Fareed Zakaria: How Conservatism Lost Touch with Reality

Party Politics: How Conservatism Lost Touch with Reality – TIME:

“In fact, right now any discussion of government involvement in the economy — even to build vital infrastructure — is impossible because it is a cardinal tenet of the new conservatism that such involvement is always and forever bad. Meanwhile, across the globe, the world’s fastest-growing economy, China, has managed to use government involvement to create growth and jobs for three decades. From Singapore to South Korea to Germany to Canada, evidence abounds that some strategic actions by the government can act as catalysts for free-market growth.”

This is why I don’t have respect for “the new conservatism.”

Who Created This Mess?

Who Created This Mess?:

Now, back to unnamed Republican lawmaker who thinks his party isn’t to blame. The frightening thing is, he probably believes it. When people hold certain ideological beliefs strongly enough, no amount of facts will get in their way. If you believe that the current deficit is the result of excessive government spending (passed by Democrats, even though they only controlled Congress and the White House for four out of the past thirty years*), no pile of charts will be big enough to convince you otherwise — just like if you believe that tax cuts increase tax revenues, that the deficit has produced high interest rates, or that Barack Obama was born on Mars, no amount of evidence will convince you otherwise.

This is just fine if you are my daughter, who is four years old — although, actually, she admits it when she makes a mess (and helps clean it up). But if you are a legislator in the most powerful country in the world –and the one whose debt is the definitionally risk-free asset against which the yield of every other financial asset in the entire world is measured — it’s not good enough.

(Via The Baseline Scenario.)

Ideology is idiocy.  I can’t say that enough.

Kwak Ethers Paul Ryan

Health Care Rationing for Beginners:

“The more relevant question is whether the Ryan Plan will promote the more efficient allocation of health care. You can dredge up a theoretical argument that it would. In free market fantasy land, remember, employers and individuals will shop around for the most efficient health care plans, so insurers have an incentive to make their plans more efficient. The crux of the argument is that since insurers face a competitive market, they will work hard to make their plans as efficient as possible, which means they should do a better job than Medicare, which doesn’t face competition. I’m sure this argument has been advanced a hundred times by Heritage, AEI, and so on.

The problem with that argument is that it’s completely false in practice. If that market worked, then we would have a functioning health insurance market for people under 65 (where there is no Medicare);*** but if we had that, then we would not be talking about health care today.”

(Via The Baseline Scenario.)

Republican Bait-and-Switch on Taxes

Republican Bait-and-Switch on Taxes:

“Thus we see that Republicans want their cake and eat it too. They want to use higher [CBO] revenue projections resulting almost entirely from expiration of the Bush tax cuts to prevent any discussion of tax increases to reduce the deficit, while implying that this revenue rise comes solely from faster economic growth. As Sen. Kyl put it, “So revenues are down, but it is due to the recession that we have. We have not cut tax rates in the last few years – since 2006 – for example.”

According to the CBO, ending all of the tax cuts and allowing scheduled tax increases now in law to take effect would raise revenues by $5.6 trillion between 2012 and 2021, including debt service. That would go a long way toward solving our debt problem. In fact, the Center on Budget and Policy Priorities says that this action, by itself, would be sufficient to stabilize the national debt and prevent it from rising as a share of GDP.”

(Via Capital Gains and Games | Washington, Wall Street and Everything ….)

Half-truths are whole lies.

Wall Street Is Already Reacting Negatively To Debt Ceiling Fight

Wall Street Is Already Reacting Negatively To Debt Ceiling Fight:

[UPDATE: Forgot to add the previous paragraph that follows.] In other words, and completely contrary to what GOP leaders are saying, two major financial market participants are warning that there will be a Wall Street-related price to pay if the debt ceiling is not raised as needed.

The best indication of all that the market has already started reacting negatively is the current trading of credit default swaps on U.S. debt. As of late May, the number of CDS contracts — essentially insurance policies on the possibility of a default — had risen by 82 percent. Equally as important, the cost of a CDS — the best indication of how much riskier U.S. debt has become — rose by more than 35 percent from April to May. Last week I spoke to a number of people who calculate such things for a living, and they said this change means that the interest rate the U.S. government has to pay has already increased by as much as 40 basis points compared with what it otherwise would be. This means higher federal borrowing costs and deficits, and overall higher interest rates on everything from car loans to mortgages to credit cards.

(Via Capital Gains and Games | Washington, Wall Street and Everything ….)

Grade school social studies class: Congress has the Power of the Purse.

A Chicken in Every Pot

How Will the Debt Limit “Game of Chicken” End?:

“The Republican strategy seems to be to ram their Medicare abolition plan into law within the next two months – Treasury says the ‘drop-dead’ date for raising the debt limit is August 2 – before people learn what they are really doing to Medicare.”

(Via Capital Gains and Games | Washington, Wall Street and Everything ….)

Isn’t this exactly what the Republicans accused Palosi and Reid of doing with “Obamacare?”

The Republican Anti-Tax Position Is Rapidly Crumbling Under the Weight of Deficits

The Republican Anti-Tax Position Is Rapidly Crumbling Under the Weight of Deficits:

“There is some evidence that House Republicans are starting to get the message that their tax position is crumbling. On May 11, a senior Republican staffer told Atlantic reporter Derek Thompson that his party’s position on taxes is intellectually dishonest. ‘There are two worlds,’ the aide said. ‘One world is political and the sole objective is to maintain party message. The other world is real and in the real world fixing the deficit is a matter of national survival. When you get down to the real world decisions, it’s not about whether to raise taxes; it’s about the ratio of spending to revenue increases.’

(Via Capital Gains and Games | Washington, Wall Street and Everything ….)

At some point you have to actually govern.

Is heavy taxation bad for the economy?

Lane Kenworthy demonstrates that anti-tax zealots’ predictions of economic apocalypse are about as credible as other doomsayers.

Is heavy taxation bad for the economy?:

Taxes reduce the payoff to entrepreneurship, investment, and work effort. If taxation is too heavy, these disincentives will weaken a nation’s economy. But at what point does the harmful impact kick in? And how large is it?

Continue reading “Is heavy taxation bad for the economy?”

Yes, Macroeconomics 101 is Correct

“Some Simple Deficit Reduction Arithmetic”:

Kash Mansori notes that it takes more than a $100 cut in government spending to cut the deficit by $100. The reason is fairly simple. A cut in government spending causes output and income to fall, and the resulting fall in tax revenue increases the deficit offsetting some of the gain from the cut in spending…

When the policies they want to pursue have large negative effect on the deficit, the economy, employment etc. Republicans invent a story where the pain goes away. Somehow, the deficit actually falls, output goes up, and employment is stimulated even if it runs counter to obvious intuition. When tax cuts are the goal, we are told that tax cuts lead to so much additional effort that revenues actually go up and this reduces the deficit. We can cut taxes, and reduce the deficit! This magical answer is, of course, nonsense, but Republicans were able to hoodwink quite a few people into believing this.

(Via Economist’s View (Mark Thoma).)

Read Mansori’s entire article.  It’s worth it.  A few nuggets:

Somehow, this simple exercise in macroeconomic math seems beyond the reach of policymakers around the world.

  • Many Republicans (and some Democrats) in Washington continue to believe that they can close a $1 trillion deficit by simply cutting $1 trillion in spending, and are apparently hoping to use the debt ceiling vote to do exactly that.
  • The Cameron government in the UK embarked on an austerity program last year to try to reduce its budget deficit, and now mysteriously keeps missing its deficit reduction targets as the UK economy shrinks.
  • The Greek government was forced into enacting a number of austerity measures last year, and… surprise, surprise… is now missing its deficit targets.

Let Them Eat Cake

Social Insurance Keeps Millions Out of Poverty:

Why would we even think of reducing anti-poverty programs before increasing taxes on the wealthy, say to where they were before George Bush decided that we needed to get rid of Clintons budget surplus (one of the few things he did well)?:

Continue reading “Let Them Eat Cake”

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