Fiscal Policy Dysfunction and Fallacy

fiscal cliffIt’s hard to take anything Republicans say seriously any more given that their arguments are not data-, fact- or theory-driven.  There’s a lot of discussion by the media that seems to project this idea that our spending is out-of-control that embraces complete untruths spread by Republicans.  Just because something is said consistently by one party doesn’t mean it’s correct or just another point of view.  There needs to be some adults in the media these days that point out that just because the republicans say the sky is green doesn’t make that a theory, a fact, or even a remote possibility.  It just takes a few charts and well-placed questions.  Like why are you worried about “out-of-control spending” when … then show these two graphs.  Data shows just the opposite of Republican talking points.

Much can be said of this fiscal “cliff” hooplah.  Most of it has to do with the degree of economic illiteracy omnipresent in the TV commentariat and the Republican office holder. Spend some time with economists and you’ll see data rejecting Republican ideological claims over and over again.

As Jed Graham points out:

From fiscal 2009 to fiscal 2012, the deficit shrank 3.1 percentage points, from 10.1% to 7.0% of GDP.  That’s just a bit faster than the 3.0 percentage point deficit improvement from 1995 to ’98, but at that point, the economy had everything going for it.

Other occasions when the federal deficit contracted by much more than 1 percentage point a year have coincided with recession. Some examples include 1937, 1960 and 1969.

In short, we do not face a serious problem of growing government deficits.  Rather the problem is one of too fast a reduction in the deficit in light of our slowing economy.

As to the challenge of the fiscal cliff—here we have to recognize, as Josh Bivens and Andrew Fieldhouse explain, that:

the budget impact and the economic impact are not necessarily the same. Some policies that are expensive in budgetary terms have only modest economic impacts (for example, the 2001 and 2003 tax cuts aimed at high-income households are costly but do not have much economic impact). Conversely, other policies with small budgetary costs have big economic impacts (for example, extended unemployment insurance benefits).

In other words, we should indeed allow the temporary tax rate deductions for the wealthy to expire, on both income and capital gains taxes.  These deductions cost us dearly on the budget side without adding much on the economic side.  As shown here and here, the evidence is strong that the only thing produced by lowering taxes on the wealthy is greater income inequality.

Letting existing tax rates rise for individuals making over $200,000 and families making over $250,000 a year, raising the top income tax bracket for both couples and singles that make more than $388,350, and limiting tax deductions will generate close to $1.5 trillion dollars over ten years  …

Yet, poor delusional Republican policy makers continue to run around screaming about the sky falling down.  Poor John Boehner seems simply out of touch with reality.  Cross check this statement with the data I provided above.

Boehner said the reason negotiations are going so poorly is that Obama administration officials – in particular, Treasury Secretary Tim Geithner – aren’t taking Republicans seriously. Boehner said he was shocked at Geithner’s proposal to Republicans last week.

“I was flabbergasted. I looked at him and I said, ‘You can’t be serious.’ I’ve just never seen anything like it,” Boehner said.

Geithner has said his plan included cuts to Medicare and additional stimulus spending, but also an expiration of Bush-era tax cuts to those making over $250,000 a year. Furthermore, the proposal included the closing of some loopholes and new limits on deductions, as well as an increase in the estate tax rate and taxes on capital gains and dividends.

Boehner acknowledged that President Barack Obama won the election on a platform that in part was based on increasing taxes for those making over $250,000. This is a major sticking point in negotiations, and Boehner said the president must compromise with the GOP.

“They won the election, (but) they must have forgotten that Republicans continue to hold the majority in the House. But the president’s idea of a negotiation is, ‘Roll over and do what I ask,'” Boehner said.

While Boehner admitted that going over the fiscal cliff would be detrimental to the economy, he said out-of-control spending is mortgaging the future of the next generation and must be reined in. Accordingly, the speaker said going over that cliff is a distinct possibility.

“I’m determined to solve our debt problem. We have a serious debt problem and it is going to be dealt with,” Boehner said.

non-security-disc-levels

NSD = non security discretionary

So, should any one with even an inkling of knowledge on the economy and finance take anything the Republicans seriously? Well, my answer is no. Not unless you’re only agenda is too see the ultrarich get richer and the economy fall apart as no one else has any money to spend. Boehner’s appearance on Dancing Dave’s Disco Party today was so pathetic that Senator McCaskill nearly threw a pity party for him.

Sen. Claire McCaskill (D-MO) said that she feels “almost sorry” for House Speaker John Boehner during an appearance on NBC’s “Meet the Press” Sunday, explaining that Boehner is in a tough spot because of the far-right wing of the Republican Party.

“I feel almost sorry for John Boehner,” McCaskill said. “There is incredible pressure on him from a base of his party that is unreasonable about this. And he’s gotta decide, is his speakership more important, or is the country more important. And in some ways, he has got to deal with this base of the Republican Party, who Grover Norquist represents.”

Meanwhile, outgoing Treasury Secretary Tim Geithner got to play the mean adult in the media room.

In an interview with CNN’s Candy Crowley on “State of the Union,” Geithner insisted that any compromise on the plan he presented to congressional Republicans on Thursday, which includes $1.6 trillion dollars in tax revenue, cuts to Medicare, and another $50 billion in stimulus spending, must contain an expiration of the Bush tax cuts for income over $250,000.

“There’s not going to be an agreement without rates going up,” Geithner said in the interview, which aired Sunday. “If they are going to force higher rates on virtually all Americans because they’re unwilling to let tax rates go up on 2 percent of Americans, then, I mean that’s the choice they’re going to have to make.”

While he maintains the administration will refuse any deal without the tax hikes, Geithner was optimistic about the negotiations, showing room for compromise as well.

“It’s a very good plan and we think it’s a good basis for these conversations,” he said. “What we did is put forward a very comprehensive, very carefully designed mix of savings and tax rates to help us put us back on a path to stabilizing our debt, fixing our debt and living within our means.”

The fiscal cliff, which begins in January if Congress and the administration fail to come to an agreement over a number of spending issues, includes automatic reductions in defense and non-defense spending, the end of the payroll tax holiday, and the expiration of extended unemployment benefits.

Paul Krugman points out that Boehner is only “serious” about getting at the budget when it hurts regular people.

In particular, the Obama administration’s call for higher revenue through increased taxes on high incomes — which actually goes considerably beyond just letting the Bush tax cuts for the top end expire — gets treated with an unmistakable sneer in much political discussion, as if it were a trivial thing, more about staking out a populist position than it is about getting real on red ink.

On the other hand, the idea of raising the age of Medicare eligibility gets very respectful treatment — now that’s serious.

So I thought I’d look at the dollars and cents — and even I am somewhat shocked. Those tax hikes would raise $1.6 trillion over the next decade; according to the CBO, raising the Medicare age would save $113 billion in federal funds over the next decade.

So, the non-serious proposal would reduce the deficit 14 times as much as the serious proposal.

I guess we have to understand the definition of serious: a proposal is only serious if it punishes the poor and the middle class.

The newest Republican emanation of Snowflake Snookie says it’s not serious.  Why is this woman getting so much media attention? WTF does she bring to the table?

Sen. Kelly Ayotte (R-N.H.) said Sunday she was “disappointed” with President Obama’s proposal to avoid the “fiscal cliff” at the end of the year.

“We want to solve this and I think the Speaker earnestly wants to solve it. I was disappointed by the president’s initial proposal here,” she said on CNN’s “State of the Union.”

On Thursday, Treasury Secretary Timothy Geithner presented lawmakers with the administration’s initial offer, which included $1.6 trillion in tax increases, $50 billion in economic stimulus spending and $400 billion in spending cuts. It would also give the president the power to raise the debt ceiling in the future without congressional approval.

Republican leaders in Congress have rejected the proposal, with Speaker Boehner (R-Ohio) calling it “not serious.”

Ayotte is yet another attorney whose claim to fame is suing Planned Parenthood because the parental notification law passed by New Hampshire was found unconstitutional.  My guess is the right loves her because she’s willing to do the old white dude’s dirty work fighting women’s rights.  She also refused to prosecute mortgage fraud cases in her role as attorney general.   Ayotte is a climate change denier and opposes marriage equality.  She’s a real piece of work in a suited skirt and I really wish the press would stop making her look reasonable because she’s not reasonable on any policy issue.  She’s basically Paul Ryan in a skirt. They’re both ideologues that let dogma rule their thought processes.  I doubt either of them can do calculus let alone handle a real economic or financial model.

I feel like I keep writing a lot of the same things, but here goes.  There’s no “cliff”.  There’s no “budget crisis”.  There’s only the increased risk of falling back into a recession should these things not be resolved at all.  Frankly, I’m glad to see the Obama administration play a little poker for a change.  The Republicans should be allowed to twist themselves into knots as long as possible.  The economy is improving and this situation will not create a jolt at all.  The only thing that might happen is stock market correction at the beginning of the year and the talk of another debt downgrade.  Considering that the world still wants our debt, I’m not even worried about that much any more.

This is really ridiculous.  The Republican Party and the media need to grow up and learn something about how our economy works.  It’s ridiculous to see policy and policy discussions held hostage to this much stupidity.  Nearly every student that comes out of Macroeconomics 101 knows that rich people don’t spend as much of their income as poor and middle class.  These days the rich invest and hide their money all over the world.  Study-after-study shows that increasing the tax rates on the rich won’t hurt the economy. That’s not true of money taken from the poor, working and middle class.  Yet, today we heard this from Boehner:

On Fox News Sunday, John Boehner said it doesn’t matter where new revenue comes from, but he ruled out raising taxing on the rich, which leaves the poor and middle class to foot the bill.

Here is a transcript of the exchange between Chris Wallace and John Boehner on Fox News Sunday,

CHIRS WALLACE: You talked about the fact that the President won and you came out with a concession the day after the election and they point out that the president campaigned on raising tax rates, you know, and it was the big issue, between him and Romney, and, they say, just as he had to cave, after your victory, in the 2010 midterms, now, it is your turn to cave on tax rates.

JOHN BOEHNER: Listen, what is this difference where the money comes from? We put $800 billion worth of revenue, which is what he is asking for, out of eliminating the top two tax rates. But, here’s the problem, Chris, when you go and increase tax rates, you make it more difficult for our economy to grow, after that income, the small business income, it is going to get taxed at a higher rate and as a result we’re gonna see slower economic growth, we can’t cut our way out of this problem, nor can we grow our way out of the problem, we have to have a balanced approach and what the President wants to do will slow or economy at a time when he says he wants the economy to grow and create jobs.

What Boehner was implying here was the Romney/Ryan tax plan. There aren’t enough loopholes to be closed in order to generate the revenue need, and if taxes aren’t going to be raised on the wealthy, who is going to pick up the tab? Some House Republicans are suggesting that we adopt Ryan’s plan of putting a cap on deductions, which would absolutely destroy the incentive for charitable giving.

Why do they keep clinging to the same stuff that’s never worked and that voters rejected in the election?  Are they insane?

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23 Comments on “Fiscal Policy Dysfunction and Fallacy”

  1. dakinikat says:

    http://www.esquire.com/blogs/politics/bobby-jindal-education-system-113012

    speaking of religious crackpots …

    Bobby Jindal Takes One In The Chops … Charlie Pierce

    Jindal is considered to be the cutting edge in Republican presidential timber.

    Except, of course, that Jindal is a religious crackpot.

    Over the past year, Jindal has managed to marry educational “reform” grifting to Christian theocracy by allowing charter schools in his state to employ to teach from Jesus-on-a-dinosaur creationist textbooks. Well, today, a local judge pretty much blew up the whole system on him. If the funding system is unconstitutional, then the problem of Louisiana’s schoolchildren being taught theories from Fantasy Island goes down with it. And “Bobby” will have something very interesting to talk himself out of come 2016.

    • Propertius says:

      I don’t have the same close-up view of Jindahl that you do, but I’m not sure he’s really a sincere religious crackpot. I think he’s a very cynical pol who has found a way to advance his personal agenda by catering to the rubes (which is much the same way as I view Obama). I look at his background (Honors degree in Biology from Brown, Rhodes scholar) and I don’t see a snake-handling bible-thumper, and I certainly don’t see somebody dumb enough to swallow the whole Creationist fable. I don’t think he’s stupid, I don’t think he’s insane – I just think he’s evil. 😉

  2. bostonboomer says:

    Yes, they are insane. The only reason I can figure out for the sudden media focus on Kelly Ayotte is that she was one of Romney’s main surrogates. Somehow she’s seen as a party leader because of that. But I don’t think she even has much seniority in the Senate.

    The corporate media just plain sucks. For awhile I thought they were starting to wake up when they began admitting that Romney was a bald-faced liar. But now they’re back to taking everything John McCain and Huckleberry Closetcase says as gospel and ignoring basic facts.

    • RalphB says:

      Yes, completely batshit insane. Hopefully most of their followers will wake up once we are over the cliff. The media are idiots!

    • dakinikat says:

      I keep thinking they want to find a sane republican but that don’t seem to realize they’ve all been booted out of the party. They don’t seem to do their homework at all. Her record is totally right wing. I have no idea why they seem to try to find the rising star and than fulfill their projections. I do think she’s going to be the main hatchet woman on women’s rights though. She’s got the entire line up of anti-women policies down pat from attacking planned parenthood to shrugging off equal pay.

  3. Propertius says:

    There’s a lot of discussion by the media that seems to project this idea that our spending is out-of-control that embraces complete untruths spread by Republicans.

    Particularly the one in the White House who convened the Catfood Commission to begin with.

    • HT says:

      And that has what to do with this post? Kat and the other front pagers have already skewered that commission multiple times in many, many ways.

      Kat, thank you for another very informative post.

      • Propertius says:

        Well, I think it’s important not to delude oneself about who’s behind this fiasco, who benefits from it, and who is or isn’t opposed to it. This whole “fiscal cliff” nonsense is very much reminiscent of the way single-payer was shut out of the health care debate in favor of the “robust public option” that never was. *Nobody* is questioning the patent untruths about social security, for example. And please note that *now* when there’s a possibility that some (few) *Democrats* might filibuster against entitlement “reform”, Reid is actually willing to consider the “nuclear option”.

        This isn’t a Republican vs. Democrat issue. It’s a bond trader vs. the rest of us issue. Yes, the Republicans are pounding the “entitlement reform” drum the loudest right now, but the White House started the parade.

    • RalphB says:

      That sad talking point is slightly out of date.

      • dakinikat says:

        I think things have changed a lot on that front. I also don’t think Obama is a uninformed as he was when it comes to economics any more too. He sounds like he knows what he’s talking about now, Plus, all the Dems are saying social security is off the table and that was a big thing in the cat food commission documents.

      • Propertius says:

        Forward not backward, right?

  4. Fannie says:

    Yes, the insanity is accelerating, especially since they lost the election. Lawd have mercy, should they relax for one fucking minute.

    • HT says:

      Cmon Fannie, relaxing means time to think. Geebus forbid any of these characters actually think. It might tax their brain. end of snark/
      But you know, it’s all the libruls fault, right – you know that don’t you? Because without the libruls they wouldn’t have gone batshirt crazy. They were forced into insanity I tell you – by the libruls.
      Does anyone know who those libruls are? As a living, breathing life long liberal, I have no idea and was hopting someone else could identify the dreaded libruls, because based on what I have read I don’t share the characteristics that are being attributed to these libruls. I also don’t share a lot with libtards, whomever they may be.

      • NW Luna says:

        Lol. Of course you can’t find them …. figments of the wingtards’ imaginations.

      • List of X says:

        It may make you feel better that for the people of the far right, Kelly Ayotte is one of those dam libruls.

      • RalphB says:

        That doesn’t help. She’s still a wingnut jr grade.

      • HT says:

        List – hmmm If that is what a librul is, then I certainly don’t want to be one and resent the implication that I might be one.
        Ralph, I’m getting confused (old ladies apparently get that way quite often – where is geritol when you need it). Libruls, wingnuts, wingtards, libtards – I feel that discord has degenerated into middle school tactics. I know you feel the same. Sad that. Once upon a time we had discourse. Now, it’s a twitter world I guess. Back to my knitting.

      • RalphB says:

        We haven’t actually talked to each other in a long time. We talk past each other for some reason. Maybe we are trying to make points with a crowd? Whatever, it’s not working.

      • NW Luna says:

        It’s too easy to reflexively call the other side ***tards/nuts/whatever.

        OTOH facts don’t seem to get thru to them either.

  5. RalphB says:

    SteveM has a nice catch of the inevitable sliming.

    THE OBAMA-IZATION OF HILLARY CLINTON BEGINs

    After Hillary Clinton gave a speech this weekend at the Saban Forum, The New Yorker’s David Remnick wrote naively:

    She proceeded to give a serious, sturdy speech of a certain kind; if not quite AIPAC-ready, it was a speech extremely careful not to ruffle anyone’s delicate feelings or becloud her last days as secretary of state. She asked of Israel only that it show more “generosity” to the Palestinians.

    You think that won’t ruffle anyone’s delicate feathers, David? Let me introduce you to the right-wing media:

    Ben Shapiro at Breitbart.com (via Fox Nation):

    “HILLARY: ISRAEL LACKS ‘EMPATHY,’ ‘GENEROSITY’ TOWARD PALESTINIANS”

    Gregg Re at the Daily Caller:

    “Hillary Clinton: Israel has ‘lack of generosity … lack of empathy’ for Palestinians”

    Pam Geller at Atlas Shrugs:

    “HILLARY CLINTON: HOLOCAUST VICTIMS LACK “EMPATHY,” “GENEROSITY” TOWARD NAZIS”

    If this is on the front page of tomorrow’s New York Post, I won’t be surprised.
    […]
    The right-wing media will seize any opportunity and use any weapon to harm those it wishes to destroy. It’s Hillary’s time again. From the ’08 primary season until this year’s Election Day, the right-wing suspended its anti-Clinton war because the Clintons seemed to have value as a stick to beat Barack Obama with, but that’s over now. It’s time to do to Hillary what’s been done to Obama for four years — or, rather, to do to her what was done to her and her husband from 1992 until Obama seized the lead in ’08. It’s quite possible that the right won’t be able to destroy her if Remnick is right and she really is planning to run for president in 2016, but it won’t be for lack of trying.

    • HT says:

      And that is what “serious” political commentary has come to? How sad is that. Honestly I don’t believe that anyone or anything could “destroy” Hillary Clinton – she’s made of far sterner stuff that those a@@holes could begin to tap into, however she’s an amazing woman/human being who has given her all to serve her country, which is more than any of these armchair warriors have ever done. I’m sick and tired of people purporting to be serious journalists or bloggers serving as attack dogs for partisan purposes. how can they claim that they care for their country when they do not even listen or give credit where credit is due. I thought Hillary’s response was even tempered – an iron hand in a velvet glove. For anyone who is familiar with nuance, she was strong and subtle and firm.

      • RalphB says:

        The only thing “serious” about the right wing media is how totally insane it has become. We need a reboot of our entire media in this country.

      • HT says:

        You are right Ralph, but as long as 6 mega billionaires own the media,not just in the U.S. but in other countries, I don’t think a reboot is in the works. The one thing that makes me steam is when they accuse each other of being liberal. There is not one liberal owned media, although there are still some liberal journalists and people like Krugman, but I suspect the only reason they are still employed is because the organizations need liberals to spend money to read their rags. And rags are what they have become. No wonder they are losing money hand over fist. Waste of trees.