Krugman points to the lack of fact in GOP economic arguments

Paul Krugman, the Nobel Prize winning NYTimes economist has an outstanding article today on the GOP arguments regarding the slow economy. A couple of highlights:

The good news: After spending a year and a half talking about deficits, deficits, deficits when we should have been talking about jobs, job, jobs we’re finally back to discussing the right issue.
The bad news: Republicans, aided and abetted by many conservative policy intellectuals, are fixated on a view about what’s blocking job creation that fits their prejudices and serves the interests of their wealthy backers, but bears no relationship to reality.

The GOP is quite united in their willingness to take a completely false talking point and repeat it so often that people begin to think it must be true. This lack of integrity in our politics is a HUGE part of the problem of our federal government. It will only end when GOP voters insist their leadership tell the truth.

Read the full article here: http://www.nytimes.com/2011/09/30/opinion/krugman-phony-fear-factor.html?_r=1&smid=tw-NytimesKrugman&seid=auto

Effective Tax Rates Worldwide

With all the GOP bluster about US taxes at "job-killing" rates, a logical listener would surmise that US tax rates must be very high as compared to other top economies globally. The Economist magazine just posted an analysis of Effective Tax Rates (after deductions) for many top economy countries. Would you guess, given the GOP rhetoric, that the US would be near the top? You'd be wrong, we are near the bottom.

Effective (after deduction) Tax Rates top global economies, The Economist May 2011

Bad Lip Reading of Rick Perry

This is what I hear when Perry speaks. Uh...what? As someone born in Texas, leaving when I was 26, I can honestly say, "Texans - sick of them aren't you?"

Big Picture: US Economy, boiling it down

One of the problems with our political debate is that it's easy to get lost in the complexity. I am going to take a stab to try to boil down the argument to just a few puts and takes. Of course, such an exercise is destined to fail on some levels, but the big picture matters, so let's try to find the big buckets and discuss the pros and cons of debiting or crediting each bucket.

First, it's clear our debt is too high - almost no one disagrees. Second, almost no competent economists think we can or should cut our debt too fast, as it will greatly slow the economy.

So, from that baseline - yes we need to cut debt, but not too fast - what are the big buckets to accomplish that?

Bucket #1: Cut Social Programs, especially Medicare
The GOP is laser-focused on cutting social programs as the sole means of balancing our budgets. It is true that these programs (especially Medicare) are a huge part of our spending, but what are the Pros and Cons of doing this?

Pros: It's a big bucket, so cutting it will indeed save money 

Cons: Cutting support for retirees and future retirees (who after all could not get insurance from the free market before Medicare) will cause immense pain for millions of Americans

Impact Score: Let's call this one massively painful depending on the level of cuts 

Bucket #2: Increase Taxes where we can
The Democrats are pushing back (much more firmly of late) on the GOP plan to balance the budget on the backs of the middle-class alone and pushing for a return to the tax rates for the top 10% of wage earners to Clinton-era levels (from a top rate of 35% to 39.6% - a massive increase of 4.6%

Pros: Certainly a small increase, as proposed by the Democrats of 4.6% for the wealthy, essentially returning the rates to Clinton-era percentages (a time of great growth), was not a dis-incentive to investment, it was one of the fastest expansions in GDP in our nations history. Raising this rate would create more than $4Trillion in income for the government that could be used to reduce debt

Cons: Careful attention to increasing taxes without slowing growth must be made. If increased taxes reduces growth, that would be bad of course, however most economists agree this is not likely on what is proposed, despite GOP demagoguery

Impact Score: If we do as Obama proposes, it's clear we can call this one manageable in terms of pain impact and to potential economic downsides

Bucket #3: Cut Defense Spending
A reduction of Defense Spending, which has skyrocketed of late is certainly achievable and broadly believed that it would not lower US defense readiness.

Pros: The budget is massive and has grown markedly over the past few years, so the potential is certainly there for positive impact if reduce 

Cons: Careful attention to increasing taxes without slowing growth must be made. If increased taxes reduces growth, that would be bad of course, however most economists agree this is not likely on what is proposed, despite GOP demagoguery 

Impact Score: If we do as the Defense department wants it won't have an impact, if we are bold and reduce it to reasonable amounts as a percentage of spend from a few key countries, this one is impactful and is unlikely to harm readiness. Time to get out of Afghanistan and Iraq for sure - even GOP lawmakers and candidates agree 

Conclusion:
Clearly cutting Social Programs is the most painful. Raising Taxes less so, and cutting defense spending also manageable. Clearly a balance between all three would lessen the impact of cuts in any program. If the choice is between raising taxes on a few tens of thousands of VERY well-off individual whose incomes have grown substantially over the past few years, versus cutting the social safety net for millions, it's a pretty easy argument that the cost of raising taxes is far lower than cutting social programs - isn't it.

Clearly the most rational outcome is spreading the pain around.

Why is that so hard for the insurgent GOP lawmakers to agree to? Could it be that by not agreeing things stay bad and that makes the GOP more confident they can eject Obama from office? Exactly. Cynical, but obviously true.

What's the opposite of Country First? GOP 2011

Michael Keegan: The Imaginary Class War

A huge share of the nation's economic growth over the past 30 years has gone to the top one-hundredth of one percent, who now make an average of $27 million per household. The average income for the bottom 90 percent of us? $31,244

Michael Keegan sums up perfectly what the vast majority of Americans know when the words "Class Warfare" are invoked. They know that the upper class is waging this war on the middle class - and the have been for decades. Worse, clearly the rich are winning and the GOP is continuing to ensure they keep winning. When do we stand up to this outrage?

From Keegan's article:

The Republicans' "class warfare" accusation is both ironic and cynical.

It's ironic because, in the midst of the current economic and jobs crisis, where a huge number of Americans are desperately hurting -- with homes underwater, with unemployment insurance running out and health insurance gone, with kids in over-crowded classrooms in buildings that are decaying -- the rich are getting richer and large corporations are sitting on record profits. Income inequality in the U.S. is at its highest since the precarious days of the late 1920s. One third of Americans who were raised in middle class households can fall out of the middle class as adults. A political elite beholden to the wealthiest CEOs has pursued policies that take money out of the pockets of the neediest to create ever-larger tax breaks for the wealthy. The richest one percent of Americans now earn almost a quarter of the country's income and control 40 percent of its wealth -- a level of inequality not seen since the days before Social Security and Medicare and the social safety net as we know it. If there is "warfare" going on between the "haves" and the "have nots" it's pretty clear who is waging war on whom.

Even more, this claim of "class warfare" that Republicans are touting is something quite dangerous. It's an expression of a deeply cynical vision of our country, in which everyone is out for themselves, the suffering of the least fortunate is of no consequence to the most fortunate, and the American dream is off-limits to those who have lost their footing in a devastating economy. 

Fortunately, this is a vision that most people wholeheartedly reject. The task of our elected officials is to stop assuming the worst about their constituents' insensitivity to the plight of their fellow Americans, to stop trying to pit us against each other and to start working toward an economic policy that works for everyone. Struggling Americans don't want to take the American dream away from those who have achieved it and successful Americans don't want to see their fellow citizens slip into permanent poverty.

The "class warfare" Republicans decry is all in the heads -- and the destructive policies -- of a small number of political leaders. While all but a few Republicans in Congress have signed a pledge to never raise taxes on corporations or the wealthy, the majority of Americans are much more pragmatic. According to a recent New York Times/CBS News poll, a whopping 71 percent of Americans -- including 86 percent of moderates and 74 percent of independents -- think that any plan to reduce the deficit should include both spending cuts and tax increases. 56 percent, including large majorities of moderates and independents said that wealthier Americans should pitch in and pay higher taxes to help reduce the deficit. A Gallup poll this week found that 53 percent of Republicans and Republican-leaners support the president's plan to eliminate corporate tax loopholes (a major element of the alleged "class warfare"), and majorities of GOP respondents supported spending that extra revenue on hiring public employees, funding public works projects and cutting payroll taxes on small businesses.

The Republicans' invocation of "class warfare" is a political ploy that the vast majority of Americans want no part of. Warren Buffett is not alone. 

So who grows our economy? Dem or GOP Presidents?

This has been around for a while, but it is staggering in the light of our current economic downturn.

Why would anyone want to change to a Republican President again, especially right now?
Here is a link to a video where Rachel Maddow deconstructs this and explains it.

Visit msnbc.com for breaking news, world news, and news about the economy

Quote of the day: Carville

My favorite quote today is James Carville at CNN blog:

As I watch the Republican debates, I realize that we are on the brink of a crazy person running our nation. I sit in front of the television and shudder at the thought of one of these creationism-loving, global-warming-denying, immigration-bashing, Social-Security-cutting, clean-air-hating, mortality-fascinated, Wall-Street-protecting Republicans running my country.

Gotta love the passion.

The needs of the many, outweigh the needs of the few, or the one...

If you're a Trekkie (I must admit to being a modest, closet Trek-ophile) then you know the title of this post is a line used in a Star Trek movie, said by Spock as he makes the ultimate sacrifice of his own life to save the crew of the Enterprise. But I think it is instructive to the political argument we are having today. I had a recent email exchange with a friend, and this is my last retort. The topic is how best to reduce US debt.

As is always the case, the most difficult part of discussing something as complex is this is agreeing on a few things; the first step is to agree on what the problem is, second to agree on the levers to fix it, and finally one must weigh the potential pros and cons of pulling each lever. This last area is the most difficult - as it touches the heart of people's ideology and in some cases religion.

First, I think we agree the main problem is US debt which is very high and we need a comprehensive plan to reduce it over time (probably 10-20 years in order to avoid the shock to the economy if we move too abruptly). I think we agree.

Next step is more difficult, what are the levers we should pull? 

There are a large contingent of more conservative-minded individuals who believe the levers that must be pulled are to end social programs - under the rationale that they are too expensive for us to afford and are only getting more so with our aging population. But certainly reducing or even ending this budget item is an option.

There are still others that argue that our tax system needs reform, as it is endlessly leaving money on the table that could be used to fund government activities. Not only that but it is dis-proportionally applied to some but not others. One could say much more - but let's just agree that tax reform is something that needs to happen and a topic upon which most everyone can agree - let's lower the rates and broaden the base. That's a legitimate and useful option.

There are still others that, while they might support tax reform, believe wealthy Americans, while paying a large portion, still pay too little. The evidence for this is pretty strong (one can blame loopholes or tax breaks, but probably it's both). Here's the evidence that our income inequality is staggering and getting worse.

FACTS: 

• The richest 1 percent of Americans, (a mere 32,000 people) now take home almost 24 percent of US income, up from almost 9 percent in 1976
• The top 10% (a mere 320,000 Americans) now own almost half of US income
• The bottom 50% of Americans (some 1.6M Americans) owns only 2.5% of US income
• The United States now arguably has a more unequal distribution of wealth than traditional banana republics like Nicaragua, Venezuela and Guyana 

Clearly wealthy individuals ("job creators" as the GOP likes to call them) (or "risk takers" as [another friend] likes to call them); clearly they are not being asked to pay too much - quite the opposite. How else can you explain this income disparity, especially while middle-class incomes don't even keep up with modest inflation rates. You know what happens if this is allowed to continue - well, just recall Marie Antoinette. The needs of the many will, sooner or later, have to be satisfied, and in the end the only way that can happen is to decrease the wealth of the few. I doubt we agree on that - but to me it's simple math. It won't fit a Libertarian, or even Conservative ideology, but to me there are no other options that create a healthy society. It's the cost of getting wealthy - and after all, without a strong middle-class, the free market engine that made all us wealthy people, will cease to function.

Regulation is too complex to summarize, but I would love to see real-world examples of regulation strangulation. I have read many articles claiming that while yes, there are too many regulations, specific job-killing examples are not that easy to find. Still, Obama has correctly announced the removal of hundreds of regulations based on recommendations from a task force he set in motion some time ago.

But we should try to agree that government regulations are important. They protect markets, protect consumers, protect the environment, level the playing fields of commerce, etc etc. So while this is a difficult topic to summarize, I will stipulate that a general reduction in regulation that maintains the basic and necessary function of government to counter-balance business interests as a means of protecting common societal interests is in order. I would argue for more regulation than you probably, but we cannot just ignore the fact that in past "l'aissez faire" times of almost no or at least low government regulation, people were afraid to buy meat, rivers burned for months on end based on business pollution and dumping, and smog once clogged our cities with unbreathable air . Visit Beijing some time and you'll remember that government regulation - while needing to be practical - is important to everyone.

So finally this leads us to the heart of the matter - weighing the pros and cons of pulling some of the above levers but perhaps not others. Let's say you pull some of all of these levers. I think that could work. But the current debate is miles from that balance. The debate today revolves around trying to balance all of the pain of economic recovery and debt reduction on the middle-class - who remember already have stagnate wages and are more at risk, increasingly so, of falling into poverty - the poverty figures came out yesterday and all segments but seniors (protected by Social Security and Medicare after all) have increased markedly. 

The negative outcome of ending Social Security - rather than reforming it (which must be done), or ending Medicare - rather than reforming it (which must be done) are catastrophic. I don't believe any thinking person can come to the conclusion that social safety nets are a luxury we can live without - but I fear I am wrong in that assertion and many, many people believe social safety nets need to die. And this is where the argument needs to be had.

I think a plurality of Americans can find a way to agree with most everything up to the last paragraph. The pain of this recovery and debt reduction has to be shared by all - from the baseline of where we are today as still the strongest nation and largest, most successful economy in the world. We must reform social programs, and we must ask the wealthy and corporations to pay their fair share - and that means more (at least for now).

The cost to society, and the eventual harm that will come to the wealthy from pounding the middle-class even more, is not a good result and eventually will lead to the breakdown of our society and at some point we potentially risk that a mob will rise to take back those riches that today are so stacked into the accounts of so few.

The whole deal in one headline...

Headline of the Day: Senate Republicans are filibustering disaster aid


That sort of sums it up doesn't it? Where do you stand?