Archive for Economy
Which brings up massive tax cuts that pay for themselves. Sen. Marco Rubio expects Republican primary voters will fall for it again. Ezra Klein explains the Rubio tax plan succinctly at Vox:
The basic idea here is that massive tax cuts boost growth so much that they pay for themselves, and so there’s no actual trade-off between lower taxes and balanced budgets. In this telling, eating your cake leads your body to burn calories so fast that it’s like you end up thinner than you started!
Basically no serious economists believe this. Careful efforts to quantify whether tax cuts boost growth have led to estimates that they have a modest negative effect, a modest positive effect, or not much effect at all, depending on what assumptions you use. Mankiw, the former Bush adviser, described the idea that cuts boost growth so much that they pay for themselves as the province of “cranks and charlatans” in his economic textbook.
What is more amazing is that Cranks and Charlatans is not already the name of a popular Washington, D.C. watering hole. (Have at it.) Maybe near the offices of the Tax Foundation. Klein continues:
I design factories for a living. When I get off a job, lots of other people get jobs: building them and working in them. And in this country, too. Does that make me a “job creator”? Or, as Damon Silvers of the AFL-CIO suggests in the video below, is that really just “a polite term for plutocrats”? As he says, maybe that is why billionaires buy PR firms.
Mike Lux has a piece up at Huffington Post promoting a progressive economic agenda that just might be more important than the next loony thing a Republican candidate for president says. A video in plain-speak condenses a lot of progressive thinking on the economy to 7:25 min. Lux writes:
Contrary to the current trickle-down economic orthodoxy, our economy will only grow and strengthen over the long run if we focus on helping more poor people climb the ladder into an expanding and more prosperous middle class.
That is not happening today. It has not been happening much since the Reagan era introduced us to trickle-down. Capitalism is overdue for an upgrade.
“Alaska is the only state in the union besides New Hampshire without sales or income tax,” writes Alana Semuels in The Atlantic. The Granite State funds itself with one of the highest property taxes in the country, through excise and corporate taxes, and through fees. Lots of fees. The Last Frontier has $50 billion in its savings account and cannot pay its bills.
Alaska has funded nearly 90 percent of its operations for years with oil revenues, but, “For every $5 drop in oil prices, the state loses $120 million, according to Randall Hoffbeck, Commissioner of the Alaska Department of Revenue.” Now, things are getting tight:
“People are used to paying little or nothing for their government services,” Hoffbeck said. “It’s just going to be a change of mindset.”
The Washington Post’s Editorial Board scolds Republican presidential hopefuls (with the exception of Jeb!) for “kneeling before [Grover] Norquist’s make-believe anti-tax theology.”
It is ludicrous, the Board believes, to “pre-reject an entire range of policy options” for dealing with government spending projected to expand from the 20.1 percent of gross domestic product the U.S. averaged from 1965 to 2014 to 25.3 percent by 2014:
At that time, federal revenue is projected to equal about 19.4 percent of GDP absent any policy changes. There is, in other words, a vast budget gap that will need to be filled. Unlike his opponents, Mr. Christie has proposed specific benefit cuts that would narrow the gap somewhat. But neither his proposals, nor any other, can close the gap entirely in the absence of increased revenue. Trying to do so would leave the government paying pensions and rising interest costs (as it borrowed more and more) and devoting little or nothing to the other things Americans expect from government: defense, roads, bridges, basic scientific research, national parks and more.
When it comes to blowing up things or threatening other countries with sanctions or invasion, Republicans take nothing “off the table.” When it comes to paying bills or leaving their country better than they found it, they take away the table.
For academics lucky enough to have tenure at an “R-1 research university” — one with “extensive” doctoral level graduate programs and support for faculty research as well as teaching — the erosion of traditional tenure protections is damaging because it threatens not only academic freedom but research and teaching that contribute hundreds of billions of dollars to U.S. GDP.
Undermining that investment would seem counter to the goal of turning every public resource into gold. Yet as we have seen with the astronomical amounts of money it is willing to throw at elections, the Midas Cult is willing to spend what it takes (and to sacrifice others) to stop the contagion of critical thinking that might threaten its dogma. Clearly, this is not about money. It is about ideology. Whatever the fiscal arguments for attacking the academy, it is not as if the cost of funding academics is that expensive (emphasis mine):
Indeed, upwards of a quarter of faculty with doctorates live below the poverty line — eight percentage points higher than the national average for all Americans. Think of this in the context of the American dream, where dedication and education are supposed to ensure a piece, however modest, of the American dream. If 10 years of intensive college and graduate study can’t even get a person a better salary than the average Walmart cashier, there is something profoundly wrong.
The Walmartization of higher education is of course part and parcel of the larger McDonaldization of American society, which devalues broad skill sets and critical thinking in favor of consumer-driven “choice” and a cheap and controllable workforce. As anthropologist Sarah Kendzior asks in perhaps the most viewed article in the history of Al Jazeera English, what does it mean when education has gone from being the great path out of poverty to being “a way into it”?
Cultists don’t need educated thinkers or researchers. Until education can be fully automated, all it needs is education delivery drones. And frankly, there is no reason cultists should have to pay for education in America anymore. As I wrote in 2011:
In the Atlantic’s “The Rise of the New Global Elite,” Chrystia Freeland describes the super-rich as “a nation unto themselves,” more connected to each other than to their countries or their neighbors. Freeland writes that “the business elite view themselves increasingly as a global community, distinguished by their unique talents and above such parochial concerns as national identity, or devoting ‘their’ taxes to paying down ‘our’ budget deficit.” Thomas Wilson, CEO of Allstate, explains that globalization means, “I can get [workers] anywhere in the world. It is a problem for America, but it is not necessarily a problem for American business …” Why should it be?
In a global economy driven more and more by bottom-line thinking, public education is just another community expense the elite would rather not bear, isn’t it? The rich can afford private schools for their children and have little need for educated workers in the multiple cities where they own houses. How much education do gardeners and waiters really need anyway?
Why should the global elite pay taxes to educate the children of those below their station? Why pay to educate workers when they can import them on H-1B or L-1 visas and pay them less than American workers? As Allstate’s CEO implied, their companies can easily set up shop in India, Indonesia or China. Globalization means multinational corporations can simply swoop in and exploit an educated workforce in countries that have already incurred the sunk costs of developing that resource. And multinationals get to pay those foreign workers less to boot. Whether here or abroad, why not just let somebody else pay taxes for educating other people’s children?
Besides, educated workers only get uppity, and whether they realize it or not, “permanent faculty … are in fact part of the laboring classes.” At least in the view of the Midas Cult. LeVine concludes:
The threats to academic freedom and shared governance posed by a system of largely contingent academic labor are obvious. If you’re treading water around the poverty line and have no guarantee of a job three months down the line, you are going to be very reluctant to teach any subject that might challenge students or the powers that be in your community, whether it’s science that is literally verboten to discuss — such as climate change in Wisconsin — “divisive” ethnic studies in Arizona or “anti-Semitic” Palestinian history almost anywhere.
President Calvin Coolidge once said, “The chief business of the American people is business.” But in examining the debate over the Trans-Pacific Partnership, Trade Promotion Authority, etc., one can see the business of business is not America.
It was clear last week that the TPP and TPA (fast track) were not dead, but unlike Monty Python’s parrot, really just resting. Politico reports on maneuvers by House Speaker John Boehner and Republican leaders to revive fast track:
Under the emerging plan, the House would vote on a bill that would give Obama fast-track authority to negotiate a sweeping trade deal with Pacific Rim countries, sending it to the Senate for final approval. To alleviate Democratic concerns, the Senate then would amend a separate bill on trade preferences to include Trade Adjustment Assistance, a worker aid program that Republicans oppose but that House Democrats have blocked to gain leverage in the negotiations over fast-track.
Decoupling TAA and TPA might be a non-starter with many Democrats. But the political mechanics are not as interesting as the broader trajectory of dealings between government and business.
In any of these deals, no matter what the promised benefits, the general public always seems to come out holding the short end of the stick. You can smell it. Somebody is going to make a lot of money. It’s just never us. We get to do the paying.
Even as Jeb! Bush and Hillary Clinton prepare for their close-ups, out in bayou country a GOP presidential wannabe is trying to keep from being the next Sam Brownback.
Republicans’ approach to taxes is not unlike Biblical literalists’ approach to confronting evolution. Christian fundamentalists will construct an elaborate house of cards on the shakiest of foundations and spend enormous time and effort trying to keep a puff of breeze from knocking it over before they will question their crappy theology. (Visit the Creation Museum on Bullittsburg Church Rd.
in Petersburg, Kentucky, and don’t forget to stop by the gift shop.)
Republicans — Louisiana Gov. Bobby Jindal, for example — will concoct an elaborate edifice of nonsense to create the illusion that they are not raising taxes, you know, to pay for services their constituent public actually wants. Like funding universities and hospitals. Facing a potential $1.6 billion budget shortfall (that’s another story), Jindal has gone to Creation Museum lengths to keep from offending Grover Norquist and Americans for Tax Fairness.
Here’s how the local paper explained it last week:
State Rep. Joel Robideaux, R-Lafayette, and 10 other Louisiana House members sent Norquist a letter (PDF) Sunday night, asking Norquist to rethink his approach to Louisiana’s budget and the “no tax” pledge….
The governor has threatened to veto any budget plan or tax bills that don’t meet Norquist’s “no tax” requirements. Currently, the governor is pushing the Legislature to adopt a controversial higher education tax credit — commonly called SAVE — that Jindal says will make the budget comply with Norquist’s wishes.
These are leaders, mind you, elected by the people of Louisiana, sending a mother-may-I letter to a gadfly in Washington, DC for permission to do their jobs. And their governor wants to be president of the United States and stand up to terr’ists.
Robert Reich looks at the Trans-Pacific Partnership’s “near-death experience” in Congress last week and explains that it is not that unions have gotten stronger or that the president has gotten weaker, but that the public no longer supports these trade deals. By about 2 to 1, as it works out. All the arguments in favor “are less persuasive in this era of staggering inequality.” Faced with the in-your-face unfairness of promised benefits accruing primarily to those in the top one percent, the public feels relatively worse off even if they are better off in some absolute sense. Reich writes:
To illustrate the point, consider a simple game I conduct with my students. I have them split up into pairs and ask them to imagine I’m giving $1,000 to one member of each pair.
I tell them the recipients can keep some of the money only on condition they reach a deal with their partner on how it’s to be divided up. They have to offer their partner a portion of the $1,000, and their partner must either accept or decline. If the partner declines, neither of them gets a penny.
You might think many recipients of the imaginary $1,000 would offer their partner one dollar, which the partner would gladly accept. After all, a dollar is better than nothing. Everyone is better off.
But that’s not what happens. Most partners decline any offer under $250 – even though that means neither of them gets anything.
When a game seems arbitrary, people are often willing to sacrifice gains for themselves in order to prevent others from walking away with far more – a result that strikes them as inherently wrong.
Even a monkey can figure that out. Just not the One Percent.
Yves Smiths’s post Tuesday summarizes the challenges of reigning in (pun intended) the One Percent and of running a blog with that purpose. Knowing your opponent is key, but mastering the gory details of finance is its own challenge. It is a worthwhile read.
You need to be a soldier in the war to demystify finance, because its supposedly arcane and impenetrable nature is one of its biggest weapons. It’s easy to dismiss critics if they can be depicted as ignorant. There are costs to citizenship. One such cost is knowing your enemy, their strategies, their tactics, and the terrain on which they fight. That requires not passing familiarity with finance, but knowledge of it.
A key piece of that knowledge is “private equity is a government sponsored enterprise.” From tax subsidies to investments in government pension funds to sovereign wealth funds, these investments make money using the government, she writes, and,
… close to half the investment capital in private equity funds is contributed directly by government entities. In this respect, private equity is little different than companies like Fannie, Freddie, and Solyndra that are regularly criticized in the media as recipients of government subsidies.”
The Century Foundation’s Amy Dean, writing for Aljazeera, describes the hangover Republican governors have from drinking all that tea. Those tax cuts for the wealthy haven’t performed as advertised:
In Kansas, Brownback lowered tax rates for top earners by 26 percent. Now the state faces a $334 million budget deficit. Kansas’ public services are so emaciated that the State Supreme Court ruled the funding of the school system unconstitutional. Economic growth has stalled and the state’s employment growth currently ranks 34th in the nation.