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.
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.
You know, normally something this stupid wouldn’t bother me, but this story really gets under my skin. If they can try to paint Common as a ‘dangerous black man,’ what black man is immune? If they think Common is vile, then I know they have no use for my black ass. Common is beyond the pale, Michelle Obama hates whitey, Eric Holder is protecting the New Black Panther Party, Shirley Sherrod is discriminating against white farmers, Barack Obama is giving reparations to black people? Conservatives, do you realize how stupid this sounds to black people?
…But shit like this is what prevents me from even getting to the point where I’d give their policies a fair hearing. And I know there are some Republicans and conservatives here, and I say that you have no chance of getting any kind of support from black voters as long as the leaders of your party are pulling these kinds of stunts.
“So why is it that I have been disdainful of the Tea Party from its first manifestation in early 2009? The main reason is that so many of its members simply don’t know what they are talking about; they seem to think that strong opinions are a substitute for facts, research and analysis. Consequently, many Tea Party members hold views on various topics that are, frankly, nuts, and these views have been embraced by some Republican voters as well.”
Precisely. I have nothing but contempt for Tea Party politics which to date, as far as I can tell, have been a foul mixture of screaming, hate, stupidity and anger which are neither reasonable nor respectable. You can’t govern that way, nor do you deserve to.
….Mr. Bowles had harsh words for fellow Democrats. He dismissed the idea that raising taxes alone might help erase the deficit, saying ‘raising taxes doesnt do a dern thing’ to address health care costs that are projected to be a big driver of future fiscal problems.
If theres anything that could be called a wonkish consensus on the left, its this: we should eliminate the Bush tax cuts in a couple of years when the economy has recovered, and we need to rein in the long-term growth of healthcare costs. Its true that taxes dont address healthcare costs, but its just sophistry on Bowles part to put it like that. Taxes do address the medium-term deficit, and thats important. Quite separately, PPACA makes a start on holding down healthcare costs and thus addressing the long-term deficit, and I hardly know anyone on the left who doesnt agree that more needs to be done.
…Jon Chait has more on this, including a more detailed takedown of Bowles own proposals for healthcare, which are almost laughably inadequate.
I think we make a mistake by talking about this as though the goal of Republicans is actually deficit reduction. Its not, the goal is a reduction in the size of government and once you understand that, its clear why Republicans will not support tax increases of any kind. Theyd rather cut taxes now (and argue its about jobs or long-run growth rather than ideology), and increase the deficit even more because they still believe the beast can be starved. Anything that increases the pressure to reduce spending will be embraced, anything such as a tax increase that might allow the government to grow larger will be opposed. Logic about the best way to close the deficit wont win this argument because it has little to do with the deficit itself.
Tyler Cowen writes a column that is both good and bad. It is good for what it says: it debunks fiscal illusions. It is bad for what it does not say, and for what it does not say it tends to deepen our political illusions. You see, for some reason Tyler Cowen does not mention the obvious solution at the ballot box to the very real fiscal illusion problems he writes about. If we simply stopped electing Republicans–if we simply elected presidents who would choose policies designed by the technocrats of the Clinton and Obama administrations and elected senators and representatives who voted for them–we would be absolutely fine.
“A Republican plan to sharply cut federal spending this year would destroy 700,000 jobs through 2012, according to an independent economic analysis set for release Monday…
[This] report comes on the heels of a similar analysis last week by the investment bank Goldman Sachs, which predicted that the Republican spending cuts would cause even greater damage to the economy, slowing growth by as much as 2 percentage points in the second and third quarters of this year.”
Predictably, the GOP goes after the messenger when it can’t rebut the message. It’s a surefire way to determine who’s lying or incompetent and who’s not, who’s got a grip on reality and who’s in denial. And sure enough as I kept reading:
Republican leaders frequently claim that cutting government spending will create jobs by removing the fear of higher taxes from the minds of the nation’s business owners and entrepreneurs…
So far, the Republicans have been unable to marshal an independent analysis that reflects that view. [emphasis mine]
In other words, they are pulling this economic “theory” clean out of their ideological butts.
“The problem is that a heavy majority of the supposed fiscally conservative congressmen, although passionate about cutting government spending in the abstract, are in truth no better able to find specific dollars of budget cuts that they can support or defend to their constituents than are the Democrats. Factoring in their immutable desire to cut taxes, I believe that if the Republicans were in full control, we would have larger budget deficits in the coming years than if the Obama crowd retained power. This is what happened in a big way when Presidents Reagan and GW Bush took office promising to cut the debt while also cutting taxes. Spending, deficits, and debt soared during their terms, relative to their respective Democratic predecessors. There is no reason to think anything has changed…
Rep. Paul Ryan’s supposedly tough long-term plan to cut spending doesn’t balance the budget until 50 years from now and runs up another $62 trillion in national debt in the meantime…” [emphasis mine]
“The current Republican Party lacks a similar basic, manageable agenda. It’s all or nothing. And the GOP no longer seems to have the capacity to get policy plans developed into legislation that is written, negotiated, and signed into law. The GOP has made a political choice to cut off a lot of its policy capacity. That’s why it has no budget plans other than Ryan’s super-unpopular one. It’s why it didn’t come up with any meaningful alternative to health reform. It’s not because Republicans are dumb — although Boehner and his allies were no match for Nancy Pelosi in a battle of tactics and determination — but because offering an alternative would mean negotiating, finding areas of agreement and disagreement.”
So Obama decides to go the “This $hit is chess; it ain’t checkers” route. Gangsta for the middle. I like.
It should be interesting to see if the mass middle will support him. Obama’s already painting the GOP as the bad guys. The thinking goes this way: my agenda that protects the middle class will go forward in exchange for giving the GOP what they want. He’s already painting the GOP as the party for the rich against the rest of us. In other words, he calls out the GOP on class warfare without using those words. On first blush, I thought this was terrible for Obama, but he just might be on to something.
Keep solving problems, Mr. President. Serve them fools!
“So what’s really motivating the G.O.P. attack on the Fed? Mr. Bernanke and his colleagues were clearly caught by surprise, but the budget expert Stan Collender predicted it all. Back in August, he warned Mr. Bernanke that ‘with Republican policy makers seeing economic hardship as the path to election glory,’ they would be ‘opposed to any actions taken by the Federal Reserve that would make the economy better.’ In short, their real fear is not that Fed actions will be harmful, it is that they might succeed.
Hence the axis of depression. No doubt some of Mr. Bernanke’s critics are motivated by sincere intellectual conviction, but the core reason for the attack on the Fed is self-interest, pure and simple. China and Germany want America to stay uncompetitive; Republicans want the economy to stay weak as long as there’s a Democrat in the White House.”
I long suspected this when I saw the GOP opposing its own policies when they came from a Democrat in the White House. They know that opposition to Obama is more about high unemployment than support for the GOP. It’s party before country which is all pretty disgusting until I realized that the real blame lies with us, the fools. We are the ones who should laugh in Mike Pence’s face when he suggests that The Fed should focus only on stabilizing prices against the law that created it amidst the worst unemployment we’ve seen in decades. To quote the Federal Reserve Act, the purpose of The Fed “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” Nope. Instead, all too many of us cheer and then blame the Obama Administration for high unemployment!