset only about 12 percent of the plan’s cost over the first decade. After an initial economic boost, bigger deficits and rising interest rates would drag on the economy.” Here is another well research source that can find no pay for itself effect in Vanity Fair. But hey, get it from the non-partisan Joint Committee on Taxation and note they still used very optimistic growth rates.

So there you have it. Or as conservative economist Bruce Bartlett said, “…virtually everything Republicans say about taxes today is hogwash.” So we are going to take a big hit. Get ready. And what is next? This from Paul Ryan in the NYT this morning:

Speaker Paul D. Ryan and other Republicans are beginning to express their big dreams publicly, vowing that next year they will move on to changes in Medicare and Social Security. President Trump told a Missouri rally last week, “We’re going to go into welfare reform.”

That’s right. When the numbers don’t add up and the Treasury starts going in the red, they will all of a sudden care about the deficit again and go after the programs that we need most. Maybe that was their game all along. We are in for hard times ahead, but as I told my son who works in the school district in San Diego and is afraid the new tax bill that eliminated his tax deduction for interest on loans and cut the deduction for state and local taxes that school districts depend on could bankrupt him, Conservatism is like cancer. The treatment to cure it if it can be cured almost kills us. That is where we are at. The great Kansas Experiment has moved to the national stage, and we will see the same results. Think you might get out and vote in 2018?

Bruce Bartlett to the Rescue

Mr. Bartlett, who held senior policy roles in the Ronald Reagan and George H.W. Bush administrations, has written another really good conservative view of tax cuts.  You remember him from his fabulous summary of what happened to the Republican Party (The Republican Party Has Become The Party of Hate) which basically got swallowed by the South.  Well this time he takes on Donald Trump’s tax cuts and cuts through the dogma.  He patiently takes us through both Economics 101 and the real history of tax cuts, why they were the right answer in some cases, and why they are folly now.  It is a good read and if only the Republican Party were a reflection of Mr. Bartlett’s reasoned and logical approach to policy, it would be a different America today.

We can argue when tax cuts are needed and when taxes need to be raised, but only with rational people who do not live by dogma uninformed by data.  Of course Progressives don’t have everything right and there are unintended consequences that need to be carefully examined before we leap, hence the need for some conservatism.  But Republicanism today has become a faith-based ideology that eschews science and data, makes up its own facts, and obstructs any attempt at real reform.  Honest debate is heresy. Mr. Bartlett reminds me at least that their might still be a few conservatives out there worth listening to.  Here is how he finished is piece:

Those economists who claim to be following Reagan’s policies by supporting Mr. Trump’s large tax-cut proposal are guilty of one-size-fits-all economics. There is far more evidence from the last 35 years showing that tax increases do more to stimulate growth than tax cuts.

I wouldn’t suggest that tax increases are always the answer. Whether taxes should be raised or cut can be determined only by analysis, not by dogma.

My god, rational thought!  No wonder he is probably being excommunicated as I write this.

Ah, Friday Morning

Well first off is Dr. Krugman coming to the same conclusion I did, Hillary don’t you dare turn right to reward those who might bolt the Republican Party:

The Trumpification of the G.O.P. didn’t come out of nowhere. On the contrary, it was the natural outcome of a cynical strategy: long ago, conservatives decided to harness racial resentment to sell right-wing economic policies to working-class whites, especially in the South.

This strategy brought many electoral victories, but always at the risk that the racial resentment would run out of control, leaving the economic conservatives — whose ideas never had much popular support — stranded. And that is what has just happened.

So now the strategy that rightists had used to sell policies that were neither popular nor successful has blown up in their faces. And the Democratic response should be to adopt some of those policies? Say what?

…If some conservatives find this too much and bolt the party, good for them, and they should be welcomed into the coalition of the sane. But they can’t expect policy concessions in return. When Dr. Frankenstein finally realizes that he has created a monster, he doesn’t get a reward. Mrs. Clinton and her party should stay the course.

Meanwhile in David Brooks Land he is calling on all Republicans to quit sitting on the fence and reject the Donald.  Of course he does not say those magic words himself or who is going to vote for which I find kind of ironic:

They [Republicans] had all sorts of squirrelly formulations about why it was O.K. to ride the Trump train: He can be tamed or surrounded and improved. Sure, he’s got some real weaknesses, but he’s more or less a normal candidate who is at least better than Hillary.

Over the past few days, Trump has destroyed this middle ground. He’s exposed the wet noodle Republicans as suckers, or worse. Trump has shown that he is not a normal candidate. He is a political rampage charging ever more wildly out of control. And no, he cannot be changed.

What kind of connects these two thoughts, Krugman’s and Brooks’, is that Brooks is realizing the moral corruption of the Republicans, but not identifying the failure of conservatism, even the gentler kind.  On the other hand Krugman is recognizing the more fundamental problem, intellectual bankruptcy of the conservative right on the economy and pushing Hillary to stay the progressive course.  On social issues no one is questioning their moral bankruptcy.

With all this noise about how unstable and unbalanced Mr. Trump is, the focus goes to Trump himself and not the real problem in the conservative movement, it is bankrupt of ideas.  As Dr. Krugman and others have pointed out, Trump did not come out of nowhere, but from “a cynical strategy: long ago, conservatives decided to harness racial resentment to sell right-wing economic policies to working-class whites, especially in the South.*.”  That and the misinformation spewed by right-wing media outlets and that same misinformation repeated by Republican politicians created the White Mob that is immune to facts and data.  And why the cynical strategy?  Because their ideas only served the wealthy status quo. So they needed misdirection.

It is interesting to note that the bankrupcy of their economic faith has been recognized by some conservative Republican think tanks who now think with the Donald and their base’s rejection of conservative economics, they might try to soften conservatism for the working class (As Trump rises, Reformocons See Chance to Update GOP Economic Views).  Here are some of the highlights but it is going nowhere:

  • Reject additional tax cuts for those making more than $250,000 a year, but expand breaks for low- and middle-income workers through tax credits for children, the earned-income tax credit or a new wage subsidy using tax dollars to bring low wages toward the local median level.
  • Promote the benefits of global trade agreements, but help displaced workers.
  • Rule out fully privatizing Social Security and Medicare, and reassure workers they will be exempt from cost-cutting.
  • Acknowledge that universal health care is here to stay, but push for market-oriented changes.
  • Disavow mass deportations and promote the economic benefits of legalizing longtime workers who are in the country illegally, but reduce the legal entry of less-skilled immigrants.

But as critics point out:

Proponents of a new conservative agenda have critics in both parties. Democrats dismiss their ideas as repackaging a familiar right-wing agenda. Some Republican politicians, activists and conservative media figures like Rush Limbaugh condemn their cause as a return of moderate Republicanism or a capitulation to liberalism.

But it is start, albeit small and probably will be defeated by the purists.  But the point is the root problem is not Donald Trump.  He is the result.  The problem is an economic religion that fails most people.  It can’t be changed because it is a religion although we now see there are some heretics.  And of course there is their social religion and its failure to recognize change.  So when the Donald is escorted off the premises, the Republicans will still have to face how they got here and that will require throwing away a lot of bad ideas.  I am not sure they are up to it.  Remember their postmortem back in 2012? Maybe they will just have to become a fringe group like Libertarians or the Greens.  Have a good weekend.

*Bruce Barlett came up with probably the best description of how the Republicans lost their moral way.  He still doesn’t face up to their economic faith-based issues, but it is a great analysis of how they became the stupid party of hate.

The Pause

The Republican Convention is over and we are in a pause prior to the Democratic Convention.  Hillary has picked her running mate and I believe in that choice made the job before her harder.  She seems to be doing what Progressives feared and swinging back to the right.  We will see.  But during the pause, let’s reflect on what we just witnessed. Several writers commented on the hate fest that was loosely termed the Republican Convention. Jon Stewart did a wonderful monologue about it. Timothy Egan, one of my favorites, pretty much saw it as I did:

Individually, many of these Trump delegates are nice people. In personal chats, you might get them to understand why Tony Schwartz, the ghostwriter for “The Art of the Deal,” broke a long silence to say that he is terrified of Trump because he’s a “sociopath.” Listening to the acceptance speech, he tweeted, “This is the Donald Trump I came to know, not a word about hope, not a word about possibility, all doom, all the time.”

But in a group, the emotions of the Trumpites pool to hatred and mob single-mindedness — all Mexicans are rapists, all Muslims are terrorists, all crime is rising, Hillary Clinton is the devil and should be shot.

…When the convention closed, fear had won the hall. And we should fear — for the republic, for a democracy facing its gravest peril since the Civil War.

But how did we get here?  And that I think that is answered in the NYT’s Room for Debate series where three Republicans respond to the question, “What is the Republican Party?”  The first is in total denial, Ed Rollins, where he triangulates what winning would mean for Republicans, but not really understanding the basis of the new party except to say, “Trump supporters are not going away and they will be a loud voice in the future of this party.”  What they represent he is in total denial about.  The second, Linda Chavez, still enthralled with a fictionalized Reagan, knows the party is not that Party anymore:

I don’t want to listen to a mob yelling “lock her up” about the Democratic nominee — tyrannical regimes lock up the opposition, democracies defeat them at the polls. I didn’t become a Republican to vent my anger. I became one to follow my aspirations. If the party hopes to keep voters like me in the fold it is going to have to appeal to my principles not just stoke fear and loathing of the other nominee. 

But her statement, “If the party hopes to keep voters like me…,” indicates that she is still in denial fo the fact that the Party that would keep voters like her left that station a long, long time ago.  And that is typical of what we see from most moderate Republicans.  However, the third Republican, Bruce Bartlett, totally got it and I will leave with his words.  It is an unvarnished view of what happened to conservatives*, they were corrupted by their need for power in office:

I do not know exactly when hatred became the binding force in the Republican Party, but its takeover of the once “Solid South” of the Democratic Party was the key turning point. When the Civil Rights and Voting Rights Acts broke the Democratic Party’s hold on that region, the G.O.P. moved in to replace it. But in the process, Republicans absorbed the traditions of racism, bigotry, populism and rule by plutocrats called “Bourbons” that defined the politics of the South after the Civil War. They also inherited an obsession with self-defense, allegiance to evangelical Christianity, chauvinism, xenophobia and other cultural characteristics long cultivated in the South.

The Bourbons maintained their power by dividing the poor and working classes along racial lines so that they would not unify for their mutual betterment by raising taxes on the wealthy, improving schools and making government responsive to the needs of the masses rather than protecting the wealth and position of the Bourbons.

The Southern states have long followed what are now doctrinaire Republican policies: minuscule taxes, no unions, aggressive pro-business policies, privatized public services and strong police forces that kept minorities in their place. Yet the South is and always has been our poorest region and shows no sign of converging with the Northeast, which has long followed progressive policies opposite those in the South and been the wealthiest region as well.

The addition of conservative former Democrats to the traditional Republican coalition increased the party’s strength in the short run and allowed it to take over Congress. But as Southern attitudes have now completely taken over the G.O.P., its strength outside the South has begun to wane. It simply cannot win nationally as a whites-only party in a nation where the white share of the vote is inexorably shrinking.

I expect that I may not live to see another Republican president and it’s only a matter of time before the G.O.P. loses control of Congress. A new Republican coalition must be assembled, purged of the haters and know-nothings, but I expect that process to take decades.

*Conservatives once meant conservative.  It doesn’t anymore.  I will give you an example.  Real conservatives would not deny global warming, but want to move cautiously to deal with it.  Real conservatives would not fail to invest in our infrastructure, but again they would count the pennies very carefully and argue about highways versus high speed trains.  Real conservatives would not use a religious test for immigration or office.  But they would stay away from large changes in social policy.  That is not what we have today as so well described by Bruce above.