Policy Vs. External Shock

July 25th, 2011

While drawing attention to a very interesting chart (below via), James Fallows makes some strong points about what drives the deficit most:

"...it identifies policy changes, the things over which Congress and Administration have some control, as opposed to largely external shocks -- like the repercussions of the 9/11 attacks or the deep worldwide recession following the 2008 financial crisis. Those external events make a big difference in the deficit, and they are the major reason why deficits have increased faster in absolute terms during Obama's first two years that during the last two under Bush. (In a recession, tax revenues plunge, and government spending goes up - partly because of automatic programs like unemployment insurance, and partly in a deliberate attempt to keep the recession from getting worse.) If you want, you could even put the spending for wars in Iraq and Afghanistan in this category: those were policy choices, but right or wrong they came in response to an external shock.

The point is that governments can respond to but not control external shocks. That's why we call them "shocks." Governments can control their policies. And the policy that did the most to magnify future deficits is the Bush-era tax cuts. You could argue that the stimulative effect of those cuts is worth it ("deficits don't matter" etc). But you cannot logically argue that we absolutely must reduce deficits, but that we absolutely must also preserve every penny of those tax cuts. Which I believe precisely describes the House Republican position."

Another Chart

May 19th, 2011

As I grow increasingly tired of writing in detail about American monetary policy in my attempts to counter the "it's all Obama's fault" idiots, I must occasionally resort to simple charts. Hey, idiots, this one even has pictures. Suck it up.

The President's Budget Address

April 13th, 2011

We will be adding our two cents in the coming days. The full text of the President's prepared remarks is below the video.

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

"What we've been debating here in Washington for the last few weeks will affect your lives in ways that are potentially profound. This debate over budgets and deficits is about more than just numbers on a page, more than just cutting and spending. Its about the kind of future we want. It's about the kind of country we believe in. And that's what I want to talk about today.

Strange Bedfellows

April 8th, 2011

Sometimes, the truth of an issue runs way too deep to let general ideological differences or even past animosities interfere with cooperation. Last night, Judy Woodruff shone a light on a very strange limited political-partnership indeed. Ben Jealous and Grover Norquist are working together to fight for major reform of America's unfair, destructive and way too expensive penal system. No. Really.



Key points from the transcript:

Ben Jealous: So, on the one hand, we know that, for instance, drug rehab, dollar for dollar, is seven times more effective for dealing with nonviolent drug addicts, which are the bulk of people in prison, than jail or prison. On the other hand, we also know that, if you look, for instance, at the state of California, when California was known to really have the best public universities in the entire world, like in the '70s and '80s, they were spending 3 percent of their state budget on prisons and 11 percent on their colleges and universities.

Grover Norquist: And when you look at it, you're seeing a lot of people are sent to prison who perhaps ought not to be in prison, in terms of some cost-benefit analysis. And, again, we're conservatives. I think there are a bunch of people who deserve to be in prison forever. I think there are some people that deserve to be in prison for a long time. I don't get weepy about the whole idea. But we are keeping some people in prison who might be better off in drug rehabilitation or under other kinds of house arrest or other kinds of control, other than very expensive prisons.

Beyond the fact that I deeply support substantial overhaul of the corrections culture, this seems to me to be the way America is supposed to work. Put aside the differences. Get together. Move forward.

Some Interesting Conservative Thought On Libya

March 22nd, 2011

Since the start of hostilities, there have been some genuinely intriguing observations over at the National Review. Kevin D. Willaimson writes in response to some derision regarding the use of our military dollars:

"With all due respect to Mr. Felzenberg and Mr. Gray, I’m not sure that our Libya campaign shows the folly of cuts in defense spending. One might argue as easily that our $1 trillion or more in defense spending shows the folly of the Libya campaign. We’re lobbing missiles that go for about $750,000 a copy into a country for the entirety of which I would not trade the change behind my sofa cushions, inasmuch as Libya strikes me the very definition of a negative asset, one that we are in the process of taking custodianship over."

"Yes, I wrote $1 trillion. Even though the last DOD budget was only — only! — about $550 billion, supplementary war funding brings the number up to about $663 billion. But lots of military spending takes place outside of DOD: at NASA, at DOE, DHS, Veterans’ Affairs, etc. And NASCAR, for Pete’s sake. Throw in all that, and the interest payments on debt incurred for previous military spending, and you get a number between $1 trillion and $1.4 trillion, depending on how you count it up. I’ll be conservative and call it a cool trillion. That’s a lot of money for a national-security system that has repeatedly, predictably, reliably failed to address our actual security threats."

Although I disagree, at points strenuously, with Williamson's recommendations for change, it is refreshing to see the truth about our defense budgets so plainly stated at NRO.

Wisconsin By The Numbers

Feb 17th, 2011

Gov. Scott Walker

As the controversy over Wisconsin Governor Scott Walker's plans to balance the state budget on the backs of his workers heats up, the likes of Glenn Beck and Michelle Malkin are attempting to demonize his government's employees for not rolling over and taking what amounts to a 7% wage cut. 

It's just another part of the current Republican war on the rights of labor. Here is a little perspective.

From the NY Times:

"Mr. Walker said he had no other options, since he is facing a deficit of $137 million in the current state budget"

From The Wisconsin Budget Project:

"At least eight new or expanded state tax cuts and tax credits will go into effect at the beginning of 2011. These tax changes add up to an estimated $210 million cut in state taxes over the 2011-13 biennium. After adding in other tax reductions with different effective dates, we calculate that tax changes contribute more than $320 million to the structural deficit for the coming biennial budget."

Uh huh. Looks like more Reaganomic upward redistribution to me.

Losing The Future, cont...

Jan 15th, 2011

We continue to stare into the economic abyss caused by 30 years worth of Reaganomic myopia. The rebuttals of the position that radical decreases in the top marginal tax rates nurture growth and expansion continue to flood in. From The Economic Policy Institute:

Krugman On Texas

Jan 8th, 2011

Writing in the NY Times a couple of days ago, Paul Krugman critiqued what he calls "The Texas Omen:"

"Wasn’t Texas supposed to be thriving even as the rest of America suffered? Didn’t its governor declare, during his re-election campaign, that “we have billions in surplus”? Yes, it was, and yes, he did. But reality has now intruded, in the form of a deficit expected to run as high as $25 billion over the next two years.

And that reality has implications for the nation as a whole. For Texas is where the modern conservative theory of budgeting — the belief that you should never raise taxes under any circumstances, that you can always balance the budget by cutting wasteful spending — has been implemented most completely. If the theory can’t make it there, it can’t make it anywhere."

The primary problem with the current Republican leadership is that they continue to argue against defusing any bombs until they go off. Then, after they go off, they scramble to blame liberals for not defusing them

Continuing Republican Budget Madness

Dec 29th, 2010

In an article for the Center on Budget and Policy Priorities, Robert Greenstein and James R. Horney expose the continuing folly and disingenuous nature of the incoming Republican house majority:

Republican Budget Cut Proposal Idiocy

Dec 28th, 2010

It doesn't get much better than this. From the NY Times:
"Note to the incoming Republican majority in the House: Eliminating government programs that do not exist does not save money. 


Of the few specific cuts that Congressional Republicans have proposed in their promised assault on annual budget deficits, one of the biggest by far would save $25 billion over 10 years, they claim, by ending an emergency welfare fund. The Republican Study Committee, which includes more than 100 of the most conservative House Republicans, promoted the idea in a statement this week, saying, “With the national debt quickly approaching $14 trillion, Washington needs to get serious about cutting spending.”

Well, seriously, the fund expired Sept. 30."

We have 2 years of this to look forward to. This is a reminder of what President Obama is up against.

Deficits As Investment

Nov 18th, 2010

by James Hayford

I cringe every time the I hear that the government should learn to live within it's means, "like households all over the country". So I was very happy to see Robert Reich take on this pervasive idea; that deficit spending is always bad. It has become an article of faith that even Obama seems to repeat in order to seem serious about the deficit. 

 Reich uses the example of households taking out loans to send their kids to college, to point out that sometimes going into debt in the short term, is the best way to get ahead in the long term. 


 I like that example, but I think that governments are more like businesses than like families. Many businesses use short term debt. And as we all know from the effects of the credit crisis, businesses that can't get credit must shrink or even go under. 
Reich goes on to say that the way out of debt is through growth. 

He worries that "budget-deficit mania will slow future growth if it forces government to cut the things that fuel growth – education, basic R&D, child health, improved infrastructure."


 Well put.