Posts tagged ‘dynamic scoring’

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?

Voting and Republicans

Well Americans voted or didn’t vote in the current crop of misfits and we got the letter to Iran and an almost shutdown of Homeland Security.  Now we are about to get their vision of our future. as the NYT reports,  with a Republican budget proposal “that partly privatizes Medicare, turns Medicaid into block grants to the states, repeals the Affordable Care Act and reaches balance in 10 years, challenging Republicans in Congress to make good on their promises to deeply cut federal spending.”  

First thing you want to consider is why returning healthcare to full control of the market place will help anyone?  Second is why the rest of the world doesn’t do that?  Third is how turning Medicare into private hands will drive your costs down and make our system much more efficient?  It won’t and never has.  Oh and block grants of Medicaid is just a way to shift the burden to the states and dry up funds.  Finally, why again does the rest of the world use mostly a single payer system and get better results than our system?  Ideology run amok.

And what is their plan for investing in R&D?  What is their plan for building, repairing, and preplacing our failing infrastructure?  They don’t have one.  And if we have learned one thing, austerity and balanced budgets will depress the economy and make further budget cuts necessary.  Name me one corporation that does not invest in its future through borrowing?  

But wait!  Republicans still genuflect to the supply side model, that tax cuts produce revenue and then even have their own boys developing fantasy reports to support it.  According to Josh Barro of the UpShot:

The Tax Foundation released a report last week arguing the Rubio-Lee plan would generate so much business investment that, within a decade, federal tax receipts would be higher than if taxes hadn’t been cut at all. According to William McBride, the chief economist at the right-of-center think tank, the senators’ plan would add 15 percent to gross domestic product and 13 percent to wages.

If that sounds aggressive to you, you’re not alone: I discussed the Tax Foundation report with 10 public finance economists ranging across the ideological spectrum, all of whom said its estimates of the economic effects of tax cuts were too aggressive. “This would not pass muster as an undergraduate’s model at a top university,” said Laurence Kotlikoff, a Boston University professor whom the Tax Foundation specifically encouraged me to call.

Its their attempt at “dynamic scoring”, the new Republican push to show that tax policy will effect revenue (we all know that).  But as Josh pointed out:

In principle, dynamic scoring is fine. Tax policy really does affect the economy, and the right tax policies can produce economic growth that increases the amount of taxable income. But as the Tax Foundation report shows, dynamic scoring can be misused: You can get essentially any answer you want out of a dynamic tax model by changing the assumptions about economic behavior that you plug into it. If you turn the dials far enough, you’ll get a report that shows a tax cut will pay for itself, even if it won’t.

So we have elected the boys and girls from La La Land and they are creating fantasy facts to believe all of this stuff will help when Econ 101 tells us it is nonsense.  And they are going to try to implement this stuff which really will crash the economy.  

Oh and as just another sign of ideological dysfunction, we have a bill in the Senate that will “create a victims’ fund from fines collected from perpetrators of sex trafficking. A similar measure has passed the House and was expected to pass easily in the Senate.”  However the Republicans in the Senate inserted a clause that says none of the funds can be used for abortions.  I guess having a love child from multiple rapes is a blessing in their eyes.  Of course they want to cut funds to programs that would help the mother care or raise the child, just that in the tyanny of their ideology, she must be made to carry it.  Who is victimizing who again?

Here is what I wonder:  Will the Democrats fight this stuff, and sort of win so that the economy and our country sputters on as it has been and both sides get blamed, or will they just let them finally crash the economy and they take over after the wreakage?  I think the answer lies somewhere inbetween, but the real question is will people get off their asses and vote?  There was not a mandate for these guys, just a mandate for apathy that allowed the organized fringe to control the elections.  If this thing is going to work, you have to vote.

More Miscellaneous Musings

With Congress out of session one would think we would be having a fairly non-political quiet time before the onslaught. I mean after all MSNBC has extended their coverage of Lockup to almost 24/7. Knowing how criminals spend their days must be very important.

But the Republicans came to our rescue or ruined our vacation depending upon how you view it, with the Scalise hand holding with neo-nazis back in the day. Oh and all the political talk is about who will run against Hillary.

Now I have already weighed in on Scalise. Judge the man by his votes and leave his free speech alone. His votes ought to raise the hair on the back of your neck and that should be enough. On the political mental masturbation about who will run, does anyone ever ask what they will run on?

It is a giant People Magazine approach to the candidates instead of looking at what policies they might support and how that would affect the country. It is almost like being back in high school and voting for class president. He can’t really do anything so it is a popularity contest. Except the President of the United States really can do something and shouldn’t we be educating the voters on the issues?

I always thought that the internet would change things in America in terms of knowing things. I mean if you have a real curiosity about just about anything, you can find the answers if you really want to. But I came across these quotes that kind of nails it. It is from an article in Mother Jones News by Kevin Drumm. First he quotes an interview with Ben Goldacre who loves to debunk Dr. Oz, about the internet:

People now are now much more empowered to fight back against stupid stuff, and to read about interesting stuff.

But then Kevin draws this conclusion which I have found to be so true:

The problem is that the internet does help people who are “sufficiently motivated and clueful,” but that’s never been a big part of the population. And sadly, the internet is probably as bad or worse than Dr. Oz for all the people who don’t know how to do even basic searches and don’t have either the background or the savvy to distinguish between good advice and hogwash. … Or in simpler terms, “the internet makes dumb people dumber and smart people smarter.”

That has been what I have found. If you want to know something you can find it, but there is, like Dr. Oz, tons of misinformation out there and you have to be “clueful”. If you you want to believe stupid things, you can find someone out there that is spouting that and ergo, it is fact.

Finally the last little thing is some arcane musing about “dynamic scoring”. That is what the Republicans are proposing the CBO use to score their tax cut ideas. As Professor Kleinbard wrote in his op-ed piece this morning in the NYT:

The Republicans’ interest in dynamic scoring is not the result of a million-economist march on Washington; it comes from political factions convinced that tax cuts are the panacea for all economic ills. They will use dynamic scoring to justify a tax cut that, under conventional scorekeeping, loses revenue.

Then when they don’t work (the tax cuts) they will demand cuts in the social programs. When ideology drives the train, facts and data don’t matter. Welcome to where we are today. I just can’t wait until Congress is back in session so that the coverage of their moronic statements distracts us from the real issues and how little we are doing about them.

More on Our Alternate Reality

Vice President Joe Bidden has been excoriated for his remarks about how some of our allies have aided and abetted ISIS. He was forced to personally apologize for his comments to each of the countries, except his comments were right on the mark. We are creating an alternate reality in order to bring in “allies” in the war on ISIS which doesn’t allow us to point out who is the real problem. How is this going to help?

Turkey was one of those countries and has much to answer for (buying ISIS oil to fund them and allowing their recruits to travel through Turkey) and now ISIS is knocking on their door and still Turkey does nothing. We hear arguments about boots on the ground, but those boots are going to have to be Muslim boots and so far they do very little, living in their world of denial about the evil they are facilitating. If they won’t play, why should we save them? Oh, and then there is that little problem of us supporting nations that do in fact implement Sharia law (Saudi Arabia).

On the environmental front, Chris Hayes has been looking into coal country and he always finishes each of these shows with a coal proponent. Here is the first thing that let’s you know they are in La La land, they deny global warming. So why listen to anything else they say since they have conveniently reordered reality so that burning of coal is not a problem. What else have they reordered? Once you have detected that they are lying to themselves to maintain their beliefs, you know they are lying to you.

On the economic front, Kansas is such a giant realtime example of Republican economics in action and yet most Republicans ignore it. Worse, Paul Ryan wants to deny the lesson with dynamic scoring of budget proposals. Let me explain. Governor Brownback believes in flowdown. Just cut taxes and businesses will flow to Kansas, jobs will be created, and the tax revenue will rise, except it didn’t. This was what Bush I called Voodoo economics when he ran against Ronald Reagan. And Reagan won, did it, and then had to raise taxes because it didn’t work. It has never worked.

So Governor Brownback, a true believer as is most Republicans, instituted massive tax cuts in Kansas and the state is deep in debt and even Fox News Republicans see their school systems falling apart. Oh, and there are no jobs. This is the supply side follies. If businesses are encouraged to expand, then people will buy their products. But the problem is demand and businesses are not going to expand when no one has enough disposable income to buy their stuff. People need jobs and income first, then comes the expansion, but Republicans refuse to believe that, even though Kansas is now the poster boy for failed Republican ideas.

But then along comes Paul Ryan to say let’s let the Congressional Budget Office do dynamic scoring of budget proposals. Dynamic scoring means that tax cuts would be scored as revenue generating actions that have never worked anywhere. We will just build more fantasy into our proposals so we can sell them, and when they don’t work, we can blame Obama (as Brownback is doing in Kansas). Yes, as we elect more and more Republicans, our belief in an alternate reality grows while the real reality eats us alive. George Orwell and double speak has nothing on us.

Then there is that candidate for Congress in Arkansas that sees a connection between the opium growers and the drug cartels in Mexico (no evidence anywhere of such a connection), and our failure to wall up our borders will have ISIS on the doorstep of Arkansas in no time. No, I am not making this up. I would love to say the people of Arkansas will reject this fruit loop, but then how do you explain Louie Gomert?

The only thing more crazy that these ideas in the face of everything we know is that the majority of people buy into this nonsense. And when things fall apart around them, there is not a mirror to be found so we can focus on the problem.