Mercury Rising 鳯女

Politics, life, and other things that matter

Archive for July 31st, 2011

Shaving Washington with Occam’s Razor

Posted by Charles II on July 31, 2011

The general reaction that I hear about our current politics is that they’re all corrupt. In the colloquial sense, that’s probably true, although enough of those guys are lawyers that they’re careful to stay on the north side of the statutory line, Tom DeLay and his pals being the exception that proves the rule. But having met, dealt with, and especially watched a fair number of politicians over the years, I think there’s a better explanation.

What I notice is that politicians are, at least in person, charming people, but also narcissistic and shallow. They’re opportunists, constantly sniffing for a way to get ahead, and constantly seeking to ingratiate themselves. When they don’t have handlers around, they come out with stunning examples of ignorance. On Thom Hartmann, Bernie Sanders actually said that he doesn’t know what ALEC is. How can anyone in Democratic politics not have heard of ALEC? And Bernie Sanders is relatively engaged in the reality-based world. As we see, Michele Bachmann doesn’t even know where “the shot heard ’round the world” was fired. Is it really a surprise that so many politicians believe that lowering tax rates increases revenues, particularly when the Wall Street Journal and other respected publications tells them it’s so?

Predicting the consequences of the debt ceiling deal is not particularly complicated. In a normal year, the American economy grows by about 3%. Since our GDP is about $14T, that’s about $420B per year. At the moment, it’s more in the 1-2% range, or $140-$280B/year. So a debt deal that promises to cut $2.6T over ten years is promising to remove about $260B per year from the economy. Without any complicated calculations, this is enough to trigger a recession with almost certainty. Even in good times, this would cut the growth rate at a first approximation to about 1%. This is growth barely sufficient to keep up with normal population growth. So the debt ceiling deal is a bill essentially guaranteed to make the next ten years the worst American decade ever–with average growth worse even than 1930-39! And this is after perhaps the second worst decade ever. Growth from 2000-9 averaged 1.7%.

Now, it’s not quite that simple. Suppose this were a municipal budget. Cuts to police and fire are very likely not going to save money. Buildings that burn down do not produce tax revenue. Communities that have rising crime lose businesses. Other cuts may produce genuine savings. For example, police like to run up overtime as a means of improving their salaries. It’s fundamentally a corrupt practice, and stopping it could produce genuine savings.

So a lot matters about the details. In particular, politicians like to backload cuts because that puts it after the next election. They often have the goal of making sure that the total budget never declines, even if there are real cuts to programs favored by the opposition party. It’s very unlikely the Tea Party will fall for this.

But in this case, these considerations are probably less important than the long-term expectations that austerity creates. If you are a business dependent on consumers, are you more or likely to invest in the US? If you are a bondholder concerned about possible default of states and municipalities, do cuts in the federal budget increase or decrease your confidence? If you are a promising student, do you take the extra years to go to a four year college and grad school in hopes of getting a high-paying job? If you are a consumer, are you more or less willing to spend? So, the likelihood is that cuts of $260B/year will damage the economy by (SWAG) up to $400B.

Genuine austerity, in which programs are constantly reviewed to see if they are being run efficiently to deliver what the public wants is a good thing. One of FDR’s best points was his insistence on efficiency, since it created public trust that taxpayer dollars were being spent well. But fake austerity, where budget cuts are made for political reasons without regard to the long-term consequences? This is the kind of thing poorly-informed, narcissistic opportunists do.

It’s very difficult for me to get upset at Washington. These people will be reviled as the worst generation of politicians in our nation’s history: shallow, vain, grasping men (and some women) who– in a few short years– destroyed the strongest economy of the 20th century. Considering the verdict that history will deliver, any condemnation that I could add would seem gratuitous.

Posted in 'starving the beast', budget, wrong way to go about it, WTF? | Comments Off on Shaving Washington with Occam’s Razor

Debt Ceiling: Obama Wants To Cave, Tea Partiers Won’t Let Him

Posted by Phoenix Woman on July 31, 2011

This has got to be driving John Boehner mad.

Here he is, having got the cut-happy Obama to bludgeon Harry and Nancy into agreeing to yet another round of austerity for the masses and tax breaks for the upper classes, to go with the one agreed upon back in April, and those darned Tea Partiers keep getting in the way:

I’m hearing that there is significant opposition from the tea partiers in the House who (1) don’t like some (taxes and military spending) of what’s in the current deal and (2) think that they can hold out for more concessions from the White House by waiting until Tuesday or Wednesday.  As of now, there’s no indication at all that House Speaker John Boehner (R-OH) has the political gravitas with his caucus to simply demand that it vote for any deal.  The same dynamic that forced Boehner to change his plan earlier this week to please the tea partiers is still in place.

There’s also the chance that a non-trivial number of Democrats will still resist the whippings of the Obama-whipped Harry and Nancy, but I wouldn’t count on that

Of course, there are six currently identified options that Obama could take if he really wanted to avoid chaos and tanking the economy, but they would also allow him to avoid the cuts to Social Security he’s apparently been set on making since before he entered office.

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America and the Right, the love affair

Posted by Charles II on July 31, 2011

Or the Democratic Party and Obama. Take your pick.

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Growth Dance Religion

Posted by Charles II on July 31, 2011

Near the depths of Plains Indians defeats in the American conquest, the Paiute shaman Wovoka had a vision of the Second Coming of Christ in which the resurrected Jesus promised to save the Indians from the white man. The new religion was widely adopted. (The religion figured in the massacre at Wounded Knee Creek, since the Indian Agency had become convinced that the Lakota were blessing shirts to be invulnerable to bullets). In fact, the religion would have facilitated the acculturation (genocide) of the Plains Indians by accommodating demands that children be sent away for schooling, among other points:

According to the prophecy, the recent times of suffering for Indians had been brought about by their sins, but now they had withstood enough under the whites. With the earth destroyed, white people would be obliterated, buried under the new soil of the spring that would cover the land and restore the prairie. The buffalo and antelope would return, and deceased ancestors would rise to once again roam the earth, now free of violence, starvation, and disease. The natural world would be restored, and the land once again would be free and open to the Indian peoples, without the borders and boundaries of the white man.

Needless to say, the vision remains unfulfilled.

The fables we hear about the debt are far more pernicious than the Ghost Dance. For all I know, Wovoka’s vision was true. The same cannot be said of Catherine Rampell’s column in the New York Times, which promises us that we can painlessly grow out of our debt. (Atrios, in his appealingly simplistic way, described this as “the other way to cure the deficit is, you know, awesome”):

But there is, in theory, a happy solution to our debt troubles. It’s called economic growth. No need to raise taxes or cut programs. Just get the economy growing the way it used to.

We wouldn’t need any of that [taxes, cut spending, have inflation, or default] if we could restore economic growth. If that happened, Americans would become richer and pay more taxes. Et voilà! — we’d pay down the debt painlessly.

Crazy as that might sound, particularly given Friday’s figures, the possibility isn’t some economic equivalent of that nice big farm where your childhood dog Skip was sent to run free. There are precedents.

Well, actually, it is on par with telling kids that you’re sending the family dog to the farm when you’re prepping him for euthanasia. Rampell cites as a precedent Ireland, which did indeed enjoy some good decades of growth: partly because it was starting from a very low base, partly because it was able to exploit the American trend of capital flight to low-wage countries, and partly because a large part of the growth was illusory, based on massive overvaluation of real estate… all of these much like the Japanese “miracle” which crashed two decades ago and has never been revived.

Jack Kemp used to tell us that he was running on “hope, growth, and opportunity.” It was a great slogan. But on the growth part, let’s be realistically. The American economy has never sustained 5% growth in the modern era. Even if we regarded the bottom end of our economy as the Third World that it is rapidly becoming, by properly investing in it, we might be able to get 7-10% growth of 10-20% of our economy… in other words, we might add about a percent to our historic growth to get near 4%. For that matter, since we need to reduce resource consumption, we might have to achieve higher standards of living without raising GDP as much as we are accustomed to… which has implications for debt service.

Ultimately, we do need higher taxes, less wars, and a much more efficient medical insurance system. The latter will cost, not create jobs, and winding down our overspending on the military will cause great pain to some areas. There is no solution to our problems that is pain free. But let the pain be inflicted on those who have enjoyed decades of overstuffing themselves, not on the poor, the sick, the elderly, and those struggling just to stay in a home.

(written in partial answer to Atrios, and Chicago Dyke in comments)

Posted in budget, capitalism as cancer, deficit | Comments Off on Growth Dance Religion