Ideology Before Facts

Everyone knows the economy is still recovering from the worst recession since the Great Depression, but here’s the good news; we know what works.  Research on the Obama stimulus package is in; the tax cuts did little to help the recovery while state fiscal relief and infrastructure investment did the most to boost the economy.  For the layman this means in a recession government spending works and tax cuts do not.

Conservatives want to argue that increasing government spending only crowds out the private sector and actually hinders the economy.  That just isn’t true.  As I have pointed out before the slow growth in the economy is due to a lack of demand.  This means people are not buying things and there are idle dollars sitting around. The “crowding out” argument can only be used during full employment when all resources are being utilized.  This is not our current situation.  Government is spending dollars not being spent; it is not taking away dollars from the private sector.

We know government spending works and it does not hurt the private sector, and we know tax cuts in a recession do not work.  So what does the GOP want to do? They want to lower taxes and cut government spending.  They are demanding these policies because Republicans want to (pre-maturely) shift the main issue from economic recovery to decreasing the national debt.  The problem is Republican proposals (the ones that cut taxes and reduce spending) actually increase the debt.

 

 

 

 

 

 

 

 

 

The GOP has become the party that puts ideology before facts. The Republican candidates’ plans solve neither of America’s biggest problems.  They want to decrease spending, which will hurt the recovery, and they want to cut taxes, which will have little impact on the recovery, but it will increase the national debt.

 

 

Is Money Speech?

If you have followed this election cycle then you know it is difficult to go a few days without hearing “Super PAC” this or “Super PAC” that.  I have written before about the devastating effects of the Citizens United ruling and resulting creation of these super PACs, but there is  legal reasoning as to why super PACs should be legal.  In the court’s view persons, including corporations and unions, should be able to contribute unlimited amounts of money to super PACs.  The court decided by limiting this right, a “person’s” free speech would be infringed.  So this begs the question: Is money speech?

(Before I begin I want to make clear this is not a discussion about whether or not a corporation is a person.  Although I do not believe a corporation should be entitled to the rights and responsibilities of people –  that is a different Supreme Court ruling. )

Before we can begin a discussion of whether or not limiting campaign contributions is an infringement on the First Amendment, we have to break down the First Amendment to the Constitution.  The First Amendment allows for the freedom of speech.  If we make that leap, and say that “money” equals “speech”, freedom does not necessarily mean unlimited freedom (i.e., unlimited money or campaign contributions).  First Amendment rights have historically been limited in many ways: we cannot shout fire in a crowded theatre nor can we say “bomb” on an airplane. Basically the courts have decided that if speech acts as a moral hazard to society then that particular speech is not protected by the First Amendment.

In other words, you cannot merely throw out the term “First Amendment” and logically conclude that every form of speech (or money) is magically swept under its magic cape.  If we agree that there are limitations on the First Amendment (which, once again, the US Supreme Court has withheld and imposed many times over the past two centuries) there is a strong legal argument against the Citizens United ruling.  By allowing corporations, unions and individuals to spend unlimited amounts of money for political purposes then we no longer have a democracy where each person has an equal voice and an equal say.  Instead we have a system where the rich have a disproportional amount of the political sway in Washington and on K Street while the average American is left virtually voiceless

If spending money to influence elections is deemed equivalent to “speech” and therefore entitled to unbridled protection under the First Amendment, an argument can be made that this type of unencumbered spending (speech), does present a moral hazard.  The Citizens United ruling has given a disproportionate voice to wealthiest Americans when it comes to influencing elections.  The rich have been getting richer and middle and lower class citizens have seen stagnate wages. Since the 1980s the top one percent has seen their income rise by 273 percent compared to around 45 percent growth in the middle class. Further, those middle and lower class individuals have not been given a fighting chance to become wealthier because America’s social mobility (the ability to go from poor to rich) is the worst among developed countries –see here.   So with the Citizens United ruling we now have a system where the already powerful now have more power and it is unlikely they will lose any of it.

Is it any wonder Washington caters to big business and special interest groups? Our politicians put these entities before the normal person.  I feel a system that allows for entities to give unlimited amounts of money to Washington while the normal person cannot even conceive of donating that amount of money is an unfair system. It is a moral hazard.  Just like you can’t shout fire in a movie theatre or say bomb on an airplane; corporations, unions and individuals should not be allowed to give unlimited sums of money towards political purposes.

Economists Agree…

I realize many times in my posts I say economists agree on this or disagree with this, and I usually never say who those economists are.  Well just a note on who those economists are; the main economist I get information from is Paul Krugman.  He is a professor of economics at Princeton, he writes a blog and a column for the New York Times and has won the Nobel Prize in economics. I also get a lot of information and ideas from Mark Thoma, a professor of economics at The University of Oregon.

The Refutation of the “Republican Revolution” – Part 4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Let’s just dig right into this one.  The attack on The Affordable Care Act as socialized medicine is a tired line by the right.  The thing is The Affordable Care Act simply mandates having insurance.  It is more about insurance than actual healthcare.  So it is not government run medicine. There are not going to be government doctors.  “Obamacare” is actually modeled off the Heritage Foundation’s healthcare plan.  It is a right-wing idea.  Also, why is socialized medicine bad? I would love socialized medicine. We are one of the few modern countries who do not have a single payer type system… and what’s the result?  We have higher costs with poorer results.

The other line of attack on the President is that he redistributes the wealth. The main way government redistributes wealth is through taxation, which is allowed by the Constitution.  The problem is the President hasn’t raised taxes! The right really wants to believe Mr. Obama has raised taxes but the thing is he extended the Bush era tax cuts and instituted the payroll tax cut. Just yesterday he put out a plan to lower corporate taxes. So, at what point did the President take money from the rich to give it to the poor?

Liberals hate guns! (sarcasm)  Now, yes Liberals believe in gun control more so than conservatives but they do not want to ban guns.  Too be honest there needs to be a balance on this issue.  No judge wants to abolish the second amendment nor does any judge believe any gun should be made available to any person.  The Supreme Court is supposed to be representative of the population, therefore; there needs to be judges on the bench who are not entirely pro gun

I love how Republicans deem the President as pro-illegal-immigration.  Fact: The President has deported more illegals per year than President Bush.  The criticism is just absurd.

Finally, the President is not engaging in class warfare! That is just a line made up by the right so they can deem a tax increase as divisive.  I’ve written on this issue before, here.

It’s the Economy Stupid, (On the Demand Side)

Some of my commenters have been saying we are stuck in this recession due to the President’s anti-business policies; claiming it is causing uncertainty in the business world. The problem is businesses are actually doing ok right now, the problem lies on the demand side.

Both business confidence and the stock market are back to pre-recession levels; what about consumer confidence…

Well it is still devastatingly low. The recession is not being driven by uncertainty among businesses.  The recession is being driven by a lack of confidence on the demand side. So how do you solve a lack of demand?  As Keynes has said all along, low aggregate demand can be spurred on by government spending.

The Refutation of the “Republican Revolution” – Part 3

 

 

 

 

 

 

 

This poster is interesting because the facts are true, but it’s presented in a misleading fashion.  It seems to blame the President for the problems in all these areas and it seems to disregard that Mr. Obama came into office at the pinnacle of the worst recession since the Great Depression.  The poster wants to convey Obama caused the mess we currently face.

First, the credit rating downgrade was mostly due to the debacle this summer when Congress decided to make raising the debt ceiling a controversial item. That controversy was brought about by ideological Republicans who felt raising the debt ceiling was not in the best interest of the country.

Second, the 8.3 percent unemployment rate is actually a good sign.  Yes, when President Obama came into office the unemployment rate was lower, but he came into office while the economy was crumbling. When he stepped into the White House the economy was losing 750,000 jobs a month and now the economy is creating thousands of jobs each month.  Also, it was not until June 2009 when the President passed his stimulus package and by October 2009 the unemployment rate began its downward trend.

Third, trying to blame one person for rising gas prices is just absurd.  Oil is a global market, and most economists agree the president (Republican or Democrat) has little effect on gas prices.  As an aside, under Obama we have decreased our foreign oil consumption.   The current increase in gas prices is being driven primarily by the problems in Iran. Like I said, global market not one person.

Fourth, the national debt has increased a lot under President Obama, but once again he came into office during a recession where demand was down, consumer confidence was low and banks were unwilling to make loans.  In these conditions there are two options, increase spending, like the President did, or use austerity measures, like Europe did.  Looking at the state of Europe I think the President made the right decision. Also, Bush came into office with a national debt of $5 trillion and left with a national debt of  $10 trillion.

Fifth, this one is arguably wrong.  We are currently only in 1 war, Afghanistan.  And unless you forgot, the big reason we went to Afghanistan was to get Osama and guess what… Obama got him.  Further, President Obama has removed our troops from Iraq (1 war down).  The third war against Libya was incredibly successful.  The President’s plan worked.  We helped rid the country of a terrible dictator with minimal spending and zero soldiers being sent there (2 wars down).

Sixth, yes the President extended unemployment benefits. How dare he help people during a recession?  He should have let them go hungry.

Finally, there has not been an annual budget, which is true.  However, President Obama has submitted budget proposals each year.  Congress just failed to approve them.  I’ll admit the Congressional Democrats are somewhat responsible, but it is not Obama’s fault. And is the poster really trying to purport the mess we are in is due to Congress failing to pass a budget proposal?  Also, there may have been an annual budget in 2008 but in 2007 and 2005 when Republicans had control of both houses no budget was passed.

Incredibly Interesting Story

 

 

 

The Refutation of the “Republican Revolution” – Part 2

Part 2.

 

 

 

 

 

 

 

 

 

 

 

This one just doesn’t make any sense; it is quintessential right-wing propaganda.  I think the message is the President has raised our taxes increasing the debt  by 1.8 trillion dollars.  Or maybe it is saying he has increased taxes by the amount of 1.8 trillion dollars, which is just odd wording. Regardless, the poster is trying to purport a tax and spend liberal who is making enemies.

This poster is confusing because the actual facts make its message meaningless.  First, let’s just be clear, raising taxes reduces the deficit not raise it.  Second, the President really hasn’t raised taxes.  He increased a tax on tobacco and he increased a tax on tanning beds.  This is actually smart because both of those goods are inelastic.  Meaning even as the price goes up the demand will not go down. So revenue for businesses will not decrease and revenue for the government will increase.  He also closed loopholes for big corporations, which is technically considered a tax increase.  The thing is these are ticky-tack tax raises and I highly doubt this is what the message of the poster is trying to convey.

The maker of this poster is far more delusional.  Raising taxes usually refers to raising taxes on individuals and corporations. And here’s where the poster just doesn’t want to believe facts.  The president has not touched the corporate tax rate. Concerning individual tax rates he actually decreased them.  The Bush era tax cuts were extended and he instituted the payroll tax cut.

So once again we have Republicans spouting their ideological beliefs based on no factual information.

The Refutation of the “Republican Revolution” – Part 1

While wasting time on Facebook I came across the Republican Revolution, which is a page devoted to spreading the conservative message.  Among other things the site puts out posters bashing the President, other Democrats and liberals in general. They are typically mean-spirited, misleading and factually untrue.

So I am dedicating this week’s posts to what I’m calling “The Refutation of the Republican Revolution”.  Each day I will choose one of the posters and explain its fallacies.

 

Part 1.

 

 

 

 

 

 

This one is not all wrong; he did lower taxes that is a fact.  However, Reagan may have said he was for small government but that is not what he practiced. He did engage in deregulation but overall he increased the size of government.  He increased government spending each year in office, he increased the national debt and overall he practiced expansionary budget deficits.

Carter Gets a Bad Rap

The Reagan revolution that began in the 1980s came to fruition due to the recession of the 1970s. The recession was caused by stagflation, which is when both unemployment and inflation rise simultaneously. (Just as an aside this temporarily ended the Keynesian revolution, which did not think rising unemployment and inflation was possible.)  For whatever reason President Carter is usually cited as responsible for the economic woes of the 1970s. In reality it was not his policies that caused the stagflation nor did it begin under his watch.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

These two graphs show both inflation and unemployment spiked at the same time, around 1974 and 1975, over a year before Mr. Carter even set foot in office. Further the stagflation was caused by policies put in place by President Nixon.  It was caused by too much expansionary monetary policy; in other words practicing too much Keynesian economics when it is not necessary.   Although Mr. Carter did not greatly improve the economy he tends to receive undeserved credit for causing the problem in the first place.