From his "New Nationalism" speech. 1910.
From his "New Nationalism" speech. 1910.
I am astounded—well actually, not really—that I'm now getting a bunch of visitors to my site who arrive after searching for some variation of "conservative polls."
The frantic efforts at self-delusion out there really shouldn't surprise me, but they do.
Most economists agree: deregulation is not what caused today's problem. (The repeal of Glass-Steagal, for instance—the Gramm-Leach-Bliley Act allowing commercial banks to act as investments banks, and vice-versa—wasn't the cause. It might even be one of the reasons things aren't worse than they are.)
What' they're not saying: not regulating is what caused the problem.
Everyone agrees: today's regulatory structure is not designed or sufficient for today's financial markets. A modern regulatory structure would, for instance, impose capital/leveraging limits on issuers of complex derivatives, such as credit default swaps—just as commercial bankers and insurers are required to maintain sufficient reserves to cover losses.
But that's illegal, thanks to the Commodity Futures Modernization Act, snuck through by Phil Gramm during Clinton's waning days.
That regulation specifically banned regulation of credit default swaps.
I follow all the major econoblogs via Google Reader—it's easy for me to search them all.
One exception: Justin Fox, who offers this brief pithy history:
It was never debated in committee or on the floor.
When we have to rely on Daily Kos and The Huffington Post to get analysis of recent economic history, it's time to take a hard look at the econoblogosphere.
Here are all the search results, going back to July 15.
Hale "Bonddad" Stewart: Who's To Blame For the Mess We're In?
...Financial Services Modernization Act repealed Glass-Steagall, a law that had separated the commercial-banking industry from Wall Street, and the two industries, plus insurance, came together again. Banks became bigger, clumsier, and hard to manage. Apparently, risk-management became all but impossible, even as banks had greater access to larger ...
The Huffington Post Full Blog Feed - Sep 28, 2008 (4 days ago)
Open Thread and Diary Rescue
...How the Commodity Futures Modernization Act Was Moved Through Congress. (ybruti) In this continuing series, LivingOxyMoron describes and defines some of the "basic" concepts underlying the sub-prime economic crisis in Understanding the Crisis, Part 2: The Borrower and Loan Originator. (vcmvo2) Eddie C relates his own traumatic experience with mo...
Daily Kos - Sep 25, 2008 9:17 pm
Robert Scheer: A Fox to Protect the Henhouse?
...and the Commodity Futures Modernization Act of 2000. By preventing mergers between the various branches of Wall Street, the former act reversed basic Depression-era legislation passed to prevent the sort of collapse we are now experiencing. The latter legitimized the "swap agreements" and other "hybrid instruments" that are at the core of the cr...
The Huffington Post Full Blog Feed - Sep 24, 2008 2:26 am
Chris Cox, American hero
...of the Commodity Futures Trading Commission--which regulates exchange-traded derivatives--campaigned for the authority to oversee the OTC kind as well, but was batted down by Congress and the Clinton Treasury Department. (I wrote about this a few days ago.) And on December 14, 2000, Phil Gramm, Jim Leach, Richard Lugar, Thomas Ewing and a few ot...
TIME: The Curious Capitalist - Sep 23, 2008 6:29 pm
Deborah Senn: Fifty Chimpanzees or One Toothless Gorilla
...is the Commodity Futures Modernization Act of 2000. The act specifically banned regulation of something called "credit default swaps." And it is precisely the creation and trading of these unregulated CDS's that led to AIG's downfall. In a nutshell, here is how a CDS works. Imagine lending money to your brother-in-law whose creditworthiness is ...
The Huffington Post Full Blog Feed - Sep 23, 2008 9:06 am
Howard Schweber: Paulson's Plan - Annotated
...2000 Commodities Futures Modernization Act. That act was added to the budget by Phil Gramm -- two days after the Court's decision in Bush v. Gore when no one was paying very much attention. "Nobody in either chamber had any knowledge of what was going on or what was in it," says a congressional aide familiar with the bill's history (quoted in ...
The Huffington Post Full Blog Feed - Sep 22, 2008 3:06 pm
The regulation of derivatives
...commodity, weather and freight derivatives." Here is one overview of MiFID. Implementation and enforcement is on a country-by-country basis and of course the UK is the big player. Read pp.27-29 in the very first link above and you'll see that overall the UK has a looser regulatory approach than does the United States, though not on...
Marginal Revolution - Sep 22, 2008 6:06 am
Three Times is Enemy Action
...with the Commodity Futures Modernization Act, which was slipped into a "must pass" spending bill on the last day of the 106th Congress. This Act greatly expanded the scope of futures trading, created new vehicles for speculation, and sheltered several investments from regulation. As with both Gramm-Leach-Bliley and Garn-St. Germain, large parts...
Daily Kos - Sep 21, 2008 7:19 am
Did the Gramm-Leach-Bliley Act cause the housing bubble?
...cover the Commodity Futures Modernization Act as well.
Marginal Revolution - Sep 19, 2008 4:57 am
Arianna Huffington: How Obama Can Demonstrate Real Leadership on the Economic Crisis
...the Financial Modernization Act, which obliterated Glass-Steagall; and the Commodity Futures Modernization act, which gave us unregulated trading of derivatives and the kind of credit default swaps that threaten our economy -- both signed into law by Bill Clinton. Speaking at a large rally in Las Vegas on Wednesday, Obama declared: "we can't st...
The Huffington Post Full Blog Feed - Sep 18, 2008 4:03 pm
James Moore: A Nation of Village Idiots
...called the Commodity Futures Modernization Act into the budget bill. Nobody knew that the Texas senator was slipping America a 262 page poison pill. The Gramm Guts America Act was designed to keep regulators from controlling new financial tools described as credit "swaps." These are instruments like sub-prime mortgages bundled up and sold as ...
The Huffington Post Full Blog Feed - Sep 17, 2008 11:02 pm
McCain Adviser Phil Gramm's Role in Today's Crisis
...Commodity Futures Modernization Act], he declared, would ensure that neither the sec nor the Commodity Futures Trading Commission (cftc) got into the business of regulating newfangled financial products called swaps—and would thus "protect financial institutions from overregulation" and "position our financial services industries to be world lea...
Economists for Obama - Sep 21, 2008 8:19 pm
Robert Scheer: Earth to McCain: It's a Crisis
...were the Commodity Futures Modernization Act and the Gramm-Leach-Bliley Act. The Gramm is former Sen. Phil Gramm, who was chair of the Senate Banking Committee when he acted as chief sponsor of both pieces of legislation. The same Gramm that McCain picked to co-chair his presidential campaign. Gramm proved an embarrassment when he cavalierly in...
The Huffington Post Full Blog Feed - Sep 17, 2008 2:58 am
Yet Another Reason to Vote Against John McCain
...behind the Commodity Futures Modernization Act and the Gramm-Leach-Bliley Act. The former made legal "the mortgage swaps distancing the originator of the loan from the ultimate collector," while the latter "destroyed the Depression-era barrier to the merger of stockbrokers, banks and insurance companies.... CARLY FIORINA.... ...
Grasping Reality with Both Hands: The Semi-Daily Journal Economist Brad DeLong - Sep 16, 2008 11:44 am
Krugman: Phil Gramm would be ‘just the guy’ to lead us into a Great Depression.
...pushed the Commodity Futures Modernization Act in 2000, which made legal “the mortgage swaps distancing the originator of the loan from the ultimate collector.” The Nation writes that “those two acts effectively ended significant regulation of the financial community.”
Think Progress - Sep 16, 2008 6:56 am
Robert Scheer: She's Clueless, He's Worse
...of the Commodity Futures Modernization Act, which former Sen. Phil Gramm, R-Texas, pushed through Congress just hours before the 2000 Christmas recess. Gramm, until recently co-chair of the McCain campaign, also had co-authored the Gramm-Leach-Bliley Act, which became law in 1999 with President Bill Clinton's signature. That gem, which Gramm had...
The Huffington Post Full Blog Feed - Sep 10, 2008 12:21 am
Mitchell Bard: McCain's Claims of "Change" in His Acceptance Speech Are New Standard for Chutzpah
...as the Commodity Futures Modernization Act), which exempted energy trading from regulatory oversight. In other words, speculation was brought to the gas markets. (Keith Olbermann did an in-depth, fact-heavy, flawlessly researched report on this issue, which you can watch here.) Who was the person responsible for the Enron Loophole? Do I have to...
The Huffington Post Full Blog Feed - Sep 5, 2008 9:27 am
Oil Prices and Speculation
...when the Commodity Futures Trading Commission examined Vitol's books last month, it found that the firm was in fact more of a speculator... Even more surprising ... was the massive size of Vitol's portfolio -- at one point in July, the firm held 11 percent of all the oil contracts on the regulated New York Mercantile Exchange. The discovery...
Economist's View - Aug 21, 2008 2:40 pm
Michael B. Ellis: Fiddling As The Housing Market Burns
...of the Commodity Futures Modernization Act (helping deregulate the lending industry), and his known participation as being one of the framers of McCain's economic plan, I think it would behoove us to ask McCain, considering Gramm's past history, are we going to see a complete overhaul of his economic plan, or should we assume Gramm's "let them ...
The Huffington Post Full Blog Feed - Jul 25, 2008 3:53 pm
Robert Scheer: The Real Legacy of the 'Reagan Revolution'
...sponsored the Commodity Futures Modernization Act of 2000, which allowed Enron's scamming to happen. As Ken Lay, who was chair of Gramm's election finance committee, put it quite candidly when asked for the secret of Enron's success, "basically, we are entering or in markets that are deregulating or have recently deregulated." Part of that dere...
The Huffington Post Full Blog Feed - Jul 16, 2008 5:12 am
Max Blumenthal: Phil Gramm May Be Gone, But His Porn Lives On
...Commodity Futures Modernization Act" into a omnibus spending bill just as Congress headed off for summer vacation. His amendment instantly enabled the creation of a shadow banking system -- "weapons of financial destruction" in the words of Warren Buffet -- that directly contributed to the current mortgage foreclosure crisis. Millions of America...
The Huffington Post Full Blog Feed - Jul 15, 2008 7:11 am
Everyone has their two bits worth. Mine: Aside from the whole thing being incredibly vague and relying far too much on the Secretary's "discretion," this passage from the CBO's description is egregious.
...the federal budget would not record the gross cash disbursements for purchases of troubled assets (or cash receipts for their eventual sale), but instead would reflect the estimated net cost to the government of such purchases (broadly speaking, the purchase cost minus the present value, adjusted for market risk, of any estimated future earnings from holding those assets and the proceeds from the eventual sale of them).
It is license for intentional obfuscation of the very worst sort, and an invitation to government and corporate lying, cheating, stealing, and collusion.
Just give us the facts, please. You can give us a prettied-up version as well, but without the basic numbers we can draw no conclusions as to the veracity of that version.
If there's one thing people would like more of these days, it's stability. When the economy rockets up one year, then plummets or stagnates the next, it's bad for everyone—especially those farther down the income scale, who have less recourse in face of national and global events that are completely beyond their control.
This got me wondering: over the course of decades, which is more stable—the U.S., with low taxes and limited social spending, or Europe, with it's larger social support systems and higher taxes?
Here's the answer, gauged by one big-picture measure—annual growth/decline in GDP per capita:
Short answer, the U.S. economy is far more volatile. In 25 out of 30 five-year periods, the EU was more stable. Overall, '71–'06, the U.S. economic volatility has been 48% higher than Europe's.
Europe's greater stability may or may not be a result of its social policies. (Though there is good reason to think it is.) But whatever the cause, it sure would be nice to import a good-sized hamperful, if such things are exportable.
I just came across this graph that I created a while ago, and never got around to posting.
Trickle-down theorists would have you believe that inequality is necessary for growth and prosperity, or even that inequality causes growth.
But in the decades after their theories took sway, growth declined.
It came after therefore it was caused by? You decide.
I think Arnold Kling's commentary pretty much says it all:
Now which political party is it, exactly, that's supposed to know something about finance and economics? To make sensible, judicious, reasoned judgments about the economy?
Some people think the McCain bailout/debate maneuvering has positioned him to trap Obama:
Kathleen Parker, to be precise:
It was fun while it lasted.
Palin’s recent interviews with Charles Gibson, Sean Hannity, and now Katie Couric have all revealed an attractive, earnest, confident candidate. Who Is Clearly Out Of Her League.
Very quickly here because I have to run out the door, you'll have to google for your own links:
Senate Banking Committee Chairman Chris Dodd has proposed an alternative to Hank Paulson's "just trust me" blank-check bailout proposal.
If Treasury (that means you and me) buys $1 worth of trash assets from a company, Treasury (you and I) gets those assets, plus $1 of equity (stock or senior debt) in that company.
So the companies get the bailout cash they need now, but in return they give us--at no immediate cash cost to themselves--a potential upside down the road. But believe me--because their own shares are being diluted--they're gonna be saying "ouch."
Companies don't have to take the deal, of course. They actually have to request it. If they're on the verge of bankruptcy, the choice is clear:
Take it or leave it.
This solves the fundamental problem with the Paulson plan: either he pays too much for the assets (which bails out the financial institutions), or he pays too little (which is good for the taxpayer, but doesn't solve the problem).
With the Dodd plan, even if we pay too much, we've got that equity to make up for it.
Now: which party is it that understands market discipline?
The economics bloggers--who have been uniformly ravaging the Paulson plan for obvious reasons--are starting to coalesce around the Dodd plan. Watch for more in the course of the day.
Well not in so many words, but for all intents and purposes:
Elizabeth Drew, who penned a rather adulatory McCain biography just a few years ago (Citizen McCain, 2002), says:
Is there a single thinking person left who supports this man?
Or is it only those who hold up "character" as the sole criterion for the presidency—while frantically closing their eyes to his character, putting their hands firmly over their ears, and humming loudly?
John McCain has promised to balance the federal budget by 2013.
He's also pledged to enact a tax plan that will deliver a budget deficit of $650 billion dollars in 2013.
Just to give these numbers a little perspective:
|2013 Projected Outlays|
"Drown it in a bathtub," indeed.
Greg Mankiw pooh-poohs the data using one of his favorite tactics:
Post hoc ergo propter hoc is the eternal comeback in macroeconomics, because we can't replay the world a different way and see what "would have" happened.
It's a very effective counter when you're looking at brief periods (let's call it micromacro) with no comparative or control element.
1. That comeback is much less convincing when comparing outcomes from two sets of policies
A. Over a long period
B. When those policies are consistently and systematically different
2. Data—especially long-term data—can quite effectively disprove a theory. (Mankiw stipulates to this in "Growth of Nations.")
i.e.: Growth in Europe and the US have been the same over decades, while tax rates have been massively different (40% versus 28% of GDP).
i.e. 2: Since WWII, growth under Democratic presidents has been far greater.
No post-hoc argument here: These facts quite effectively disprove the theory that Republican/supply-side/trickle-down policies cause greater/faster economic growth.
On the two "equality" studies that Mankiw pooh-poohs.
Dems deliver less rich/poor inequality: Blinder's point is not that Dems deliver more equality. It's that everyone is better off under Democratic policies. (Bartels demonstrates this in spades.) The equality is a wonderful (causally connected?) bonus.
Pubs deliver less male/female inequality: women appear to have done relatively better under 'pubs because working-class men have done so poorly under same.
Update: Casey Mulligan—author of the Republicans-promote-gender-equality article—responds to Mankiw in his new blog.
My sister sez:
Seems like that would make it kind of hard to see "the facts on the ground."
Update: If you're looking for conservative polling, click here.
I've been meaning to put together a post for a while now on the metanalysis sites: the top-feeders one level above pollster.com, realclearpolitics, electoral-vote and the like (who aggregate and average recent polls)—outfits that run statistical crunchers on the polls, and spit out what everyone wants to know:
What are Obama/McCain's odds of winning?
These three sites use similar methods, but as you can see—especially in these post-convention/Palin times—their conclusions diverge.
fivethirtyeight.com. Current odds of an Obama win: 52.1%. These guys actually try to project what will happen in November. (Not easy: the odds here a week ago were 70%.) Founder Nate Silver is also an excellent blogger.
Princeton Election Consortium. They seem to have been discombobulated by the convention/Palin bounces, so I'm not quite sure what their probability is today. (There's a post suggesting that the electoral-vote estimator is not their current prediction.) It was nearly 100% a week ago.
ShHe's got the Obama odds at 85%, and includes some interesting conditional probabilities:
|But if Obama loses ...|
|... Colorado, Florida and Virginia||47.7%|
|... Florida, Ohio and Virginia||65.3%|
|... Colorado, Florida, and Ohio||54.0%|
|... Colorado, Florida, Ohio and Virginia||47.5 %|
Less statistically sophisticated, but more graphically sophisticated, check out this cool chart that my friend Mike just put together. (This is a live link, so it will look different from what I'm looking at as I write this; IOW, it may make this post's headline ridiculous.)
It's based on the state-by-state poll numbers from electoral-vote.com. Click for an expanded version on Mike's site.
What it says about today: Obama would win by just taking those states where he's currently polling ahead.
McCain would have to take all his strong, weak, and barely states, plus all the ties, plus all the states where Obama is leading by less than 5%.
This supports what I've been guessing, and what Nate Silver said today about the latest polls:
The theme here is simply traditionally red states coming home to John McCain in a big way
McCain's national polling numbers are up, but if it's just energized Republicans deciding to answer the phone—and that in states that McCain's already winning—it doesn't translate into many electoral votes.
Also, note how the number of "weak McCain" states has been growing over the last month, while the "weak Obama" states have been shrinking. (Until the last day or two.)
Update: If you're looking for conservative polling, click here.
We all know that national polls tell us nothing about what's gonna happen in November. (See, for instance, this very funny post.)
But still. The national polls seem way out of synch with every other indicator. Obama and McCain have been nearly tied for months (with Obama generally up one to four percent), and some post-Palin polls show McCain with a big lead. (Obama's been leading handily in electoral votes—see fivethirtyeight.com—but even that's getting razor thin.)
What's with that? Everything else says otherwise (most recent that I could dig up quickly):
Dems rule, 36% to 27%.
Even Republicans prefer Democratic policies. As an example, Only 38% of Republicans support Republican tax policies. (Unless you tell them it's a Republican policy.)
Since 2006, Dem registrations are up by 2 million (in the 28 states that register by party). Pubs are down by 344,000.
As of July, Obama had 2 million donors. McCain had 600,000.
Donations from the Military (>$200)
Obama/McCain Donors: 859 to 558 (61% Obama). Dollars: $336K to $281K (55% Obama).
Donations from soldiers deployed abroad
Obama has a 6:1 dollar advantage and a 5:1 donor advantage. (Obama: 134 for $60K; McCain: 26 for $11K.)
Obama has at least a 3:1 advantage in field offices (338 to 101), and perhaps as much as a 35-to-1 advantage in voter contacts. (This last is the iffiest number reported here.)
56% of voters are "excited to be voting for" Obama, versus 34% for McCain. (Pre-Palin, McCain's enthusiasm number was 12.)
Feel free to list others.
Everything says that Democratic turnout will swamp the 'pubs, and Obama will win this thing walking away.
Except the national polls.
Especially perplexing are the polls that tally both registered and likely voters, and show a bigger McCain lead in the LV tallies. Per the above: doesn't everything suggest that a higher percentage of Obama supporters will turn out? I don't get it.
I can think of two reasons for the big disparity:
Despite the Dem slant in party affiliations/preferences, 60% of American's consider themselves to be "conservative." (PDF) For "liberal," it's 36%.
Obama is Black
Only 84% of Americans say they would be "completely comfortable voting for a black presidential candidate." And you gotta figure that number overstates reality.
In comments on my recent post—which discusses how the economy performs (much) better under Democratic presidents—my friend Steve uses a few different rather familiar arguments to undercut the import of the facts imparted therein.
He claims first that presidents don't have any effect on taxes and such—that congress controls the purse strings. But he acknowledges at least:
Even though Reagan had a Democratic congress. So, can we stipulate to the fact that presidents at least predominate on tax policies? That, for instance, Reagan and Bush II cut taxes, while Bush I and Clinton raised them?
That the Reagan revolution has had a profound effect on tax levels for the last twenty-eight years?
And proceed to look at how those actual economic actions have played out, empirically?
Back to my previous post: the empirical results are clear.
1. I'm not arguing away deadweight losses (see below). That's a straw-man argument.
2. These are not not cherry-picked results about this year or that year, this administration or that administration. They're big-picture, long-term views, and as such they're the best indicators we have from which to draw conclusions. Add to them the many multi-decade cross-country analyses detailed in my previous posts.
These are the best long-term, big-picture facts we have.
Dropping down from that big empirical picture to a particular aspect of theory: deadweight loss. It exists, or course, but not in isolation. Mankiw's discussion in Chapter 8 of his textbook rather conveniently ignores (at least) two things.
1. The positive effects of government spending (which of course is dependent on taxes unless you're a Republican)—particularly investment spending. As a big champion of "dynamic scoring," it seems hypocritical for Mankiw to ignore an obviously huge effect, while clamoring to consider its opposite effect.
2. In his sidebar, The Deadweight Loss Debate, Mankiw takes an approach that's common among right-wing economists. He details the mechanism of the substitution effect at length, but completely ignores the income effect (among others). This heavily tilts the rhetorical scales toward an elastic labor supply and a high deadweight estimate.
I say familiar because I had a lengthy email conversation with a Cato economist recently, and despite repeated queries, couldn't get him to even acknowledge that the income effect exists.
This is like a climate scientist going on at length about increased humidity as a greenhouse increaser, but ignoring the reflective effect of clouds.
Likewise, right-wing economists enthuse about the invisible hand, but refuse to discuss the tragedy of the commons.
Centrist economists acknowledge and attempt to incorporate all these effects—income, substitution, government spending, deadweight loss, invisible hand, and tragedy of the commons (though of course they differ on their relative strengths and interactions).
Who is most likely to deliver an accurate model: the one who includes or ignores cloud reflectivity? Who's the most judicious, centrist, and reasonable?
Who's likely to deliver the best economic results? The one with a more complete, accurate model, or the one with a model ignoring major factors?
The empirical results are in.
Mankiw says that we should ignore all those messy empirics, and go with intuitively appealing theories—but only the intuitively appealing theories that support his a priori beliefs.
Everything we need to know, we learned in kindergarten—or Econ 10.
Clear-eyed economists have taken the field somewhat further—incorporating the full scope of economic theory, and giving credence to the actual "facts on the ground."
Their conclusions are clear: progressive policies work better—for everyone (except the very rich).
Put aside for the moment the current Republican presidential candidate's tax plan, which imposes higher taxes on 250 million Americans than the Democratic candidate's plan.
The simple fact is—as innumerable sages (at least since Adam Smith) have pointed out—spending is taxing.
Three choices (laid out very nicely by Brad DeLong):
Alexander Tabarrok also laid it out very clearly, back in 2003:
Better: the "Borrow and Spenders." Tabarrok is arguing for less spending. But the simple fact is, this is the government we've chosen. It can be tweaked (and in some areas severely pared) in very good ways, but the big picture is not going to change any time soon.
We have to pay for the government we've chosen, sooner or later.
"Starving the Beast" is delusional at best. At worst, it's just cynical vote-buying using imaginary "tax cuts."
Tabarrok is concerned that "taxes will have to rise 50 percent on a lifetime basis (assuming we don’t cut benefits severely)." That would boost our taxes to 42% of GDP (local, state, federal combined), up from the current 28%. That's two percent above the European average over recent decades. (We could attribute those extra two points to paying off interest from the Delay strategy.)
Europe is not going down in flames; life is good over there. People have time to spend with their families, health care for their children, and reasonable security from personal economic disaster.
And over recent decades (as I point out with annoying regularity), GDP-per-capita growth in Europe has been the same as in the US (after growing much faster in the post-war decades, despite much higher taxes).
The sad story: because the tax-cut pander has been so ingrained into Americans' psyches by decades of Reagan-revolution rhetoric—and because it has been such a succesful vote-buying strategy—Democratic candidates have to match—actually exceed—the Republicans to get elected. Their only wiggle-room—which Obama's tax plan embodies—is apportioning those taxes in a way that is truly pro-growth.
I thought I'd pointed this out in a previous post, but apparently not.
When you hear Republicans speaking negatively of America's extreme and growing inequality, it's only because it might hurt their brand and their electoral prospects.
David Frum is the poster child. In this week's NYT Magazine, he's nice enough make my point for me, explicitly and prominently. The title pretty much says it all.
"Dismissed" is right. But in what seems to be an attempt to accelerate the very decline that he bemoans, he goes so far as to say, in his final paragraph:
Adam Smith, the original poster-child, thinks otherwise (though admittedly somewhat grudgingly)—both on the basis of morality, and the general good:
Today's progressives are somewhat less grudging. They also believe that in a wildly prosperous society, it's in everyone's best interests for hard-working people to have some leisure time to spend with their families and friends, health care for their children, reasonable economic security, and some modest comforts and pleasures.
McCain’s TV commercials assailing Obama’s tax policy contain serious distortions, if not out-right lies.
On Aug. 8, FactCheck.org, published this report on a spate of new McCain TV spots on Obama and taxes.
That report followed one in July that raised similar concerns about
the truthfulness of the McCain attacks on Obama. Read it here: www.factcheck.org/elections-2008/the_32000_question.html
And today The Washington Post published this blistering editorial that comes as close as any Beltway publication can to using the word “lie” to describe McCain’s criticism of Obama’s tax policies. Read it here:
The Post editorial specifically mentions a side-by-side analysis of McCain and Obama tax policies by the non-partisan Tax Policy Center. Here is the link to the center’s updated comparison posted on Aug. 28: www.taxpolicycenter.org/publications/url.cfm?ID=411750
Both McCain and Obama would cuts taxes, but Obama’s tax cuts would be targeted to the middle class and partially offset by higher taxes on the wealthy (those earning more than $250,000).H/T: Economists for Obama
Republicans like to claim that they're the party of growth and prosperity. Even though all the facts say otherwise.
I've pointed out repeatedly that when you compare a lot of developed countries over decades, you see that lower taxes and smaller government don't result in faster growth. Tax cuts are an effective vote-buying political pander (who likes paying taxes?), but they don't create prosperity.
I've also been dismissive of most of the U.S.-only discussions (left and right), because they tend to cherry-pick brief periods that don't really tell us anything. (Look! There were tax cuts in Year X, and there was growth in Year X+3!)
You have to look at the big, long-term picture (viz) to see if economic policies generate long-term growth. Here are some long-term looks at Democratic versus Republican economic results.
Even the rich people did better under the Democrats.
|President||Time Period||Average Misery Index|
|Jimmy Carter||1977 - 1980||16.27|
|Gerald Ford||1974 - 1976||15.93|
|Ronald Reagan||1981 - 1988||12.19|
|George H.W. Bush||1989 - 1992||10.68|
|Richard Nixon||1969 - 1973||9.98|
|George W. Bush||2001 - 2007||7.89|
|Harry Truman||1948 - 1952||7.87|
|William J. Clinton||1993 - 2000||7.80|
|John F. Kennedy||1961 - 1962||7.27|
|Lyndon Johnson||1963 - 1968||6.78|
|Dwight Eisenhower||1953 - 1960||6.26|
We've now had almost thirty years to try out and evaluate the Reagan revolution. The results are in. It failed.
Not only did it fail to generate the stunning prosperity that was promised for that city on the hill, it left a large portion of the American people scattered around at the bottom. And it left our country in a massive hole of debt.
In both of the following figures, check out the inflection point at—surprise—1980.
Isn't it about time we hired "the most economically sophisticated presidential candidate in years, or maybe decades"?
The former chair of Bush II's Council of Economic Advisors, in his manifesto, Smart Taxes: An Open Invitation to Join the Pigou Club (pdf):
Okay well, not explicitly. And in any case he does contradict this sentiment in his "Growth of Nations."
But really, read the manifesto. He's right. Reading it is like hearing Dick Cheney slam defense contractors (yeah: as if...). Given where it's coming from, it's got a lot of credibility. In addition to its plain good sense and well-founded economics, both theoretical and empirical.
My friend Steve can't resist taking a somewhat tangential jab at me regarding corruption: Dems versus Pubs.
For those who aren't in the know, he and I have had this conversation already, and after looking at his evidence, I found myself hard-pressed to argue that in the legislative branch, over decades, the Pubs are necessarily worse than the Dems. Republicans have just been especially bad in the last decade or two. (By Steve's reasoning, because they held the power, as the Dems did in past decades.)
But the other point I made, which he's never replied to: in the executive branch over three decades, the Republicans are consistently far more corrupt, even when the Dems control congress.
He had pointed to four cases under Clinton. (Obviously, not much to find under Carter...the kind of squeaky clean politician that could never get anywhere in the Republican party.)
I pointed to thirteen cases under Reagan alone—with thirteen convictions/guilty pleas. Even if you discount the four Iran/Contra figures—they were not rent seekers, but zealots (though zealots are arguably far more dangerous)--you've still got nine for nine.
And you know this is just the tip of the iceberg.
It starts at the top...
What do they really think?
Caught on open mikes yesterday, three top political analysts—including two being long-time top Republican operatives—said what they really think about the Palin choice ("cynical"), and about McCain's prospects following that choice.
The money quote, from Peggy Noonan:
Peggy's right. On fivethirtyeight.com, Obama's odds of winning have gone from 60% to 70% in the last week. Other meta-analysis sites give him odds of 100% and 94.2%. (These last two: if the election were held today.)
Call it a convention bounce if you will, but lots of people are calling it the Palin bounce. As Nate Silver at 538 has pointed out, Palin only rallies the base—she won't convert independents and disaffected democrats. And the ever-shrinking base won't win it for them this time.
Noonan tried to walk back her (accurate) opinion by retroactively adding spin to the top of her WSJ OpEd (which had said exactly the opposite just hours before she was caught on tape). But her explanation (Paraphrase: "I meant that the era of Republican dominance is over") doesn't make any sense in the context.
Decide for yourself: Here's the full open-mike transcript, from TPM, where you can also hear the conversation. Speakers are NBC's Chuck Todd, Republican strategist Mike Murphy, and Peggy Noonan (best known for her speechwriting for Reagan and Bush I).
Up next, one man who's already convinced and he'll us why Gov. Jon Huntsman.
Peggy Noonan: Yeah.
Mike Murphy: You know, because I come out of the blue swing state governor world: Engler, Whitman, Tommy Thompson, Mitt Romney, Jeb Bush. I mean, these guys -- this is how you win a Texas race, just run it up. And it's not gonna work. And --
PN: It's over.
MM: Still McCain can give a version of the Lieberman speech to do himself some good.
CT: I also think the Palin pick is insulting to Kay Bailey Hutchinson, too.
PN: Saw Kay this morning.
CT: Yeah, she's never looked comfortable about this --
MM: They're all bummed out.
CT: Yeah, I mean is she really the most qualified woman they could have turned to?
PN: The most qualified? No! I think they went for this -- excuse me-- political bullshit about narratives --
CT: Yeah they went to a narrative.
MM: I totally agree.
PN: Every time the Republicans do that, because that's not where they live and it's not what they're good at, they blow it.
MM: You know what's really the worst thing about it? The greatness of McCain is no cynicism, and this is cynical.
CT: This is cynical, and as you called it, gimmicky.
From the Cooper Union speech. Emphasis mine.
One contemporary commenter described the speech's "sledgehammer logic." If you haven't read it (lately), do.
So-called conservatives continue to dig in their heels to this day, denying the very principles upon which our country was founded, in a centuries-long effort to turn back—and turn their backs upon—those very principles.
To again quote the speech that made Honest Abe the President of the United States:
I guess John McCain will do anything to (try to) win an election. He'll even saddle his country with a president who knows nothing about foreign or military affairs. While we're fighting two wars.
I'll just point to my previous post.
My 17-year-old daughter just pointed out to me something that's completely obvious, but that I hadn't realized, and that I haven't seen discussed much, at least in these terms.
Think about the words Hope. Change. Yes We Can.
Who owns 'em? I mean owns them? When you think Obama, what words come to mind? When you hear those words, who do you think of immediately?
No need to ask.
Okay now quick: What words does McCain own?
Update 8/26: There is actually one word that McCain completely owns:
Today's NYT/CBS poll gives the answer: Taxes.
67% of voters think it's "more important to provide health care coverage for all Americans" than to "hold down taxes."
I've searched all over but haven't found any discussion of why they announced Biden on friday night/saturday morning. The exception: some wildly worded Aha! comments on right-wing blogs saying that the Obama team was forced into the announcement by a leak. (The leak, presumably, being secret service arriving at Biden's place?)
It's common wisdom that friday night is the news dead zone, where everything gets announced that the announcers don't want discussed.
Not that this question matters much. It's just a curiosity about the Obama team's tactics.
I have no clue. But I'd be very interested to receive one.
Update 8/25: Via TPM, the Obama team says they were going to send the text at 8 am Saturday, but rushed it out after CNN got ahold of it. No, the 3 am text was not a jab at Hillary. That would have been just stupid, and these guys may be many things, but stupid is not among them.
I say somewhat presumptuously, even audaciously.
Andrew Sullivan points out:
Obama in Time:
I was always suspicious of dogma, and the excesses of the left and the right. One of my greatest criticisms of the Republican Party over the last 20 years is that it's not particularly conservative. I can read conservatives from an earlier era—a George Will or a Peggy Noonan—and recognize wisdom, because it has much more to do with respect for tradition and the past and I think skepticism about being able to just take apart a society and put it back together. Because I do think that communities and nations and families aren't subject to that kind of mechanical approach to change. But when I look at Tom DeLay or some of the commentators on Fox these days, there's nothing particularly conservative about them.
I pointed out recently the horrific rise in the federal debt caused by the much-ballyhooed Reagan Revolution (with only a brief respite under Clinton)—a debt built on the apparent belief among so-called conservatives that we can borrow and spend our way to prosperity.
It went from 34% of GDP in 1980 to nearly 70% today.
McCain doesn't just want to continue that decades-long decline. The man who Republicans want as president wants to hit the accelerator on the way off the cliff.
Projected Annual Federal Tax Revenues as % of GDP 2009–2013
Tax Policy Center Figures (PDF)
Per Stump Speeches
Per Campaign Staff
For reference, federal taxes have been hovering around 18% of GDP for decades. That has not been sufficient to fund the government that we've chosen. (Remember: every prosperous, advanced democracy besides Japan and Korea taxes far more than we do, with economic growth equal to ours.)
Point number one: McCain is talking out of both sides of his face. (Or his staff is talking out of one side for him.) Which is he actually proposing or promising—16%, or 17.6%?
That 1.6% may not sound like much. Just a little semantic difference. But $228 billion in additional debt—every year—definitely does. $350 billion—the difference between McCain's (stump speech) plan and Obama'sreally does.
That's what he's standing up there and promising—to further indebt and impoverish our children and great grandchildren.
How do these people dare to call themselves conservatives?
Hat tip to DonPedro at Economists for Obama for highlighting these stats the latest TPC report.
Because, the following seems very odd to me.
According to Steve Clemons at The Washington Note, the Obama campaign is either ignoring Clark or actively putting him at arm's length—he's supposedly not even attending the convention.
Odd because: Clark's clearly a Very Big Democratic Asset, and what Obama describes as one "inartful" comment doesn't change that.
And the Obama campaign certainly knows how to field their assets. They might not play him up a lot, but ignoring him or telling him to crawl in a hole? Doesn't make sense.
All of which suggests to me: an incredibly well-executed head fake.
But whaddo I know? I'm an inveterate wishful thinker.
Wishful because: I cast my mind forward two days, two months, and I imagine the campaign atmosphere with any of the first-tier VP prospects. What I experience in my imagination: a dull, dead, same-ol'-same-ol' feeling.
Then I imagine the atmosphere with Clark in the game. Maybe it's self delusion, but the feeling is electric. Those two on stage together? Yow.
My wonderful friend and former business partner Steve allows as how maybe Obama isn't going to drive our economy into extinction after all. His route to that revelation, via a Mankiw post, puts aside that sage's other comment in the post:
[Obama quote:] Over the past decade, we've seen...hefty corporate profits, but a shrinking share of those profits going to workers.
Which can only be described as a spurious, specious, intentionally obtuse quibble, utterly unworthy of one so well-versed. (Okay, it could be described other ways; but I like my way.)
The key point here I think is that Obama, like every other important progressive leader, is totally on board the bigger-pie bandwagon. (Think: Clinton. Rubin.) And they have some seriously good ideas about how to make that pie bigger while at the same time giving more people (in America and worldwide) a place at the table—actually making it bigger because the table's bigger and there are more seats. (For some of the best of that thinking, run don't walk to read everything by Lane Kenworthy. Don't be lazy; read his books.)
By contrast, the leaders on the right cling to a single, childishly simplistic faith-based prescription: cut taxes and make government smaller. Damn the evidence, damn the experts, and damn the consequences.
When you do find right-wingers rather reluctantly calling for more equity (i.e. Jim Manzi), they do so not because they think it promises a better future, or because they envision any kind of win-win, all-boats-rise, non-fixed-sum, bigger-pie solutions in that direction, but because they're worried that their brand is eroding. They're scrambling to dole out dollops to the downtrodden in some kind of lèse majesté, latter-day inversion of droit du seigneur. (Okay, sue me for florid alliteration; I deserve it.)
The "cut taxes" pander has been a very effective method of buying votes and power for decades. But it's not working so well any more.
Here’s the best laid-out presentation I've seen, from the Washington Post. Sort of speaks for itself.
Hat tip to Monte Asbury.
Jim Manzi was nice enough to drop me a note in response to one of my comments, and he pointed me to his National Review piece, "A more equal capitalism: preserving the free-market consensus." I ended up writing some lengthy responses, and not being one to waste perfectly good copy, I decided to post them here.
Thanks very much for the pointer. I'm delighted to see a right-leaning opinionator saying that we should be thinking about prosperity and equality--that there's lots we can do to promote both. When I hear that on the right, the tone is usually one of somewhat grudging acknowledgement of the need for some equality bolt-ons. (The best of the left, OTOH, embraces both wholeheartedly, and in a unified way, trying find paths and policies that can achieve them in tandem.) Your piece is a nice exception--a perfect example of where we can find common ground and agreement.
Responses to random bits:
It is hard to exaggerate the strength of the U.S. competitive position in the world economy in June 1945
So true. Damn I was lucky to be born in America in 1958.
As you point out though not exactly this way: In the ensuing 25/30 years (albeit with a huge amount of US aid and supported by US-incepted institutions [is incept a verb? don't think so...]), European real GDP per capita went from less than 50% of the US to 75% (OECD data), while they simultaneously built the social support systems that are supposed to be so debilitating to growth and prosperity. Counterarguments: It's been stuck around 75% ever since. (Countercounter: it hasn't lost any ground.) And, the more-rapid growth '45-'78 is probably largely attributable to the catch-up effect--technology transfer, capital infusion, etc. But the high taxes didn't prevent it. (Or are we suggesting that without those taxes, Europe would have kicked our asses?)
over the past 25 years the U.S. has reemerged as the acknowledged global economic leader. Economic output per person is 20 to 25 percent higher in the U.S. than in Japan and the major European economies, and the U.S. economy dominates in size and prestige.
"Has reemerged as the acknowledged global leader" is quite a statement, and I find it hard to support. (Though we obviously are and have been the leader since World War II.) By your chosen measure--U.S. GDP per capita compared to other developed countries--the results are pretty ambiguous. There have been big swings, but compared to Europe the 26-year trajectory starting in 1980 (the end of Europe's long catch-up period) is flat:
(Interestingly, OECD data shows far less volatility in this graph.) Asia's Per-Cap GDP has never broken 4% of the US's, but that ratio's been skyrocketing since the late eighties. Yes, we've kicked Japan's ass. But it's hard to argue that it's attributal to American supply-side policies...
Overall global economic dominance, as measured by share of world GDP, is also ambiguous, especially regarding presumed causes and effects:
As for growth in America's "prestige," check out Pew surveys. Over the last seven years at least, they show precipitous decline throughout the world. The only places where America's president has been warmly cheered lately are in Albania (thanks to what Clinton did) and Israel.
Absolute income equality, a.k.a. communism, is a poor goal, but if inequality becomes sufficiently extreme it undermines the social support required for a democratic and capitalist society to flourish.
Right, I understand your need to put in that caveat. Nobody's suggesting that CEOs and professors be put on collective farms.
Question: does this extreme inequality also slow long-term growth? The econometrics I've seen suggest a small positive correlation—barely or not statistically significant—between inequality and growth in developed countries. So it's hard to say; I've seen nothing that analyzes today's rather extreme situation, for which we have no real precedent in modern, developed economies. But looking back on the small six-figure inheritance that gave me the courage to go entrepreneurial without risking my kids' futures (or ignominious, debilitating failure), I can't help but imagine the power of tens of millions of naturally entrepreneurial (native and neo-) Americans given a stable springboard from which to leap. I talked about that in Wealth and Innovation: The Freedom to Do Cool Shit.
it's generally not a good idea to keep pulling bolts from an airplane in mid-flight just because it hasn't crashed yet.
The Democratic party has never assimilated the need for an increasingly market-based economy, so their "solutions" are a recipe for decline....How do we continue to increase the market orientation of the American economy
I think a better description: Democrats have never accepted the belief that all market-based solutions are a priori better, or that a headlong trajectory toward purely market-based solutions is good for the country or the world. That doesn't mean they don't believe in market solutions and their power to increase prosperity. Just one example among hundreds: The Pro-Growth Progressive by Gene Sperling, head of the National Economic Council under Clinton. These Democrats (count me among them) are in favor of the very kind of growth-and-equality initiatives that your article is calling for.
Your language suggests that "the need for an increasingly market-based economy" is a given, which simply needs to be "assimilated." Given our national economic performance since 1980, a lot of reasonable people can very reasonably question whether that is a given. (Krugman gets at least one thing right:: markets "should be seen as a tool, not an object of religious devotion.")
"Increasingly" and "increase" here, is I think the sticking point. Why not "maintain and manage"? It's a far more "conservative" position.
A reasonable common goal: harness the natural powers of the market (the things that the market is good at) and the natural powers of government (i.e., setting and enforcing the necessary rules, and providing common goods that the market won't provide)--an ox-team pulling in tandem. (Though they sometimes pull in different directions--that's exactly what we want to solve by judicious use of reins and occasional whips.)
There's no evidence that government-imposed constraints are, a priori, any worse than market-imposed constraints--any more than natural selection is in some way superior to artificial selection (i.e. breeding) just because it's "natural." I wrote about this in Lane Kenworthy's Big Idea.
There's plenty of evidence, of course, that government-imposed constraints/incentives are sometimes/often bad, at least in their sum effects. But the same is obviously true of market-imposed constraints/incentives. Enron. Moody's! Your invocation of international institutions as one cause of America's post-war prosperity is spot on; ditto for the SEC and the Fed, and the Consumer Product Safety Commission. (And tangentially, I'm personally very fond of the National Parks.)
As we have seen in the private economy, only markets will force the unpleasant restructuring necessary to unleash potential.
Simply not true, but it's mainly that your case isn't stated right. See above. See the SEC, and your SEC-like proposal for education reform. Good stuff! (And don't get me started on schools of education--my ex-wife went to one albeit some decades ago, and described a class on "The Ten Ps of Pedagogy": a week on Punctuality, a week on Preparedness...) It's true that markets have far more power to effect huge change. But the government can exert the force that causes them to do so, and do things that they won't do under their own direction.
It's important to leave behind the knee-jerk gag reflex for regulation (while keeping a judicious eye on its net effects—and on mixed metaphors too). Planning and direction is not the same as the state owning the means of production. ("Central planning" is hate speech on the right, but we do all approve of the executive branch having an "economic plan," right?)
Going all the way back to the comment I left on your post, I hope you'll give real consideration to my posts on tax burden vis-a-vis growth.
Twenty-nine of the thirty OECD countries--the rich, succesful, modern economies--tax between 27% and 50% of GDP. Only four tax less than the U.S.: Greece (27%), Japan (27%), South Korea (27%), and Mexico (21%). None is exactly a model for U.S. emulation. Some of those on the high end (think: Scandanavia) arguably are.
At 28% of GDP, it's not insane to wonder whether our current tax base has us teetering on the bottom end of the range in which a modern, stable, developed society can prosper and thrive.
If you haven't already, take a gander at this post, where I point out that far better-credentialed souls than I agree with me regarding taxation and growth. The consensus of the data is pretty resounding: in developed economies in current taxation ranges (25-50% of GDP), tax burden and growth rate don't correlate.
Put that shibboleth aside, and we can start having really interesting and productive analysis-based conversations about *which* taxes, how much of each, how much in total, etc.
Thanks again for writing, and thanks for listening.
In his NYT Op-Ed today, David Brooks makes a very good point:
McCain has infinitely better grounds than Obama to run as a do-what-it-takes reformer. He has a long record of taking on not only the other party, but his own.
Case in point: McCain voted against the farm bill, a bill that's uniformly vilified by everyone except the legislators who vote for it, and the lobbyists who cause them to do so. Obama voted for it.
But as for the title of the piece, "Talking versus Doing," it's not clear that McCain is quite the paragon that Brooks suggests. Brooks quotes McCain, for instance, using words that make my heart sing:
“In all my reforms, the goal is not to denigrate government but to make it better, not to deride government but to restore its good name.”
That's the right contra-Reagan message--government is not the problem, bad government is the problem. He's singing the hymn that Obama should be owning. But McCain's proposed tax cuts--equal to total nondefense discretionary spending--say something very different: that bleeding the beast and further eviscerating our government is the answer to our problems.
McCain also makes very nice sounds about multilateralism in foreign policy. But his specific proposals suggest a continuation of policies that have resulted in the greatest decline in American power in living memory.
But I have come to believe that large swathes of today's conservative movement truly are hateful.
He calls it a "revelation" for him.
He's surprised. I'm stunned.
Assignment: compare and contrast:
Rush Limbaugh. Sean Hannity. Anne Coulter.
Jon Stewart. Stephen Colbert. Al Franken.
This is a candidate who does not merely speak as a Christian. He acts like a Christian.
Well, she didn't quite say it. But what she said said it.
I've been banging my spoon on the highchair about this for weeks, and I'm happy to say that Nancy Pelosi finally came out and agreed with me.
"If the votes of the superdelegates overturn what's happened in the elections, it would be harmful to the Democratic party."
"It's a delegate race," she said. "The way the system works is that the delegates choose the nominee."
The superfluousdelegates will never override the pledged delegates. And Hillary can't catch up on pledged delegates.
Obama is the presumptive nominee. He's in the general now.
Time to start acting like it.
I actually mean no disrespect to my preferred candidate, or to Hillary, neither of whom who is anything like stupid. Just misquoting Carville.
2. As I pointed out yesterday, that there's no way she'll get a lead in pledged delegates.
3. Obvious: There’s no way the superdelegates will override both of those popular mandates.
So Senator Obama, please just ignore her (politely). McCain’s the man. His unremitting campaign against you (he only mentions Hillary out of habit, grudging respect, and desperate hopes that she might beat you) puts you right where you want to be: as the presumptive nominee.
Use it. Turn all your guns (and charm) his way.
Once you do that, unless things change radically between now and November (ya never know for sure...), it’s over.
The nightmare, the Reign of Terror, will finally be over.
It may seem amazing with all the analysis out there, but I had to assemble these basic facts on non-super delegates myself.
Absent a pop-vote anomaly or an Obama meltdown, it's over.
Obama (and all the rest of us): Time to go after McCain and (sadly) ignore Hillary.
If he wants to look presidential (or at least nominational), that's the ticket. It’s also his best strategy for the primary.