The World Will End When Republican Economics Finally Works

From the NPR religion news feed on the right side of this blog, I found this:

Doomsday Redux: Prophet Says World Will End Friday

Mark your calendars: The world is ending Oct. 21. So says Harold Camping, the doomsday prophet who had said Judgment Day would come May 21. Camping had a stroke a few days after his prophecy failed, his organization is tottering and many followers have fallen away. But some still believe.

Now, I’m not so much interested in the end of the world on Friday as I am in that last line:

But some still believe.

The NPR report notes that Harold Camping’s church is still full of folks who, in the words of a documentarian following what’s going on, are “very much excited about the approaching date.” Apparently, for some people there is no evidence weighty enough to smash a wish.

Which may explain how it is that Republicans, imitating Harold Camping, can continue to sell their failed economic philosophy to gullible Americans.

“There Is No Crisis”

E. J. Dionne, one of the top liberal columnists in the country, has joined the small but growing chorus of folks who refuse to accept that America is fiscally “broke” and that we’re in a time-to-panic crisis.

As I have said repeatedly, we’re not bankrupt and we shouldn’t be making decisions in panic mode.  And I believe this point needs to be hammered in the heads of the American people.

Dionne wrote on Monday:

We’re not broke. Yes, nearly all levels of government face fiscal problems because of the economic downturn. But there is no crisis. There are many different paths open to fixing public budgets. And we will come up with wiser and more sustainable solutions if we approach fiscal problems calmly, realizing that we’re still a very rich country and that the wealthiest among us are doing exceptionally well.

He continued:

We have an 8.9 percent unemployment rate, yet further measures to spur job creation are off the table. We’re broke, you see. We have a $15 trillion economy, yet we pretend to be an impoverished nation with no room for public investments in our future or efforts to ease the pain of a deep recession on those Americans who didn’t profit from it or cause it in the first place.

Dionne references a speech given by Senator Al Franken last December, when the fight over the Bush tax cuts for the wealthy was dominating the news.  And what a speech it was. I don’t know how I missed it, but I did. I recommend all go watch it.

Here are some highlights:

According to the Economic Policy Institute, during the past 20 years, 56 percent of all income growth went to the top one percent of households.  Even more unbelievable-a third of all income growth went to just the top tenth of one percent. 

When you adjust for inflation, the median household income actually declined over the last decade.  During those years, while the  rich were getting richer, the rest of working America was struggling to keep up.   We’ve been growing apart.  And the American people know this.  And now, working Americans are forced to listen to the Republicans as they demand “Everyone needs to share the pain.  We’re all in this together.” 

The IRS published a study analyzing the tax returns of the wealthiest 400 Americans.  Together, in 2007, they brought in nearly $138 billion dollars.  Want to take a guess at what their average effective tax rate was?  Just over 16 and a half percent.   Is that really sharing the pain?  Are they really sharing in the pain just like everybody else?  

He pointed out that,

Bill Clinton inherited the largest deficit in history from George H. W. Bush and then handed George W. Bush the largest surplus in history.  And George W. Bush nearly doubled the national debt.  He also handed Barack Obama the largest deficit in history.

And part of the way Bill Clinton handed over the largest surplus in history (as well as 22.7 million new jobs) to Bush was through the Deficit Reduction Act of 1993, which set the marginal rates that the Bush tax cuts repealed.  Not one Republican voted for that responsible tax policy, and Franken quoted some prominent Republicans at the time:

Newt Gingrich.  Remember him?  On August 5, 1993, he said, “I believe this will lead to a recession next year.  This is the Democrat machine’s recession, and each one of them will be held personally accountable.”

Senator Phil Gramm.  Remember him?  He said, “The Clinton plan is a one-way ticket to recession.  This plan does not reduce the deficit…but it raises IT and it puts people out of work.”

Governor-elect John Kasich said, “This plan will not work.  If it was to work then I’d have to become a Democrat.” Congratulations, Ohio, on electing a Democratic governor. 

When you hear Republicans (and some Democrats, too) talk about sharing the pain of fiscal responsibility, ask yourself just why they aren’t talking about the Deficit Reduction Act of 1993, one of the most successful pieces of legislation in the past 40 years, one that turned deficits into surpluses while the economy was creating  millions upon  millions of jobs.

Ask yourself why anyone who claims to be serious about our so-called fiscal crisis refuses to acknowledge that not that long ago we had a tax policy that corresponded with our spending, and that Republican economic philosophy destroyed that delicate balance.

The answers won’t surprise, of course.  That Republican economic philosophy, which failed most of the country, does have a small, but powerful, collection of beneficiaries.

And I can confidently say that nearly everyone reading this today is not among them.

While We Were Away, Republicans Were Trying to Kill The Economy

While the mess in Wisconsin drags on, the economic recovery remains fragile and anemic.

And the Republicans in Congress—almost unnoticed—are doing everything they can to exacerbate its fragility and deprive it of much-needed iron—government spending.

Most every economist this side of Rush Limbaugh understands that there is a deficiency in demand in our economy.  That’s one reason (but not the only one) why American businesses are sitting on a Chris Christie-size pile of cash.   But what to do about the demand problem is the issue.

The Republican answer is austerity.  Crippling austerity, it turns out.  Last week, Speaker Boehner famously said he doesn’t much care (“so be it”) if the GOP spending cuts kill jobs, because they would be government jobs.

But yesterday, the Financial Times published a story indicating that it won’t just be government workers who take a hit from Republican budget-cutting hysteria. The headline was:

Goldman sees danger in US budget cuts

The story began:

The Republican plan to slash government spending by $61bn in 2011 could reduce US economic growth by 1.5 to 2 percentage points in the second and third quarters of the year, a Goldman Sachs economist has warned.

Even if—to avoid a government shutdown—Democrats managed to whittle down the budget cuts in a compromise deal with Republicans, say, to $25 billion, that will still “lead to a smaller drag on growth of 1 percentage point in the second quarter.”

Mark Zandi, chief economist at Moody’s Analytics, and former John McCain campaign adviser, concurs:

The betting is that we’ll see cuts somewhere close to $25-, $30 billion that take affect beginning in the second quarter of this year. And that could shave growth by as much as a percentage point. So it would weigh on growth. It would have longer lasting affects, but near-term it would be a negative.

Kudos to at least one Senate Democrat Chuck Schumer, who said,

This nonpartisan study proves that the House Republicans’ proposal is a recipe for a double-dip recession. Just as the economy is beginning to pick up a little steam, the Republican budget would snuff out any chance of recovery. This analysis puts a dagger through the heart of their ‘cut-and-grow’ fantasy.

Unfortunately, the cut-and-grow fantasy is not that easy to kill.

Paul Krugman, wrote a few days ago:

It’s amazing how this whole crisis has been fiscalized; deficits, which are overwhelmingly the result of the crisis, have been retroactively deemed its cause. And at the same time, influential people around the world have seized on the idea of expansionary austerity, becoming ever more adamant about it as the alleged historical evidence has collapsed.

Since the fall of 2008, there has emerged two diametrically opposed approaches to solving our (and the world’s) economic predicament:

(1) Stimulate the economy through government (deficit) spending until consumer demand picks up sufficiently to sustain a strong recovery

(2) Drastically cut government spending because deficits are a drag on the economy

It appears to me that the balance of economic opinion—from real economists—agrees with (1).  But Republicans—energized by anti-government deficit-phobes in the Tea Party movement—have successfully changed the debate from nurturing the economy back to health and creating jobs to killing labor unions, dismantling government programs, and making draconian cuts in government spending.

It’s fair to ask: What does killing Big Bird and collective bargaining have to do with lowering the unemployment rate?

Mark Thoma, Professor of Economics at the University of Oregon, wrote in The Economist:

Policymakers are not taking proper account of the risk of an extended period of stagnation. We should be pursuing additional fiscal stimulus along with quantitative easing as insurance against a stagnant economy that persists into the future, in fact this should have happened months ago.

He wrote that in October of 2010.

But Thoma is a real economist.  He doesn’t just play one on TV or radio.  And as Krugman said,

From where I sit, it looks as if the ascendant doctrines in our policy/political debate are coming precisely from people who don’t know and don’t care about technical economics. The revival of goldbuggy sentiment, the fear of hyperinflation in the face of high unemployment, the continuing force of the notion that tax cuts don’t increase the deficit, aren’t coming from some subtle battle among mathematical modelers; they’re coming from the same people who reject evolution, climate science, and more. They don’t need no stinking technical analysis. The truth is that the economics profession is proving far less relevant to public debate, even in the face of economic crisis, than was dreamed of in our philosophy.

Now, whether you think it good or ill that professional economists have lost their clout, the fact remains that in their place have come fiscal and monetary policy geniuses like Michele Bachmann and Glenn Beck and, God forbid, Ozark Billy Long.  People like these three have more to do with how we are fighting this crisis than those who have spent a lifetime studying economics.

And if that doesn’t scare you, then you must be a wealthy Republican.

[J.S. Applewhite / AP (left, center); Cliff Owen / AP]
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