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  • epublican = fiscal displine DOA

    The New VoodooBy PAUL KRUGMAN
    Hypocrisy never goes out of style, but, even so, 2010 was something special. For it was the year of budget doubletalk — the year of arsonists posing as firemen, of people railing against deficits while doing everything they could to make those deficits bigger.

    And I don’t just mean politicians. Did you notice the U-turn many political commentators and other Serious People made when the Obama-McConnell tax-cut deal was announced? One day deficits were the great evil and we needed fiscal austerity now now now, never mind the state of the economy. The next day $800 billion in debt-financed tax cuts, with the prospect of more to come, was the greatest thing since sliced bread, a triumph of bipartisanship.

    Still, it was the politicians — and, yes, that mainly meant Republicans — who took the lead on the hypocrisy front.

    In the first half of 2010, impassioned speeches denouncing federal red ink were the G.O.P. norm. And concerns about the deficit were the stated reason for Republican opposition to extension of unemployment benefits, or for that matter any proposal to help Americans cope with economic hardship.

    But the tone changed during the summer, as B-day — the day when the Bush tax breaks for the wealthy were scheduled to expire — began to approach. My nomination for headline of the year comes from the newspaper Roll Call, on July 18: “McConnell Blasts Deficit Spending, Urges Extension of Tax Cuts.”

    How did Republican leaders reconcile their purported deep concern about budget deficits with their advocacy of large tax cuts? Was it that old voodoo economics — the belief, refuted by study after study, that tax cuts pay for themselves — making a comeback? No, it was something new and worse.

    To be sure, there were renewed claims that tax cuts lead to higher revenue. But 2010 marked the emergence of a new, even more profound level of magical thinking: the belief that deficits created by tax cuts just don’t matter. For example, Senator Jon Kyl of Arizona — who had denounced President Obama for running deficits — declared that “you should never have to offset the cost of a deliberate decision to reduce tax rates on Americans.”

    It’s an easy position to ridicule. After all, if you never have to offset the cost of tax cuts, why not just eliminate taxes altogether? But the joke’s on us because while this kind of magical thinking may not yet be the law of the land, it’s about to become part of the rules governing legislation in the House of Representatives.

    As the Center on Budget and Policy Priorities points out, the incoming House majority plans to make changes in the “pay-as-you-go” rules — rules that are supposed to enforce responsible budgeting — that effectively implement Mr. Kyl’s principle. Spending increases will have to be offset, but revenue losses from tax cuts won’t. Oh, and revenue increases, even if they come from the elimination of tax loopholes, won’t count either: any spending increase must be offset by spending cuts elsewhere; it can’t be paid for with additional taxes.

    So if taxes don’t matter, does the incoming majority have a realistic plan to cut spending? Of course not. Republicans say that they want to cut $100 billion in spending, which is itself small change in a $3.6 trillion federal budget. But they also say that defense, Medicare and Social Security — all the big-ticket items — are off the table. So they’re talking about a 20 percent cut in what’s left, which includes things like running the judicial system and operating the Centers for Disease Control and Prevention; they have offered no specifics about where the cuts will fall.

    How will this all end? I have seen the future, and it’s on Long Island, where I grew up.

    Nassau County — the part of Long Island that directly abuts New York City — is one of the wealthiest counties in America and has an unemployment rate well below the national average. So it should be weathering the economic storm better than most places.

    But a year ago, in one of the first major Tea Party victories, the county elected a new executive who railed against budget deficits and promised both to cut taxes and to balance the budget. The tax cuts happened; the promised spending cuts didn’t. And now the county is in fiscal crisis.
    Now the federal government has a lot more flexibility than a county government: it needn’t, and shouldn’t, balance its budget each year. The deficits of the past two years have actually been a good thing, helping to support the economy in the aftermath of the 2008 financial crisis.

    But Nassau County shows how easily responsible government can collapse in this country, now that one of our major parties believes in budget magic. All it takes is disgruntled voters who don’t know what’s at stake — and we have plenty of those. Banana republic, here we come.
    So, once more Republicans kill pay as you go when enpowered. I think the 1995-6 congress was a one time fluke. The party just pays lip service to fiscal displine. It's a shame both parties are intent on running the countries future into a brick wall. One party resists efforts beyond cutting fees to Dr's to reign in entitlements and the other party governs with magical thinking that if they drive deficits high enough by refusing to fund goverment someone else will make hard choices in the future. Of course my finger missed the R in epublican...
    Last edited by Roosveltrepub; 31 Dec 10,, 18:02.
    Where free unions and collective bargaining are forbidden, freedom is lost.”
    ~Ronald Reagan

  • #2
    Originally posted by Roosveltrepub View Post
    So, once more Republicans kill pay as you go when enpowered. I think the 1995-6 congress was a one time fluke. The party just pays lip service to fiscal displine. It's a shame both parties are intent on running the countries future into a brick wall. One party resists efforts beyond cutting fees to Dr's to reign in entitlements and the other party governs with magical thinking that if they drive deficits high enough by refusing to fund goverment someone else will make hard choices in the future. Of course my finger missed the R in epublican...
    Your first mistake was listening to Krugman who is an absolute joke. he uses his title as a economicsa professor to shill for the Democratic Party.

    The next day $800 billion in debt-financed tax cuts, with the prospect of more to come, was the greatest thing since sliced bread, a triumph of bipartisanship.
    He premises his whole argument on that lie, or series of lies in a single sentence. First they are not tax cuts, they have been the established tax rates for a decade. Even if we assume that they should be called tax cuts after a decade the next part of the lie is telling. He calls them 800 billion in cuts but in truth government revenue is not decreasing 1 dime due to rate changes ergo no active cuts. He oprates from the premise that the 800 billion was already in the treasury and its not. The problem is not revenue but spending. While I don't like the military beign untouchable, the fact is the government is spending way too much and we get too little out of it. Porkulus, Obamacare, the money being wasted by the EPA in its attempt to take over carbon and ruin the economy etc.

    Krugman wants people to assume that becuase some government spending can stimulate an economy, all government spending can. The fact is the government is a leech. It has moved so far past being a constructive force it has become an anchor dragging us down. Yet krugman's solution is more loss of liberty, more centralized control, and more national stagnation.

    Comment


    • #3
      z,

      First they are not tax cuts, they have been the established tax rates for a decade.
      the way they were written into law was on a proviso that they expire by 2010, which was the only way the republicans could pass it originally as "deficit-neutral".

      The problem is not revenue but spending.
      it also does't mean the bush tax cuts were the most optimal way to design tax cuts; a deeper payroll tax cut, or a deeper middle-class tax cut, for instance, would have had more economic bang for the buck vice the section for higher-income tax cuts.

      and i hate the sentence "the problem is not revenue but spending". well, no, it's -both-. the level of spending is problematic, yes, but things would not be half so serious had not the economy imploded in 2008, which not only led to a smaller taxable economic base but also significant sums being spent on making sure the world economy didn't completely collapse.

      also, if lower taxes are -always- legitimate and government spending never is, then krugman's quite right in saying that the logical endpoint would be the complete elimination of taxes.

      While I don't like the military beign untouchable, the fact is the government is spending way too much and we get too little out of it.
      primarily because the areas we're doing the spending is warped. we generally spend too much on medicare and SS, and not enough on capital investment and S&T development.
      Last edited by astralis; 01 Jan 11,, 07:10.
      There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

      Comment


      • #4
        •Reprints
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        --------------------------------------------------------------------------------

        December 29, 2010
        Deficit HypocrisyIt was not long ago that Republicans succeeded in holding unemployment benefits hostage to a renewal of the high-end Bush-era income tax cuts and — as a little bonus — won deep estate tax cuts for America’s wealthiest heirs. Those cuts will add nearly $140 billion to the deficit in the near term, while doing far less to prod the economy than if the money had been spent more wisely.

        That should have been evidence enough that the Republican Party’s one real priority is tax cuts — despite all the talk about deficit reduction and economic growth. But here’s some more:

        On Dec. 22, just before they left town for the holidays, House Republican leaders released new budget rules that they intend to adopt when they assume the majority in January and will set the stage for even more budget-busting tax cuts.

        First, some background: Under pay-as-you-go rules adopted by Democratic majorities in the House and Senate in 2007, tax cuts or increases in entitlement spending must be offset by tax increases or entitlement cuts. Entitlements include big health programs like Medicare and Medicaid, for which spending is on autopilot, as well as some other programs for veterans and low-income Americans. (Discretionary spending, which includes defense, is approved separately by Congress annually.)

        The new Republican rules will gut pay-as-you-go because they require offsets only for entitlement increases, not for tax cuts. In effect, the new rules will codify the Republican fantasy that tax cuts do not deepen the deficit.

        It gets worse. The new rules mandate that entitlement-spending increases be offset by spending cuts only — and actually bar the House from raising taxes to pay for such spending.

        Say, for example, that lawmakers want to bolster child credits for families at or near the minimum wage. One way to help pay for the aid would be to close the tax loophole that lets the nation’s wealthiest private equity partners pay tax at close to the lowest rate in the code. That long overdue reform would raise an estimated $25 billion over 10 years, but the new rules will forbid being sensible like that.

        Even worse, they direct the leader of the House Budget Committee to ignore several costs when computing the budget impact of future actions, as if the costs are the natural course of politics for which no payment is required.

        House Republicans obviously believe they have a good thing going with voters by sanctifying tax cuts and demonizing spending. That’s been their approach for 30 years after all, and it unfailingly rallies their base. http://www.nytimes.com/2010/12/30/opinion/30thu1.html
        This is what the new fiscal responsibility looks like? It looks vaguely like the same thinking that turned a surplus into a deficit
        Where free unions and collective bargaining are forbidden, freedom is lost.”
        ~Ronald Reagan

        Comment


        • #5
          1. It was not a tax cut. No one got more money into their pockets. They just didn't have to pay more.
          2. Unemployment handouts shouldn't have been extended....3 times.
          3. Payroll tax should not have been cut.
          4. Porkulus II was Obama's idea and the republicans were stupid enough to go along.
          "Only Nixon can go to China." -- Old Vulcan proverb.

          Comment


          • #6
            Originally posted by astralis View Post
            z,
            the way they were written into law was on a proviso that they expire by 2010, which was the only way the republicans could pass it originally as "deficit-neutral".
            But to claim they are costing the government revenue is simply untrue.

            it also does't mean the bush tax cuts were the most optimal way to design tax cuts; a deeper payroll tax cut, or a deeper middle-class tax cut, for instance, would have had more economic bang for the buck vice the section for higher-income tax cuts.
            I don't dissagree the original cuts could ahve been done better. I'd rather see corporate rates and rates on forgien income cut to make domestic production and forgien income streams serve as job builders.

            and i hate the sentence "the problem is not revenue but spending". well, no, it's -both-. the level of spending is problematic, yes, but things would not be half so serious had not the economy imploded in 2008, which not only led to a smaller taxable economic base but also significant sums being spent on making sure the world economy didn't completely collapse.
            And I dissagree, porkulus and its offspring are abject failures. That is spending we did not need, spending that was done only to magnify the actual problems we face.

            also, if lower taxes are -always- legitimate and government spending never is, then krugman's quite right in saying that the logical endpoint would be the complete elimination of taxes.
            I didn't make that claim. Some level of taxation is required. But taxing Arkansas and Missouri to pay for state workers in Illinois is not appropriate. Crushing the buying power of the average joe buy printing money when its not part of a thought out plan to spur domestic prodiuction is also a disaster. Fuel costs are headed up and grocery prices have been headed up for most of the 3/4Q of 2010 with no let up in sight. The establishment seems to be perfectly willing to inflate the money supply independent of a coherent strategy to make use of that inflation.

            primarily because the areas we're doing the spending is warped. we generally spend too much on medicare and SS, and not enough on capital investment and S&T development.
            I don't dissagree with you at all on this.

            Comment


            • #7
              Originally posted by gunnut View Post
              1. It was not a tax cut. No one got more money into their pockets. They just didn't have to pay more.
              2. Unemployment handouts shouldn't have been extended....3 times.
              3. Payroll tax should not have been cut.
              4. Porkulus II was Obama's idea and the republicans were stupid enough to go along.
              So, since the temporary Bush taxcuts were the current rate then not extending them would be a tax increase. Does that mean when the Republicans don't extend the Obama 2 percent middle class taxcuts they will be presiding over the largest middle class tax increase in the modern era? After all both were temporary taxcuts and both are the current rate and both were supposed to expire because they were unaffordable.
              Where free unions and collective bargaining are forbidden, freedom is lost.”
              ~Ronald Reagan

              Comment


              • #8
                Originally posted by Roosveltrepub View Post
                So, since the temporary Bush taxcuts were the current rate then not extending them would be a tax increase. Does that mean when the Republicans don't extend the Obama 2 percent middle class taxcuts they will be presiding over the largest middle class tax increase in the modern era? After all both were temporary taxcuts and both are the current rate and both were supposed to expire because they were unaffordable.
                Yes, that is correct. I'm sure you are totally for the republicans NOT raising the payroll taxes. I am actually against all temporary tax cuts and increases. Make all changes permanent. Give people a certainly so they can make long range plans. That is one major reason why businesses are sitting on cash. Highsea explained this already. He can't make plans for next year without knowing exactly what the tax rate will be next year. Would you get a mortgage to buy a house if you don't know what the interest rate might be next year?
                "Only Nixon can go to China." -- Old Vulcan proverb.

                Comment


                • #9
                  Originally posted by gunnut View Post
                  Yes, that is correct. I'm sure you are totally for the republicans NOT raising the payroll taxes. I am actually against all temporary tax cuts and increases. Make all changes permanent. Give people a certainly so they can make long range plans. That is one major reason why businesses are sitting on cash. Highsea explained this already. He can't make plans for next year without knowing exactly what the tax rate will be next year. Would you get a mortgage to buy a house if you don't know what the interest rate might be next year?
                  That does not explain why business is hanging on to cash but this does
                  Companies hold record $837B in cash, yet won't hire workers - USATODAY.com
                  Where free unions and collective bargaining are forbidden, freedom is lost.”
                  ~Ronald Reagan

                  Comment


                  • #10
                    zraver,

                    But to claim they are costing the government revenue is simply untrue.
                    depends on which baseline you are using. i think it's rather more dishonest of republicans to claim they were deficit-neutral in the first place.

                    And I dissagree, porkulus and its offspring are abject failures. That is spending we did not need, spending that was done only to magnify the actual problems we face.
                    like i said much earlier:

                    GDP = private consumption + gross investment + government spending + (exports − imports)

                    explain how to keep GDP from falling if first two are down.

                    But taxing Arkansas and Missouri to pay for state workers in Illinois is not appropriate.
                    the irony is that it's really the other way around, where blue states pay for the red states. by the way, i have yet to see inflation. remember, we have that bet...:)

                    but anyway, the point is that republicans have a bad tendency to think: lower taxes are -always- better. liberal dems think: more government revenue is -always- better. centrists think (correctly, IMHO ): it depends on the situation.

                    The establishment seems to be perfectly willing to inflate the money supply independent of a coherent strategy to make use of that inflation.
                    i don't think so.

                    10 Questions for Ben Bernanke - TIME
                    There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

                    Comment


                    • #11
                      gunnut,

                      Make all changes permanent
                      doing so makes federal spending policy inflexible. you're right that on the positive side there's more predictability; but on the negative side it also hamstrings whatever response the government may have in response to some disaster, economic/political/natural.

                      try this thought experiment. say in the future ron paul or whichever suitably libertarian president waves a wand and suddenly taxes turn into a flat 20% sales tax. of course this means getting rid of SS, medicare, pretty much everything but a (much smaller) military and perhaps some of the most basic government functions.

                      let us assume another miracle and believe that this has no disruptive effect whatsoever, let the free markets bloom and all that.

                      okay...what happens when we go into a recessionary cycle? what can the government do?
                      There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

                      Comment


                      • #12
                        Originally posted by Roosveltrepub View Post
                        That does not explain why business is hanging on to cash but this does
                        Companies hold record $837B in cash, yet won't hire workers - USATODAY.com
                        Sounds pretty much like what I've already described, just on a much larger scale.

                        Why should I hire people if I don't know how much they will cost me in the long run? Especially factor in Obamacare.
                        "Only Nixon can go to China." -- Old Vulcan proverb.

                        Comment


                        • #13
                          Originally posted by astralis View Post
                          gunnut,

                          doing so makes federal spending policy inflexible. you're right that on the positive side there's more predictability; but on the negative side it also hamstrings whatever response the government may have in response to some disaster, economic/political/natural.

                          try this thought experiment. say in the future ron paul or whichever suitably libertarian president waves a wand and suddenly taxes turn into a flat 20% sales tax. of course this means getting rid of SS, medicare, pretty much everything but a (much smaller) military and perhaps some of the most basic government functions.

                          let us assume another miracle and believe that this has no disruptive effect whatsoever, let the free markets bloom and all that.

                          okay...what happens when we go into a recessionary cycle? what can the government do?
                          I mean permanent as in no temporary tax cuts or tax hikes scheduled to automatically expire like the Bush tax cut or the Obama payroll holiday. If they want to change it, then change it. If they want to change it back, have another vote. The fiasco of this past congress was a disgrace to this republic.
                          "Only Nixon can go to China." -- Old Vulcan proverb.

                          Comment


                          • #14
                            Originally posted by astralis View Post
                            zraver,

                            depends on which baseline you are using. i think it's rather more dishonest of republicans to claim they were deficit-neutral in the first place.
                            Minus the war I think they would have been

                            like i said much earlier:

                            GDP = private consumption + gross investment + government spending + (exports − imports)

                            explain how to keep GDP from falling if first two are down.
                            you have two choices- 1 use government as a tool to help the first two recover. Or 2 use government spending to create a false picture. FDR's spendign didn't work, it took a global war to do it. That war was a combination of totally directed spending and massive savings. We are no where near that. All we are ding is borrowing or printing money.

                            the irony is that it's really the other way around, where blue states pay for the red states. by the way, i have yet to see inflation. remember, we have that bet...:)
                            Thats a myth- that blue states pay for red states. Blue states tend to have company HQ but the work or resources is often done in red states. Plus much of the federal spnding in red states is transportation related which is a blue state benefit.

                            As for inflation, the infaltion index is baffling me. Grocry prices and fuel prices are sky rocketing but the index remains low. I am guessing from the downward pressure of the housing market. However if we look at food prices- as salt goes so goes the economy... The current projections are for a 3% increase overall in food costs. I think this is going to prove far to low as rising fuel prices combine with them to create an upward spiral.

                            but anyway, the point is that republicans have a bad tendency to think: lower taxes are -always- better. liberal dems think: more government revenue is -always- better. centrists think (correctly, IMHO ): it depends on the situation.
                            And realist think we need a tax rate that is stable to provide confidence, targeted and small enough to not act as a mill stone to development, and just big enough to meet the real obligations of government.



                            From your link

                            Would it be beneficial to the economy if I created new dollars out of thin air whenever I wanted? If it isn't good for me to do it, why is it good for you and the Fed to create new money at whim? —Jonathan DuPree, MARTINSBURG, W.VA.
                            The Federal Reserve is buying Treasury securities in order to lower interest rates, which in turn helps people buy houses and cars and promotes investment by firms. That leads to a stronger economy. These policies are not leading to increases in the amount of currency in circulation.

                            Read more: 10 Questions for Ben Bernanke - TIME

                            He is flat out lying, The Federal Reserve does not have 600 billion in cash on hand. They are having the treasury print the money (electronically) for the federal reserve to then buy bonbs from the same treasury that is printing the money to buy them excpet doign it through a corrupt middleman (Goldman Sachs). The government is then going to spend that 600 billion that was created out of thin air. The fed and government are hiding behind the fiction of not printing since the presses are not physically printing dollars. The truth is the money has been created electronicaly. We both know if the government had to physically trade paper dollars for goods and services it buys or provides the fiction of "not printing money" would be revealed to all.

                            Comment


                            • #15
                              z,

                              Minus the war I think they would have been
                              are you saying that the wars depressed economic spending so much that they made the tax cuts non-deficit neutral?

                              you have two choices- 1 use government as a tool to help the first two recover. Or 2 use government spending to create a false picture. FDR's spendign didn't work, it took a global war to do it.
                              ugh, i've already had this debate multiple times with highsea. see the graph below. what happened in 1937-1938?

                              -Federal reserve requirements doubled to prevent inflation
                              -FDR lowered the deficit from 5.5% to 2.5% to less than 1% in two years by slashing spending

                              oops.

                              then looking at WWII, what was that but -very- massive government spending on a global scale? so massive, in fact, that the US government borrowed quite heavily from the taxpayer not just in the form of taxes but war bonds.

                              Plus much of the federal spnding in red states is transportation
                              plus welfare and medical spending. the red states, primarily the south, still continue to have the highest obesity rates in the nation, as well as the lowest average income.

                              As for inflation, the infaltion index is baffling me. Grocry prices and fuel prices are sky rocketing but the index remains low. I am guessing from the downward pressure of the housing market. However if we look at food prices- as salt goes so goes the economy... The current projections are for a 3% increase overall in food costs. I think this is going to prove far to low as rising fuel prices combine with them to create an upward spiral.
                              like i said, a tin of butter cookies for the winner.

                              And realist think we need a tax rate that is stable to provide confidence, targeted and small enough to not act as a mill stone to development, and just big enough to meet the real obligations of government.
                              that's a fine statement by me. what i have an issue with is when forced to choose between lowering taxes and dealing with the deficit, the republican answer has recently been to say "BOTH!!" and not provide the math for how that's supposed to work out.

                              He is flat out lying, The Federal Reserve does not have 600 billion in cash on hand. They are having the treasury print the money (electronically) for the federal reserve to then buy bonbs from the same treasury that is printing the money to buy them excpet doign it through a corrupt middleman (Goldman Sachs). The government is then going to spend that 600 billion that was created out of thin air. The fed and government are hiding behind the fiction of not printing since the presses are not physically printing dollars. The truth is the money has been created electronicaly. We both know if the government had to physically trade paper dollars for goods and services it buys or provides the fiction of "not printing money" would be revealed to all.
                              note that bernanke is careful in his terminology:

                              These policies are not leading to increases in the amount of currency in circulation.

                              he drew this out more at length in an earlier speech:

                              Our approach—which could be described as "credit easing"—resembles quantitative easing in one respect: It involves an expansion of the central bank's balance sheet. However, in a pure QE regime, the focus of policy is the quantity of bank reserves, which are liabilities of the central bank; the composition of loans and securities on the asset side of the central bank's balance sheet is incidental. Indeed, although the Bank of Japan's policy approach during the QE period was quite multifaceted, the overall stance of its policy was gauged primarily in terms of its target for bank reserves. In contrast, the Federal Reserve's credit easing approach focuses on the mix of loans and securities that it holds and on how this composition of assets affects credit conditions for households and businesses.
                              in short, QE increases the monetary base but not necessarily the money supply. note what happened in the first round of QE; inflation still dropped in the year afterwards.
                              Attached Files
                              There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

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