Competing views

The economist Dean Baker examines a WaPo piece and concludes that the WaPo is in complete agreement with his liberal Keynesian economic theories, but the WaPo doesn't appear to want to admit that.

The WaPo piece on the slow economy at first agrees with the liberal Keynesians and says: "Many Democrats say the economy needs more stimulus." Yee-hah to that. Very sensible. But then the piece sets up the counter-point: "Business lobbyists and their Republican allies say it needs less regulation and lower taxes." But then they go even further and say: "But here in the heartland of America, senior executives say neither side's assessment fits." So what evidence does the WaPo present to bolster any of the sides?

During the first half of this year, capital expenditures by business have been a bright spot in the economy, growing at more than a 20 percent annual rate. But executives say little of this reflects expanded capacity. They say firms are spending primarily to replace equipment they had held onto longer than usual last year to conserve cash.

Okay, this makes sense given the first two sentences: "Corporate profits are soaring. Companies are sitting on billions of dollars of cash." But hmm, why are business capital expenditures no longer "a bright spot in the economy"?

The piece then runs through the tale of Brook Furniture Rental and how Brooks is reacting to slow consumer demand by investinng much less. Okay, this is in complete accord with what liberal Keynesians are saying. Next, the piece examines attitudes in the "executive class in the Chicago region" and finds them sour and grumpy over the proposed expiration of the Bush tax cuts (That did very little to boost the economy in the first place*) and uncertainty over the Affordable Care Act. Key point?

None of the executives interviewed linked a specific new government initiative with a specific decision to refrain from hiring.

Finally, an interview with the CEO of the Illinois Tool Works concludes

More fiscal stimulus "might help make things a little better for a couple of quarters, but I'm not sure it would get at the underlying economic issue," Speer said.

Soooo, fiscal stimulus is lacking only in that it's not a permanent solution, but in the piece, Speer offers no indication of what the US's long-range financial problems are and thus, no idea is presented as to what the long-range answer might be.

Bottom line of the piece: The liberal Keynesians are absolutely correct and the other two groups "Business lobbyists and their Republican allies" and senior executives in the heartland of America, don't have any ideas to counter those of the liberal Keynesians.

*From a 2002 piece examining the impact of the 2001 tax cut:

...a new study by the President's Council of Economic Advisors, which reportedly shows that the tax cut package passed last year substantially reduced the severity of the recession. It is worth noting that the main stimulative impact of the tax cut that went into effect last year was a $300 per worker income tax rebate. This rebate was put in at the insistence of Congressional Democrats, not the Bush Administration, and was derived from a proposal that came from its Progressive Caucus.

The total cost of the tax cut: $1.35 trillion. Total spent on the $300 and $600 checks: $38 billion. So 2.81% of the 2001 tax cut did the major part of the work in providing the economy with what little stimulus it got. As Paul Krugman points out, the stimulative impact of the Bush tax cuts on employment was awfully minimal. The 2001 tax cut doesn't appear to have affected employment at all and the 2003 tax cut might, possibly, at best, have had a delayed effect.

Just hafta respond to this

Second comment down on a piece in the Inky today.

Posted 08:08 AM, 08/13/2010

taxmancometh

As a matter of fact, let me save the LWNJ's some of the trouble. "Sarah Palin is a lunatic".¹ "Where were you when Bush was President"? (we were right here protesting deficit spending)² "Most of the people in the TEA Party want smaller government but they want their Social Security and Medicare, right?" (that they were FORCED INTO BY LAW - NOT VOLUNTARY, and PAID INTO THEIR ENTIRE LIVES and and yes, they want THEIR money back AS PROMISED)³.....did I miss anything? Help me out here LWNJ's⁴. Oh yeah, I forgot to mention "Cheney started the Iraq War"⁵ and "Bush is a Nazi"⁶. "(even though this was off topic) AND "The Republicans are responsible for all US Debt!!!"⁷ (even though they only controlled the House of Representatives for about 1/3rd of the time since 1921.)⁸ There. Now even RightWinghypocrite doesn't have to post. I think that about covers it all! Have a blessed Friday the 13th!

1. I left the comment:

Posted 10:52 AM, 08/13/2010

rich2506

taxmancometh: your analysis is largely correct, but I don't think anyone on the left characterizes Sarah Palin as a lunatic. I think our view is that Rush Limbaugh, Ann Coulter and Sarah Palin all use the term "half-black" to describe the President. Limbaugh and Coulter use the term because they're hard-core racists, but I don't credit Palin with the smarts to know what the term means.

As of 9:00pm, no one had responded to my assertion, even though there were seven other comments afterwards.

2. Sure, okay, I'll take the guy's word for it that he and a few other lone, isolated conservatives protested against "Dear Leader" Bush's excessive spending. Not sure if he has any opinions as to Bush's tax cuts, but the public at the time was pretty underwhelmed. They tepidly supported the cuts, but accurately saw that only the upper income brackets would really benefit from them.  Big problem with the guy's thesis: The Republican Party as a whole and conservatives in general didn't have an articulated problem with Bush's excessive spending. Certain individuals may be able to claim they opposed that spending, but they can't point to any actual political movement of any significance that agreed with them at the time. Progressives just don't really care about "excess" spending and a Kaiser Family Foundation study of Medicare Part D didn't uncover any strenuous opposition, even though it found a pretty strong feeling that the program was duplicative and unnecessary. A blogger suggests that the Medicare Part D program eventually became popular because it was a "no pain, all gain" program, but even then it took two years for the public to warm to it.

3. Hmm, okay. People want promised benefits from programs they've paid into. Just like if I paid into a 50-year Missile Defense program (I count the period between the 1973 ABM Treaty and Reagan's 1984 revival, called "Star Wars" as an "on-spec" period) with my taxes, I'm going to be annoyed that this program still hasn't produced tangible results after a half-century of working on it! Heck, that strikes me as just plain thievery by a bunch of swindlers!

4. LWNJ refers to Left Wing Nut Jobs.

5. Not quite sure I'd agree with that. The Iraq War started because A. The Bush Administration as a whole wanted Iraqi's oil, B. Democrats were frantically calculating whether Iraq really had WMDs and decided they'd beter play it safe and assume that Iraq was indeed a deadly threat to the US and C. Our press corps was utterly broken and completely failed to fulfill its' proper function. That's why the Alternative Media, then with technological progress, the Left Blogosphere, or as it's known today, the Netroots, was born.

6. Nah, calling Bush a Nazi improperly glamourizes him. That's like saying Bush communicates directly with the Devil. I prefer to think of Bush as bragging of all of his evil misdeeds to a minor subordinate of the Devil. In response, the suburdinate passes on the Devil's "Attaboy!"

7. That's an entirely accurate evaluation and the blame traces back to Ronald Reagan, who

promised something arithmetically impossible: to increase military spending, cut taxes, and balance the budget. He kept the first two promises, delivering the largest peacetime military build-up in American history, and cutting taxes massively, mostly for upper-income households.

The extra spending the current President has engaged in and the reduced tax receipts that constitute Obama's extra additions to the deficit are a direct result of the near-depression that began in late 2007. But if there's an economic crisis today, it comes from the deficit scolds who insist on balancing the budget at the expense of jobs for those who need them.

8. They controlled it for the last six years of Clinton's term and the first six years of Bush's term. Clinton was interested in lowering the deficit and so the deficit went down. Bush couldn't have cared less and so the deficit exploded. With conservative "Blue Dog" Democrats and the Republicans together constituting a majority and the Presidency and its veto pen in Bush's hands from 2007 to 2009, which party had the majority in Congress just wasn't a terribly relevant measurement.

Oh, and my response to the piece is:

The Tea Party represents something new? Hardly. The Tea Party is a group of the old Bush dead-enders with a few extra hangers-ons and people like the Log-Cabin Republicans included, i.e., people who don't understand that the Republican Party loathes them. The group was pulled together by astro-turf organizations as an anti-Democratic Party group, so while it's entirely correct to say that racial hatred was never the primary motivation behind the Tea Party, it's also entirely correct to refuse to recognize the Tea Party as a genuinely grassroots phenomenon.
It's all very fine and well for Tea Party members to say that they believe in small, limited, cheap government, but from Ronald Reagan on, no one in the Republican Party has ever explicitly disagreed with this. They just never actually carried out anything along those lines. Is there even the slightest chance that a Tea Party in power will do so? No. They'll just run headlong into the same problems that the Republican Party has long since been aware of.

So there was a statement from a later comment that "The message of the Tea Party movement is: free people and free markets, Constitutional rule of law, first principles, spending restraint, limited government. This life-affirming, traditional message resonates with the vast majority of Americans."

I and other progressives agree with the commenter as to the value of the "Constitutional rule of law," but as to "free markets, ... spending restraint, limited government"? Nah. Buncha worthless conservative/libertarian nonsense.