We're almost three years into a crippling economic slump. Economic inequality is skyrocketing. Democrats are trying their hardest to blame the Tea Party for the recent debt crisis. Yet voters are not moving towards the Democrats or toward big government in any significant numbers. Democratic pollster Stanley Greenberg recently asked voters why, and his conclusion was quite enlightening. According to Greenberg, voters simply do not trust the government to carry out its policies fairly. This distrust in government translates to distrust of big-government progressives and of Democrats in general.
The voters' take on TARP, for instance, was that "government works for the irresponsible, not the responsible." "Average citizens," they said, "don't get money for free." Overall, the Americans in Greenberg's survey see a government made up of politicians that work only for themselves, Wall Street lobbyists, campaign donors, and special interest groups. The American people are ignored. The 2009 stimulus, the lack of seriousness about controlling the borders, the attempted cap-and-trade legislation, and the number of Obama cabinet members with ties to Goldman Sachs are all seen as indicators of how much Washington is controlled by special interest lobbyists and campaign money.
Greenberg goes on to suggest several ways that Democrats can "detoxify" government and renew voters' faith in progressivism. But is detoxifying government really possible? Hasn't Greenberg just pointed out the fundamental problem with big government? If we had a government of angels, I'd be a progressive too. The problem is, we don't. We have a government made up of people--all of them flawed, inherently corruptible, and inherently self-interested at least to some degree. We've all heard the saying, "Power corrupts." It is simply not realistic to expect that people, when given the power of a seat in Congress, will consistently put the interests of the people ahead of themselves and their campaign donors. I'd love for someone to think of a counterexample--a government that consistently did the right thing for its people, decade after decade.
But most of the time, at least, government doesn't work that way. As government gets bigger, those who benefit are mostly a well-connected few. That certainly happened under the big-government crony capitalists of the Bush administration and it's happening now. And Americans seem to be figuring that out.
Thursday, August 11, 2011
Wednesday, August 10, 2011
A victory over special interests in Wisconsin
In general, I have no problem with private sector unions. They represent workers and negotiate with companies who have strong incentives to cut costs in order to make a profit. Public sector unions, on the other hand, are a completely different story. They are employed by government, whose goal is not to make a profit but to get votes. If anything, government has an incentive to overpay their workers in order to try to get their votes. It is also not fair that public sector unions, who take their money out of the taxpayer-funded salaries of public workers, are free to donate vast sums to political parties. Finally, we have George Meany, the former President of the AFL-CIO, who said in 1955 that "it is impossible to bargain collectively with the government."
Public sector unions, basically, are just another one of the special interests that are currently infesting governments throughout the country. Thus, I believed that Scott Walker's bill which limited the collective bargaining power of public sector unions in Wisconsin was a step in the right direction. Predictably, Democrats fought Gov. Walker tooth and nail, first by fleeing the state, then by organizing an attempted recall of the six Republican lawmakers they saw as most vulnerable. They needed three of the six seats to regain control of the Wisconsin senate.
What happened? Despite staggering amounts of money and effort from organized labor, the Democrats only managed to win back two seats--one in a solidly Democratic district, the other held by a man who had left his wife and moved outside his district to live with his mistress. The other four recall elections were not close.
It certainly helped that Walker's bill helped school districts save millions of dollars by eliminating the teachers union's monopoly power on health insurance contracts, and that Walker's administration has had a very good record on jobs. It's good to know that people can still stand up to powerful special interests.
Public sector unions, basically, are just another one of the special interests that are currently infesting governments throughout the country. Thus, I believed that Scott Walker's bill which limited the collective bargaining power of public sector unions in Wisconsin was a step in the right direction. Predictably, Democrats fought Gov. Walker tooth and nail, first by fleeing the state, then by organizing an attempted recall of the six Republican lawmakers they saw as most vulnerable. They needed three of the six seats to regain control of the Wisconsin senate.
What happened? Despite staggering amounts of money and effort from organized labor, the Democrats only managed to win back two seats--one in a solidly Democratic district, the other held by a man who had left his wife and moved outside his district to live with his mistress. The other four recall elections were not close.
It certainly helped that Walker's bill helped school districts save millions of dollars by eliminating the teachers union's monopoly power on health insurance contracts, and that Walker's administration has had a very good record on jobs. It's good to know that people can still stand up to powerful special interests.
Monday, August 8, 2011
Bush and Obama: More similar than different
Obama is (deservedly, in my opinion) taking a lot of heat these days for the debt crisis and the down economy. One of the classic responses from left-wingers trying to defend Obama is "Well, would you prefer Bush?" In some ways, that is a good point. More fundamentally, however, I feel like it misses the point. If you look past the "R" and "D" labels, Bush's and Obama's presidencies are really more similar than different. Obama is not really a liberal, although he does lean left; nor was Bush really a conservative, although he leaned right. They are both statists, dramatically expanding the power and the role of government. And both their administrations were characterized by grossly irresponsible spending and heavy-handed policies that backfired.
During Bush's eight years in office, the national debt ballooned from $5.7 trillion to $10.6 trillion--an increase of nearly $5 trillion. During Obama's 2.5 years in office, the national debt grew from $10.6 trillion to $14.5 trillion--an increase of nearly $4 trillion in about one-third of the time. However, Obama has done his borrowing in a historically bad economy, when some amount of deficit is acceptable or even advisable so as to allow for pro-growth tax cuts or spending. Bush's borrowing was mostly during good economic times, when deficits are much harder to justify. In addition, some of Obama's spending was the result of the two wars he inherited from Bush. Conclusion? Bush borrowed a lot when he should have been borrowing nothing. Obama is borrowing a ridiculous amount when he should only be borrowing a little.
Besides spending like drunken sailors, both presidents seemed to believe that more power from the U.S. government is a good thing. Bush attempted to expand American global influence with bombs and guns. He started two wars that turned into long, deadly occupations, while continuing to believe that the people of Iraq and Afghanistan would somehow appreciate the American occupation and the heavy American influence on their new governments. Obama, on the other hand, seems to believe that he always knows better than the American people--whether it means forcing people to buy healthcare, preventing people from buying incandescent lamps, trying to tell companies that they can't open a factory in a certain state, or trying to prevent workers from having a secret-ballot vote on whether to unionize. Obama clearly does not see individual economic freedom as anything worth protecting.
So forget the "R" and "D" labels. We should not automatically associate all Democrats with Obama or all Republicans with Bush. The next president, regardless of party, needs to be someone who is as unlike either of them as possible.
During Bush's eight years in office, the national debt ballooned from $5.7 trillion to $10.6 trillion--an increase of nearly $5 trillion. During Obama's 2.5 years in office, the national debt grew from $10.6 trillion to $14.5 trillion--an increase of nearly $4 trillion in about one-third of the time. However, Obama has done his borrowing in a historically bad economy, when some amount of deficit is acceptable or even advisable so as to allow for pro-growth tax cuts or spending. Bush's borrowing was mostly during good economic times, when deficits are much harder to justify. In addition, some of Obama's spending was the result of the two wars he inherited from Bush. Conclusion? Bush borrowed a lot when he should have been borrowing nothing. Obama is borrowing a ridiculous amount when he should only be borrowing a little.
Besides spending like drunken sailors, both presidents seemed to believe that more power from the U.S. government is a good thing. Bush attempted to expand American global influence with bombs and guns. He started two wars that turned into long, deadly occupations, while continuing to believe that the people of Iraq and Afghanistan would somehow appreciate the American occupation and the heavy American influence on their new governments. Obama, on the other hand, seems to believe that he always knows better than the American people--whether it means forcing people to buy healthcare, preventing people from buying incandescent lamps, trying to tell companies that they can't open a factory in a certain state, or trying to prevent workers from having a secret-ballot vote on whether to unionize. Obama clearly does not see individual economic freedom as anything worth protecting.
So forget the "R" and "D" labels. We should not automatically associate all Democrats with Obama or all Republicans with Bush. The next president, regardless of party, needs to be someone who is as unlike either of them as possible.
Sunday, August 7, 2011
Now is the time for tax reform
The United States is currently in an unenviable situation. The economic slump is approaching the end of its third year. At the same time, sky-high deficits and debt have resulted in a credit downgrade and a bitter partisan fight in Washington. Clearly, a return to economic growth would help solve both these problems.
Where will the growth come from, though? Stimulus spending has been tried--and has failed. Pro-growth tax cuts like those in 1961 and 1981 would not be politically feasible because of deficit concerns. One possible answer, suggested by WSJ columnist Stephen Moore, is revenue-neutral tax reform.
As Moore points out, a similar deal was struck in 1986, when the top income tax rate was lowered to 28%, which was balanced out by eliminating a host of deductions. The deal resulted in an estimated $1 trillion of economy-wide gains. This time, rather than lowering the marginal income tax rate (which was already done under Bush), a better idea would be to lower the corporate tax rate. Combining state and federal taxes, the US corporate tax rate is currently 39%, which is far higher than almost all other countries, and gives US companies a clear disadvantage in the global market. The employer portion of the payroll tax, which is basically a direct tax on hiring, also needs to disappear ASAP. If we want more hiring (which clearly we do), we shouldn't be taxing it.
How can we balance this out? For one thing, aggressively close off loopholes and tax subsidies. The real sad part of our corporate tax policy is that the largest corporations can hire armies of lawyers to figure out how to best exploit the loopholes--but mid-size businesses, without the ability to hire those lawyers, get hit with the full effect of the tax. That needs to end. Similarly, the favors to special industries (agriculture, hedge funds, green energy, etc) in the tax code need to be cut. Ethanol was a good start.
And if that doesn't balance the revenue effects of cutting the corporate and payroll taxes? Raise taxes on large high-yield capital gains, or put a tax on derivatives transactions. Unlike business, Wall Street does not create jobs or produce goods that add value to the economy. Large capital gains and derivatives are almost exclusively the province of the rich. And such a tax could discourage the kind of high-risk speculation that resulted in the 2008 crisis.
Where will the growth come from, though? Stimulus spending has been tried--and has failed. Pro-growth tax cuts like those in 1961 and 1981 would not be politically feasible because of deficit concerns. One possible answer, suggested by WSJ columnist Stephen Moore, is revenue-neutral tax reform.
As Moore points out, a similar deal was struck in 1986, when the top income tax rate was lowered to 28%, which was balanced out by eliminating a host of deductions. The deal resulted in an estimated $1 trillion of economy-wide gains. This time, rather than lowering the marginal income tax rate (which was already done under Bush), a better idea would be to lower the corporate tax rate. Combining state and federal taxes, the US corporate tax rate is currently 39%, which is far higher than almost all other countries, and gives US companies a clear disadvantage in the global market. The employer portion of the payroll tax, which is basically a direct tax on hiring, also needs to disappear ASAP. If we want more hiring (which clearly we do), we shouldn't be taxing it.
How can we balance this out? For one thing, aggressively close off loopholes and tax subsidies. The real sad part of our corporate tax policy is that the largest corporations can hire armies of lawyers to figure out how to best exploit the loopholes--but mid-size businesses, without the ability to hire those lawyers, get hit with the full effect of the tax. That needs to end. Similarly, the favors to special industries (agriculture, hedge funds, green energy, etc) in the tax code need to be cut. Ethanol was a good start.
And if that doesn't balance the revenue effects of cutting the corporate and payroll taxes? Raise taxes on large high-yield capital gains, or put a tax on derivatives transactions. Unlike business, Wall Street does not create jobs or produce goods that add value to the economy. Large capital gains and derivatives are almost exclusively the province of the rich. And such a tax could discourage the kind of high-risk speculation that resulted in the 2008 crisis.
Wednesday, August 3, 2011
Two views on balancing the budget
Esquire today presented a very interesting left-right juxtaposition: two articles by former senators Gary Hart (D-Colo.) and Bob Packwood (R-Ore.) about balancing the federal budget. Here is Hart's article and here is Packwood's.
So who's right? Well, neither. Or both. Hart understandably decries the failure to regulate financial markets. Hart also correctly points out that the Iraq and Afghanistan wars combined with the Bush tax cuts were not good for the deficit. Given that both the wars and the tax cuts have continued for more than a decade, at this point they are responsible for a huge chunk of the federal debt.
Now, the Bush tax cuts, by themselves, were not a bad idea. Hart's biggest mistake is his refusal to acknowledge that tax cuts can stimulate the economy--a strategy that is part of Keynesian economics and worked undeniably well under both Reagan and JFK. The problem is, if you cut taxes you need to restrain spending, and Bush did exactly the opposite. Here's an idea: pass a law that requires a tax increase for any military operation that continues longer than 10 days. That will keep deficits down, and it might make the trigger-happy contingent of the GOP (which thankfully seems to be in decline) less likely to push for war.
Packwood's article discusses the worrisome increase in total federal spending, with a particular emphasis on entitlements. He is right on there: unless something is done to stop the runaway growth of entitlement spending, deficits will explode in the next few decades. However, by failing to discuss anything besides entitlements, Packwood exemplifies a certain conservative myopia. If the GOP focuses too much on slashing entitlements and leaves everything else alone, they will lose election after election. It would almost take a Vulcan to not see it as unfair for seniors and Medicaid patients to have to make all the sacrifices. While restraining entitlements are essential, fiscal conservatives need to be just as willing to consider things like dismantling the American empire, eliminating foreign aid, cutting federal payroll, closing tax loopholes, and probably--in a decade or two--raising taxes in some form.
So who's right? Well, neither. Or both. Hart understandably decries the failure to regulate financial markets. Hart also correctly points out that the Iraq and Afghanistan wars combined with the Bush tax cuts were not good for the deficit. Given that both the wars and the tax cuts have continued for more than a decade, at this point they are responsible for a huge chunk of the federal debt.
Now, the Bush tax cuts, by themselves, were not a bad idea. Hart's biggest mistake is his refusal to acknowledge that tax cuts can stimulate the economy--a strategy that is part of Keynesian economics and worked undeniably well under both Reagan and JFK. The problem is, if you cut taxes you need to restrain spending, and Bush did exactly the opposite. Here's an idea: pass a law that requires a tax increase for any military operation that continues longer than 10 days. That will keep deficits down, and it might make the trigger-happy contingent of the GOP (which thankfully seems to be in decline) less likely to push for war.
Packwood's article discusses the worrisome increase in total federal spending, with a particular emphasis on entitlements. He is right on there: unless something is done to stop the runaway growth of entitlement spending, deficits will explode in the next few decades. However, by failing to discuss anything besides entitlements, Packwood exemplifies a certain conservative myopia. If the GOP focuses too much on slashing entitlements and leaves everything else alone, they will lose election after election. It would almost take a Vulcan to not see it as unfair for seniors and Medicaid patients to have to make all the sacrifices. While restraining entitlements are essential, fiscal conservatives need to be just as willing to consider things like dismantling the American empire, eliminating foreign aid, cutting federal payroll, closing tax loopholes, and probably--in a decade or two--raising taxes in some form.
Tuesday, August 2, 2011
"Terrorists" rhetoric completely crossed the line
With the signing of the debt deal, perceived as favorable to the GOP and the Tea Party, a whole mess of nasty rhetoric has come out of the woodwork. You might expect a leftist blog to compare the Tea Party to terrorists. It's a bit more surprising when you see a New York Times columnist claiming that the Tea Party has "waged jihad on the American people." Still, it's only an op-ed column.
However, when the Vice President of the United States says that the Tea Party "acted like terrorists," that's pretty despicable. He was responding to an even blunter comparison from Rep. Mike Doyle (D-Pa), who flat-out said that a “small group of terrorists have made it impossible to spend any money.”
Look, I realize political debates can get heated. You could call the Tea Party Republicans obstinate, pigheaded, or extremist, and I might agree with you somewhat. You could talk about GOP hypocrisy for not cracking down on spending when Bush was in office, a perfectly valid argument. You could call them cruel and heartless or talk about their supposed allegiance to millionaires and oil companies at the expense of the working class. Fine.
But terrorists? Terrorists want to blow up buildings and trains and kill people, ideally thousands of people. The Tea Party wants to cut government spending--that's it. Some people have tried to argue that the Republicans were leading the country toward default with their reluctance to raise the debt ceiling. That is hogwash. The government would still have had more than enough money to pay interest on the debt. The only way a default could have happened is if Congress decided that paying some bureaucrats in the Department of Energy was more important. The worst-case scenario was a government shutdown a la 1995.
So seriously, enough with the crazy rhetoric, or there might be knife fights in the Capitol before the end of the year.
However, when the Vice President of the United States says that the Tea Party "acted like terrorists," that's pretty despicable. He was responding to an even blunter comparison from Rep. Mike Doyle (D-Pa), who flat-out said that a “small group of terrorists have made it impossible to spend any money.”
Look, I realize political debates can get heated. You could call the Tea Party Republicans obstinate, pigheaded, or extremist, and I might agree with you somewhat. You could talk about GOP hypocrisy for not cracking down on spending when Bush was in office, a perfectly valid argument. You could call them cruel and heartless or talk about their supposed allegiance to millionaires and oil companies at the expense of the working class. Fine.
But terrorists? Terrorists want to blow up buildings and trains and kill people, ideally thousands of people. The Tea Party wants to cut government spending--that's it. Some people have tried to argue that the Republicans were leading the country toward default with their reluctance to raise the debt ceiling. That is hogwash. The government would still have had more than enough money to pay interest on the debt. The only way a default could have happened is if Congress decided that paying some bureaucrats in the Department of Energy was more important. The worst-case scenario was a government shutdown a la 1995.
So seriously, enough with the crazy rhetoric, or there might be knife fights in the Capitol before the end of the year.
Monday, August 1, 2011
The debt deal: kicking the can down the road
So, after a months-long fight over raising the debt ceiling, we finally have a deal. But what did it accomplish? Not much, according to this Washington Post analysis. In the words of Sen. Lindsey Graham:
“It’s a $3 trillion package that will allow $7 trillion to be added to the deficit over the next decade. We’re no longer running toward oblivion, we’re walking toward it.”
In the best-case scenario the deal will only cut 6-7% of federal spending over the next 10 years. That is ignoring the fact that federal spending is slated to increase by over 50% over the same time period. Meanwhile, unemployment is as high as ever. As fights go, the budget battle was reminiscent of the War of 1812, which featured years of nasty fighting and then a cease-fire that basically just restored the status quo ante bellum.
In general, I like divided government. When one party controls the House, Senate, and the White House, they tend to do things like send us into a protracted war without a clear objective, or an exit strategy, or a way to pay for it. The downside of divided government, however, was on full display over the last few weeks. With Democrats stubbornly refusing to cut or reform entitlements, and Republicans stubbornly refusing to raise revenue by closing loopholes or eliminating tax subsidies, there was little chance of achieving significant long-term deficit reduction. They also ignored the ongoing jobs crisis in their obsession with the deficit, refusing to consider more small business tax cuts or infrastructure spending that could help reverse unemployment. Indeed, the only compromise they could settle on was just kicking the can down the road.
“It’s a $3 trillion package that will allow $7 trillion to be added to the deficit over the next decade. We’re no longer running toward oblivion, we’re walking toward it.”
In the best-case scenario the deal will only cut 6-7% of federal spending over the next 10 years. That is ignoring the fact that federal spending is slated to increase by over 50% over the same time period. Meanwhile, unemployment is as high as ever. As fights go, the budget battle was reminiscent of the War of 1812, which featured years of nasty fighting and then a cease-fire that basically just restored the status quo ante bellum.
In general, I like divided government. When one party controls the House, Senate, and the White House, they tend to do things like send us into a protracted war without a clear objective, or an exit strategy, or a way to pay for it. The downside of divided government, however, was on full display over the last few weeks. With Democrats stubbornly refusing to cut or reform entitlements, and Republicans stubbornly refusing to raise revenue by closing loopholes or eliminating tax subsidies, there was little chance of achieving significant long-term deficit reduction. They also ignored the ongoing jobs crisis in their obsession with the deficit, refusing to consider more small business tax cuts or infrastructure spending that could help reverse unemployment. Indeed, the only compromise they could settle on was just kicking the can down the road.
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