"If you believe skills are the problem, there’s lots you can do about that. You can try to train people, you can invest in education, you can help people move from places where their skills aren’t valued to places where their skills are valued. What you wouldn’t do is sharply cut Pell grants and career counseling centers. Nothing about the skills-based explanation encourages inaction. But there are a lot of people who prefer inaction and conscript the skills-based explanation to justify it. Telling the two groups apart is important."
He went on The Kudlow Report and wonders Is disagreement really so hard to explain? "You can disagree with Mundaca’s take, but you don’t need to ask Dr. Strange to summon a demon in order to interpret it. Bloomberg Business Week — not exactly a publication known for its aggressively anti-business leanings — ran a cover story this week making almost exactly the same argument. In that cover story, a dozen respected tax economists provided support for the position. But that’s not how Kudlow saw it. “I believe they want to punish international business,” he said. A few minutes later: “I’m suspecting that Team Obama just doesn’t want to help the foreign earnings of companies.” And then: “I think they do have an ideological bias against business.”"
"Somehow, people find it preferable to think the president of the United States a socialist, Marxist or Kenyan anti-colonialist than a guy who agrees with Mitt Romney’s 2005 health-care opinions rather than Mitt Romney’s 2011 health-care opinions. I won’t even get into Glenn Beck’s take on the administration’s motivations, as even on the Internet, I don’t have the space. But you end up with these winding, esoteric theories to explain perfectly common policy preferences and political decisions. It’s really weird."
It's also really frustrating. It's why the right has driven me so far away from them. You try to talk about improving health care in the country and you get "death panels" from their VP nominee and echoed by everyone else. How about this, G.E.’s Strategies Let It Avoid Taxes Altogether, can't we agree that is wrong?
But no we have to go through dances like this.
Remember a few weeks ago when Boehner said "Over the last two years since President Obama has taken office, the federal government has added 200,000 new federal jobs and if some of those jobs are lost in this, so be it." Well the 200,000 number was wrong but there's more to the "so be it".
On March 15th, Speaker Boehner Urges Obama Economic Team to Review New JEC Study Showing Spending Cuts Support Job Growth. Here's the pdf, it's 20 pages.
I read the whole thing and it refers to various economic papers by people I haven't heard of it. There are three pages of footnotes. Still it was easy to get the gist. It claims to be arguing against a Keynesian view in favor of a neo-classical view in that "spending reductions trump tax increases" and that "Consequently, fiscal consolidation programs that reduce government spending decrease short-term uncertainty about taxes and diminish the specter of large tax increases in the future fro both household and businesses." Of course, a Keynesian stimulus would increase the debt and make things worse.
It gives some examples of what to cut:
"1. Decreasing the number and compensation of government workers. Generally, government workers are well-educated and have significant skills. A smaller government workforce increases the available supple of educated, skilled workers for private firms, thus lowering labor costs.
2. Eliminating agencies and programs.
3. Eliminating transfer payments to firms. Generally, government provides transfer payments to firms to entice them to engage in otherwise unprofitable and unproductive activities. If eliminating transfer payments causes firms to cease these activities, there are immediate gains in efficiency. For example, the United States could increase efficiency by eliminating subsidies for Amtrak or ethanol.
4. Reforming and reducing transfer payments to households. Reforming major programs of transfer payments to households, such as government pension and health insurance benefits for the elderly, to make them sustainably solvent in the long term increases the credibility of fiscal consolidation plans. Even if current beneficiaries are exempt from any change, the reforms are phased in slowly, and any short-term spending reductions are very small, the credibility of fiscal consolidation plans will be enhanced. Moreover, reforming government pension and health insurance benefits for the elderly in the future will induce younger works to increase their current saving, to work more, and retire later, thus boosting real GDP growth."
Seriously, that's what it says. We should layoff government workers because that will add more people looking for jobs in the private sector which will lower labor costs. So not only will more be unemployed but those that are employed will be paid less. The idea is that businesses will use the savings to hire more workers. Does that at all sound likely? Back to the real problem, there is no demand because 9+% of the population is unemployed and those that are employed have watched their home prices collapse which means their second mortgages are a real problem, so they aren't spending.
And the second item is still amazingly vague as to which agencies and programs to cut.
And third, notice their suggestion for eliminating subsidies to industries are Amtrak and ethanol. I'm fine with cutting ethanol and would add other corn and soybean farmers, but what about the billions we subsidize the oil industry, with the most profitable companies around? Or remember GE that we just talked about? How about hedge fund managers who pay capital gains taxes for their income?
And the last, that's all double speak for cutting medicare and social security. Because the real problem is that people have to save more and work longer. I liked Reich's solution to social security, raise the ceiling on income subject to the Social Security tax from $106,800 to $180,000 to balance out the income inequality of the last 30 years.
I said there were a lot of papers referenced that I didn't know and didn't look up. Fortunately others did. Klein wrote:
"But to give the GOP’s report a bit more credit, its argument is that in the mid-1990s, a number of small, European nations (and Canada) sharply cut government spending and saw rapid economic growth afterwards. The problem, as the International Monetary Fund details in this review (pdf) of the austerity measures attempted by developed nations, is that these countries understood that cutting government spending would kill demand, and so they compensated with policies that would keep demand strong. Those policies were 1) really aggressive efforts on the part of the central bank, 2) devaluing their currencies, and 3) living in the mid-1990s, when the global economy had one of its best-ever decades. Republicans oppose policies that would lead to #1 and #2, and 2011 is a very different moment, in terms of global demand, than 1994." He goes on to give the report a little credence but admits that's not clear.
Krugman is harsher.
"So, for this to work you first have to have a downward-sloping demand for labor as a function of the nominal wage rate. There’s no reason to believe that’s the case: in a liquidity trap, falling wages probably reduce the demand for labor, because they worsen the burden of debt. And even if you somehow bypass this objection, the argument is still nonsense: it says that by reducing demand, you cut the price, which increases demand, which means that you end up selling more than before. Um, no — that’s the kind of answer that, in Econ 101, has you suggesting that the student get special tutoring. Given all that, it’s hardly worth mentioning that they’re appealing to the thoroughly refuted doctrine of expansionary austerity."
In that last link Krugman back in October referred to the IMF report that refutes one of the main studies in the GOP report. The authors respond here. But in the end, all they are trying to argue is that "that spending cuts are better than tax increases to reduce a budget deficit." I'm willing to accept that.
In fact I'm pretty sure that when Obama got into office he said he'd cut taxes on all but the richest 1% and even then all they want to do is let the Bush tax cuts expire back to their levels in the 90s. It's very clear Democrats are not saying lets raise taxes so this is all a strawman. Both sides want to cut spending. One wants to cut PBS, Amtrak, education, and even though they won't say it, social security and medicare. The left would like to cut defense spending, lower health costs, and end giveaways to big corporations. Now if only we could convince our elected officials to do that.
But the elected GOP just want to cut spending. They think austerity is the way to cure the economy. They cite this study with it's examples of European economies in the 90s that Klein mentioned above. They didn't cite Japan which is what we're most like. And they didn't cite current European austerity measures, which aren't working. "Since [June 2009], the interest rate on Irish debt has doubled; Ireland’s unemployment rate now stands at 13.5 percent...British growth has stalled, and the government has marked up its deficit projections as a result."
In fact unemployment is our problem. It's not just that workers are lazy it's that there aren't enough jobs. I'm remember a statistic that there were 3 unemployed people for every job opening. That's not quite right and I can't find it. I can find this which says the unemployment rate is about 9% while the Job opening rate is about 2%.
But no, the GOP wants to make more unemployed people now because that will help in the future. Sigh.
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