Winning the economic argument provides both space to forge effective policy and time for that policy to work. Instead, the Dems and the Obama Administration are, perhaps unwittingly, reinforcing Republican myths that have dominated economic discussion for decades.
The economic crisis provides the opportunity for ridding the airwaves of these myths. The Administration and Congressional Dems should begin, immediately, to cease-and-desist from characterizing the tax cut portion of the economic package as playing a significant role in stimulating the economy.
It will not. To the extent that anything is "provable" in economics, there is good evidence against a significant stimulus role for tax cuts.
First, we are already in the tax cut mode. This economic crisis occurred with the "Bush tax cuts" firmly in place.
Secondly, if further tax cuts were able significantly to stimulate economic growth in these times, the "tax cut" provided by the precipitous fall in gasoline prices from $4/gallon to less than $2, approximately a $300 billion "cut" in obligatory, recurrent, household expenses, would have had this economy purring or at least recovering. It has not. True, the economy might even be worse, but there is little evidence of a substantial stimulatory effect of the tax cut equivalent of plunging gasoline prices.
Middle class tax cuts have an intrinsic rationale unrelated to economic stimulus. Wages have not kept pace with productivity gains so that the wealthy have reaped a disproportionate share of the economic pie that, in turn, has strapped the middle class. Prosperity cannot return and be sustained without a strong middle class. That is a sufficient basis to support Obama's middle class tax cuts.
"We won", "get over it" are statements of political power, not economic wisdom. The change-we-need is accurate analysis and effective communication uncowed by rightwing rhetoric. By shifting the debate from wishful thinking to sound economics, prospects rise for effective policy decisions now and in the future, and doing the debate right is as important as the policy itself.
For the last 30 years, Democrats have become all bollixed up when discussing taxes. As soon as the Republican minority offered tax reductions as a stimulus package, Democrats began choking like George Bush chomping a pretzel. Part of the blame for their apoplexy is that the Obama tax relief proposals are included in the Democrats' stimulus package, and thus rhetoric about stimulus is conjoined with those cuts reinforcing the Republicans' framing. Bad strategy.
It would be far wiser, and lead to a better bill, to discuss the stimulus portions of the bill on economic grounds and the inclusion of tax cuts as a legislative strategy to deliver much-needed relief for the middle class that the President promised during the campaign.
Months ago, just as this crisis dawned, it was these pages that first explained that in a major "contraction" as we are experiencing, massive public investment in projects that would improve the economy's efficiency once recovery occurred is the only remedy. ("Wanted: A Good Keynesian. Massive Public Investment Will Fix the Economy", October 13, 2008) Private demand is collapsing so that public demand (i.e., spending) must substitute to keep people working, factories producing, mortgages and college tuitions met, and the overall fabric of society from disintegrating.
Although overlooked at the time, this precept became the animating force behind the size and scope of the stimulus package. Obama et al. need to return to it.
And, as the article noted, there is strong proof (and here it gets closer to scientific validity) of this proposition.
For the last half-century, Republicans have been genetically unable to accept that the New Deal worked. To do so would mean that government action in a free market economy played an important counter-cyclical and regulatory role. In the face of that criticism, Democrats rushed to extol the virtues of their icon, Franklin D. Rooosevelt.
Here's the truth, and it was presented in the October 13th article. The New Deal did work. From 1933 to 1936, unemployment fell from 25% to 14%.
Then, FDR screwed up; he abandoned the New Deal. Having come to Washington as a dyed-in-the-wool budget-balancer, he decided that the economy was improving and it was time to balance the budget again. Result: unemployment rose until the needs of the Second World War created full employment. That is, private sector demand had not yet fully recovered when FDR balanced the budget, and the decreased government spending (public sector demand) contracted. Q.e.d.
If the Republicans need it for their psyches, let them critique FDR. But, the New Deal worked, and the country will be marched down another foolhardy path if it fails to recognize this lesson, and allows mythology to continue to set economic policy for the sake of comity.
The massive deficits this public investment will bring, to be paid by the next generations, can be justified if those investments improve the economy's efficiency for the long run so that those future generations benefit: cleaner/renewable fuels, public transportation, roads-bridges-tunnels, medicines to reduce long-term health costs, digital connectivity, and so on. Think of the Grand Coulee dam in Washington State as a New Deal example that still provides electricity to the area (Washington State generates 80% of its electricity from hydroelectric, so Grand Coulee also fits the 21st century imperative of clean, renewable, home-grown energy...not a bad investment for 50 years ago, for which the New Deal was entirely responsible!)
President Obama's new Commerce Secretary choice, Judd Gregg, may have provided a springboard for the the Administration and Congress (and the so-called "strategists" who appear on TV) to get back on track.
On CNBC, he slapped down Larry Kudlow, the supply-side siren, by repeatedly telling an increasingly apoplectic Kudlow that in times of contraction the only entity willing to spend and stave off deflation is the federal government.
Kudlow could not believe his ears: was Gregg a, a, a Keynesian?
Yes.
John Maynard Keynes was the economist of the Great Depression. His insights applied, and apply, with great specificity to major economic downturns. Much like the laws of physics do not apply to the first trillionth-trillionth of the second after the big-bang, the economics of contractions are not the same as the policies one might apply in periods of growth.
Bipartisanship is useless if it does not produce sound policy. The way to achieve it is not to cave to harmful policies, but to explain to the country, like Judd Gregg did to Kudlow, over the heads of Congress, (and over the heads of the permanent yapping class that takes up residence in DC to set forth misleading policy statements cloaked in the aura of erudition) very clearly just what, and why, the public spending investments are both stimulative and useful, and the separate rationale for middle class tax cuts. By generating public demand, Republican votes will emerge.
Use the bully pulpit. Use charts, graphs. Reference history. We can take it. Everyone is affected, and the whole country will listen.
If Obama confuses sound policy with bipartisanship, he will lose the economy.
Let the discussion begin, anew.
And this hilarious one, "Not enough tax cuts!"
MSM + Republican Stupidity = Obama defeat (they hope).
But...it's not going to happen that way, guys. So sorry.
And these are the people who are wanting us to give them credibility, so they can spin another trickle down tax cut to buy more big boats and airplanes. Meanwhile, the only people who ever create any wealth or value in our society are suppose to let MANAGEMENT decide whether the employers get a union. The debate is over. Lets vote!
order to 'implement a stimulus', the government is going
to basically 'just print more money', and a bunch of it.
I think we have been taught for several decades now to
believe that this is a very bad, vile, disgusting practice.
And now, they are going to have to do it, because NOT
doing it is worse.
This time, people, we're not even going to go through
the pretense of 'borrowing', as if there was anyone left
to lend the funds. Just going to print more, so get over it.
Now, I could be wrong about this, but I'd be interested
to understand how the accounting is going to be done.
I'd rather print more money and keep playing the game, personally.
I would like to see projections on the long range effect of all this, but they don't exist, of course, because this scenario has never really existed before.
U.S. Treasury debt issuance to surge in Q1 - Mon Feb 2, 2009
NEW YORK, Feb 2 (Reuters) - U.S. Treasury issuance of bills, notes and bonds is expected to surge in the first quarter, in line with forecasts for a higher budget deficit, according to a survey by an association of securities firms, banks and asset managers.
Treasury debt issuance is expected to be $437.0 billion in the first quarter of 2009, above the $264.7 billion issued in the fourth quarter and more than double the $190.9 billion issued in the first quarter of 2008, the Securities Industry and Financial Markets Association said in a survey released late on Friday.
The median forecast from the survey projected a federal budget deficit of $1.45 trillion for the fiscal year 2009, more than twice the record fiscal 2008 deficit of $455 billion, SIFMA said, adding, however, that the median projected deficit forecasts have tended to be higher than the actual figures. ...
Ms. Feinstein got it right when she faulted one of the GOP talking heads for "cherry picking" partial statements from a recent CBO report.
J Kyl (R) state a consensus of economists...but oops not enough time to tell us who, so do you believe that???? I think NOT!
I had to email McCain twice - thats how bad is was!
Not all parts of the country will recover at the same pace. The midwest and high growth areas will take until the winter before they firm up.
Unemployment is a lagging economic indicator.
If you like government stimulus packages, 18 months ago was the time to pass it. Now, its too late. By the time the money reaches the economy, ( 6 to 18 months). The recovery will be well on its way.
That wouldn't be because of the market would it? You, know, prices are finally about to meet demand?
The interest rate is a major component of real estate values
Hmmm... let's see if you have any clue whatsoever about what you are prattling on about:
"Employers Slash Nearly 600,000 Jobs--Most Since 1974
...The grim figures were further proof that the nation's job climate is deteriorating at an alarming clip with no end in sight."
and
"Bill Gates warns of tough economy
...Gates' comments on the economy came as U.S. Gross Domestic Product shrank by a 3.8 percent annual rate in the fourth quarter, according to government data. It was the severest economic contraction in 27 years.
..."No doubt, we've got three or four years here that are going to be very tough," Gates told the eclectic gathering of industry executives and business leaders. "We're going through a period ... where a 50-year credit expansion has moved to contraction.
"You're going to have a number of years where aggregate demand is low," he said."
Too bad there is a word limit of postings, or I could continue to show how completely delusional and idiotic your statement is. Let us know if you return to reality anytime soon.
.
If your knowledge of economics comes from newspapers, TV and magazines, I can't discuss anything with you.
I have a degree in economics and finance and work in the financial business.
Private business moves the economy. Government only has the power to allow business to function or not function. The government can't contribute to the economy because they have nothing to contribute. They don't have the ability to create wealth. The government has no wealth to contribute. Only private business can create wealth. Read what the congressional budget office has to say about this spending bill.
Let us know what each line item will do because the way they are selling it now, only someone who bought into a subprime loan last week would believe it.
(XYZ dollars expected to create XYZ jobs for XYZ years and it benefits the use of taxpayer money because . . . )
This should be demanded of the public if they want accountability.
Meanwhile the media obsession with these little morality plays about executive pay (it's a real issue, and simply put, executives of companies on public welfare shouldn't be "cadillac driving welfare queens") sucks up all the oxygen. The MSM would rather (as always) feed on the fear and outrage of the public, turning up the volume on sexual titillation ("what, money to educate people about STD's!!!!!" "Condoms???") , moral hazard ("How dare we give a tax cut to people who don't pay taxes!"), the size of the package ("A trillion dollars scotch taped together could go around the world 3 times.")
The Republicans are hoping to throw enough s*** into the air until they find something that will cripple or end the stimulus plan. The MSM is helping them, not out of ideology, but because it keeps people watching.
Both sides seem to be bringing nothing new to the table.
Disappointing.
The reason that Democrats are bringing old ideas to the table is that the old ideas in question (infrastructure investment, education investment, public health investment, social safety net investment) have been proven to work: Teddy Roosevelt's 'Square Deal', FDR's 'New Deal', Truman's 'Fair Deal', and even the much maligned 'Great Society' of LBJ (until it was gutted by Bill Clinton) all worked. If something works, we should use it again. It will work in the current crisis as it has worked before.
And your love of the LBJ Great Society is also misplaced. It was LBJ that created the problems with social security that we are having now. He and his Great Society caused social security to go from overflowing with cash to the current state by allowing the money to become part of the general fund. When that happened every agency that wanted money signed an IOU and took the cash from SS and never put it back.
Old ideas are not always the best ideas and these did not work then and will not work now!
Most foreclosures have been a result of 'prime mortgages' gone south due to job loss and the housing bubble as a whole. The bursting of this bubble was predicted years ago and the reason it was is that you can't base your entire economy on construction and the stock market when you have no manufacturing base left. We don't make anything anymore.
Employment numbers during both Bush term's were pathetic, the growth didn't even keep up with new entries into the workforce let alone replacing jobs lost by workers in the system for decades. We've been losing jobs for two years. When we gained some previously, it was at pathetically low rates.
No, this whole thing is not about the sub-prime mess. It's a cumulation of 25 years of bad economic policy.
I knew it was more far-reaching than just the sub-prime industry, but the line the British media would have most of us believe is that sub-prime is the main cause.
That's what the British media does best - Dumb things down, and introduce catchy soundbite-friendly tag-lines like "The Credit Crunch".
He is not even close to sounding competent trying to sell this stimulus bill. I am hearing the bully side of Obama. He wanted the bully pulpit. Maybe it is because he is a bully.
The Press is not helping our nation now anymore than they have in the last fifty years. Between the Press Corp and the Republicans we have a steep road ahead.
I hope that the President reads it.