Senator McConnell Tells One Revealing Truth and Then Goes Back to Lying

Brian Beutler captures this from the Senate Republican leader:

“[T]he American people have never given us the kind of hammerlock on Congress that Democrats had during the New Deal, that they had during the Great Society, and that they had in 2009 and 2010” … In other words, just wait until we have a filibuster-proof majority and then we’ll make our move. It explains, by implication, why Republicans didn’t do more when George W. Bush was president to cut or phase out safety net programs through the filibuster-proof budget process. But if Republicans take over Congress and the White House next year, even with thin majorities, conservatives will be clamoring to streamline major changes to popular programs like Social Security and Medicare anyhow.

In other words, voting for Republicans means good bye to Social Security, Medicare, and even ObamaCare. Glad we cleared that up! But now the great lie from the Senator:

And the Democrats have had Congress, sometimes with whopping majorities, most of the time since the New Deal. And that’s a great disappointment — I think that’s the reason the country has the kind of debt and deficit that it has

Wrong. The government debt fell relative to GDP from the time of the Truman Administration to the end of the Carter Administration. It exploded under Ronald Reagan because of the great Laffer lie. Under the Clinton Administration we saw declines in government debt relative to GDP but the administration of George W. Bush threw that all away. And the great Laffer lie is the centerpiece of Mitt Romney fiscal plan. In case Senator McConnell has forgot, Reagan, Bush, and Romney are Republicans.

Ignoring Their Critics, Romney’s Economists Have Lined Up Their Next Spin

Brad DeLong had exposed the White Paper from Romney’s economic team (Kevin Hassett, Glenn Hubbard, Greg Mankiw, and John Taylor) to be a collection of things that don’t follow, things that are wrong, and things that are just plain false if not lies. Something tells me that the Romney economists are not going to rush out and acknowledge Brad’s many and excellent points. Instead we see Greg Mankiw show casing something John Diamond provided to the Romney campaign. Diamond claims that the Romney tax reforms will add 5.4 percent to GDP over the next decade. Contrast this prediction to what Brad wrote:

The CBO currently estimates potential real GDP at the end of 2022—what we would expect without policy changes to boost economic growth—to be $18.5 trillion real dollars. Current real GDP is $13.5 trillion. Applying HHMT’s lower-range growth numbers produces an end-of-2012 real GDP not $2.1 trillion higher than CBO projects but rather $0.6 trillion higher. $1.5 trillion of their claims thus arise not from faster growth of the economy’s productive potential but from an implicit—and unmotivated—assumption that under Romney policies aggregate demand in 2022 is equal to potential output, but under other policies it is not.

Interestingly, 5.4% of CBO’s $18.5 trillion in potential GDP would represent a $1.0 trillion improvement. But how does Diamond get there. He assumes a specific policy of tax rate reductions with tax revenue offsets (“base broadening”). His model also ignores any crowding-out effects which must mean that any failure to offset the rate reductions were paid for by cuts in government spending. Again, let’s turn the microphone back over to Brad:

Similarly, Romney has not even the outlines of a plan for how to reduce federal spending to 20% of GDP, or how he could possibly broaden the tax base to keep his tax cuts for the rich revenue-neutral. If you do indeed fear uncertainty about tax and regulatory policy, you need to vote against Romney as you would vote against the plague—and urge everybody you know to vote against Romney, and urge them in the strongest possible terms.

I’m sure Team Romney will tout the results of the paper from Diamond but something tells me that they are not going to be so willing to address the legitimate questions about whether their alleged policy proposals match the assumptions made in this paper. If they don’t – this is not a real policy debate. It is just propaganda dressed up to look like economics. Didn’t we see this movie back some 32 years ago?

Laffer’s Case for Fiscal Ineffectiveness

Laffer writes:

If you believe, as I do, that the macro economy is the sum total of all of its micro parts, then stimulus spending really doesn't make much sense. In essence, it's when government takes additional resources beyond what it would otherwise take from one group of people (usually the people who produced the resources) and then gives those resources to another group of people (often to non-workers and non-producers).

Brad DeLong does a nice rebuttal on the logic here so let me take up Laffer’s “evidence”, which includes a table and this discussion:

It worked miserably, as indicated by the table nearby, which shows increases in government spending from 2007 to 2009 and subsequent changes in GDP growth rates. Of the 34 Organization for Economic Cooperation and Development nations, those with the largest spending spurts from 2007 to 2009 saw the least growth in GDP rates before and after the stimulus. The four nations—Estonia, Ireland, the Slovak Republic and Finland—with the biggest stimulus programs had the steepest declines in growth.

Most economists who have examined the correlation between fiscal stimulus and real GDP growth show precisely the opposite of what Laffer claims here. For example, Estonia and Ireland were supposed to be examples of how austerity was supposed to be expansionary according to the right wing camp that Laffer belongs to. Of course, the 1st column Laffer’s table (government spending/GDP) is a horrible measure of fiscal stimulus. For example, the rise in this ratio for the U.S. was more from the recession itself and not fiscal stimulus.

White Paper on the Romney Economic Boom

Jon Ward reports that Glenn Hubbard, Greg Mankiw, and John Taylor joined with Kevin (DOW 36000) Hassett to produce white paper that should be fun reading for us of all:

Mitt Romney's campaign released a paper by four of its top economic advisers on Thursday to back up its assertion that Romney's tax reform and fiscal plan would create "millions of jobs," as an adviser earlier in the day had stated … "The Romney economic program will change the direction of policy to focus on economic growth," the advisers wrote. "Its pro-growth effects will work in two basic ways: It will speed up the recovery in the short run, and it will create stronger sustainable growth in the long run." The paper was less actuarial work with raw data and specific numbers, however, and more of an economic philosophy argument based largely on the premise that simply by undoing much of what President Obama has done since taking office, the economy would recover at a faster pace than it has been from the recession that began in late 2008. "By changing course away from the policies of the current administration and ending economic uncertainty, as proposed by the Romney plan, we expect that the current recovery will align with the average gains of similar past recoveries," the advisers stated. "History shows that a recovery rooted in policies contained in the Romney plan will create about 12 million jobs in the first term of a Romney presidency."

Past recoveries have relied on monetary expansion. I guess these four have not figured out we currently are in a liquidity trap. The bit about policies that are both good for the short-run and the long-run have been standard talking points from Team Romney for quite a while. To be honest – I still need to read this paper but before I do, let me tick off four such possibilities. The first two are proposals from the Obama Administration which have been stonewalled by Congressional Republicans: (1) accelerating public investment in infrastructure; and (2) using Federal revenue sharing to insure that state & local governments don’t cut public education. The other two rely on encouraging private investment, which is admittedly still low. We could ask the Federal Reserve to lower interest rates – oh wait, that liquidity trap thing again. Finally, Team Romney is doing its best imitation of Art Laffer saying that tax cuts for high income individuals will somehow encourage investment even as negative real interest rates have not fully succeeded. Isn’t this what the Reagan Administration argued some 30 years ago – which prompted the critique from one of the authors of this white paper that the claim was from “cranks and charlatans”. But let’s also take a read of this white paper and see if there is anything new worth considering.

Mixed Message on the Labor Front

BLS released its Employment Situation Summary for July. The payroll survey showed an increase in employment of $163 thousand but that unemployment rate rose to 8.3%. So what was the deal from the household survey? Actually the labor force participation rate fell from 63.8% to 63.7% so the small rise in the unemployment rate masks the fact that the employment to population rate fell from 58.6% to 58.4%. The household survey indicates that employment dropped by 195 thousand last month. So I’m sure the political hacks will have lots to debate on this news. But one thing is crystal clear – we are still far below full employment. This Administration and the Federal Reserve need to do a lot more in terms of stimulus. Of course the Republicans are proposing even more fiscal austerity. Go figure!

Who Has the Rosy Scenario About GDP Growth?

On Tuesday, Greg Mankiw gives this lecture to the Obama Administration:

Of course, the Administration's optimistic forecast feeds directly into its budget projection. If we get the slower growth that private forecasters predict, we will get less tax revenue and larger budget deficits than the Administration projects.

I was tempted to fire off a post yesterday taking perhaps a couple of different approaches. One approach might have been – we’ll let’s hope that the weak economy recovers faster than the private forecasters predict. But then I remembered that macroeconomy policy has been stuck in this dysfunctional nonsense leading to short-term austerity. The second approach might have been to scoff at the idea that anyone from Team Republican could toss this reality at a Democrat as it is Team Republican that gave us the Laugher Curve back in 1981. But to be fair to Greg Mankiw – he did not serve Reagan’s Administration and once called the Lafferites “crooks and charlatans”. He did work for George W. Bush, however, but let’s stick with the 2012 election. No one from Team Romney would ever overestimate economic growth – would they? I woke up this morning, however, to read this from Paul Krugman:

And the Romney people respond with deep voodoo, invoking the supposed fabulous growth effects from his tax cuts. And who could argue? Remember how the economy tanked after Clinton raised taxes? Remember how great things were after Bush cut them? Oh, wait.

Paul links to this:

“This is just another biased study from a former Obama staffer that ignores critical parts of Governor Romney’s tax reform program, which will help the middle class and promote faster economic growth,” Chen wrote in a statement Monday evening in response to the study by the Tax Policy Center released earlier in the day. “The study analyzes only half of Governor Romney’s tax program, ignoring the reforms that would make America’s corporations more competitive by moving from the highest corporate tax rate in the industrialized world to one that is comparable to our trading partners. And the study ignores the positive benefits to economic growth from both the corporate tax plan and the deficit reduction called for in the Romney plan. These glaring gaps invalidate the report’s conclusions."

Lanhee Chen omitted the fact that the other co-author was Adam Looney who served on Bush41’s team. But mull over the premise that a gigantic tax cut for the rich somehow leads to more economic growth because it allegedly reduces the deficit. This was exactly the Laugher nonsense that Greg Mankiw once attributed to crooks and charlatans. Funny thing – we haven’t seen Greg mocked this rosy scenario. At least yet. Greg? Update: Glenn Hubbard argues that a mix of more austerity with a few supply-side sprinkles will produce the following results:

the Romney reform program is expected by the governor's economic advisers to increase GDP growth by between 0.5% and 1% per year over the next decade. It should also speed up the current recovery, enabling the private sector to create 200,000 to 300,000 jobs per month, or about 12 million new jobs in a Romney first term, and millions more after that due to the plan's long-run growth effects.

Dare I say that Glenn must be drunk on the Kool-Aid.

The Lumpire Strikes Back!

"And you just arbitrarily publish email exchanges w/ people you don't know? I'll remember that. What exactly is your beef w/ me? If you wrote clearly, maybe I could follow."

(Apparently, she forgot.)

Excuse me? Who arbitrarily publishes mind-reading declarations about the presumed beliefs or assumptions of people you don't know, haven't met and whose analyses you haven't read?

My beef is not with you, Ms. Baum, but with a false allegation that you wittingly or unwittingly propagate.

The slew of recent articles on the deleterious effect of productivity suggests the ``lump-of-labor'' fallacy is due for a revival. This fallacy assumes there is a fixed amount of work to be done in an economy, to be divided up among the total supply of laborers. If machines do the work, there's less for people to do, resulting in higher unemployment.

No doubt this fallacy was behind France's romance with the 35-hour workweek. It also repeatedly fuels protectionist sentiment: the desire to protect domestic industries, via tariffs and quotas, from foreign competition.

As for the clarity (or otherwise) of my writing, the usual remedy for perceived incomprehension or misunderstanding is to engage in a conversation BEFORE one leaps to the conclusion that one's correspondent is solely responsible for the difficulty. You mentioned difficulty 'sorting through' or 'following' (3x) my argument in all but one of your emails and I tried to respond to your feedback (while maintaining a discrete silence about what might have appeared to me to be willful incomprehension). The exception was your AHA! moment in which you wrote, "I think I get it now" proclaiming that the arguments about shipping jobs overseas, automation etc. SUGGEST that people who make those arguments believe in a lump of labor. That's a circular argument, Ms. Baum. It assumes its own conclusion as its premise: "People who argue that assume there's a lump of labor because arguing that suggests they assume there's a lump of labor!" When you are thinking in circles it is awfully hard to follow someone who is not thinking in those same circles. My sympathies.

Off-shoring and automation DO eliminate jobs -- that's what they are SUPPOSED to do. Similarly, if a credit and speculation-fueled housing boom comes to an end, construction jobs will be eliminated. If those jobs aren't replaced with new and presumably different jobs, people will be unemployed. Simple. There's no need for people anxious about unemployment to assume that the amount of work to be done is "fixed." There just has to be less job creation going on than there is job destruction plus new entrants into the labor market -- as in the present situation.

So anyway, thank you for responding to my provocative posting of our email exchange. I'll gladly take down my unauthorized publication of our email exchange if you will retract your unauthorized publication of the spurious lump-of-labor mind reading exercise.

Cheers,

Tom

How to Explain Red Herrings to a Bloomberg Columnist

"Tom - thanks for the long note. I've having trouble sorting through your argument on the fallacy on the fallacy. Can you send me what you wrote so I can read?"

Hi Caroline,

I'm attaching a copy of my 2007 Review of Social Economy article, "Why Economists Dislike a Lump of Labor," the text of my 2000 article "The 'lump of labor' case against work-sharing: populist fallacy or marginalist throwback?" and a more recent piece I wrote for the new economics foundation in the U.K. that contains some of my more recent research and seeks to set out the argument step by step. At it's core, my argument is simply that the "fixed amount of work" is a figment of the imagination of the economists who invoke the fallacy, not a belief of those who are accused of committing it. There is no evidence for the latter nor is there any "logical necessity" that establishes it.

Cheers,

Tom

"I found it very hard to follow your email. So a fixed amount of work IS a fallacy but the economists who tout it believe the amount is fixed? Is that what you are saying?"

Caroline,

A fixed amount of work WOULD BE a fallacy if someone actually believed it. The economists who tout the fallacy claim make a false accusation that advocates of shorter work time, etc. believe in a fixed amount of work. The accusation is a red herring and is the source of all the confusion that follows. It is a "when did you stop beating your wife?" type of rhetorical construction that covertly presents a spurious allegation as an undisputed 'truth' and then shields that primary allegation behind a secondary screen: "that belief is a fallacy," "you have (or haven't) stopped beating your wife."

That secondary claim is irrelevant and is a distraction. Why would it matter that belief in a fixed amount of work is a fallacy if no one believed there was a fixed amount of work or even if such a belief, though false, was itself inessential to the broader policy issue?

Tom

6:56 AM: "Sorry. I can't follow your explanation. I'm on deadline. I'll look at your work later this week. Thx."


6:57 AM: "I think I get it now. People do believe it b/c their arguments about shipping jobs overseas, automation, etc. Suggest that they do. Obama's comment on ATM machines. The labor unions believe it. So I guess I don't agree w/ you that no one believes it. Obama's "made in America" is another example."

(to 6:57 AM) You got it, Tinkerbell. If YOU believe strongly enough that other people believe something, that makes it true! Clap louder!

(to 6:56 AM) Yes, dear, it is hard to follow explanations that don't confirm your biases. No need to bother "looking at" my work later this week. There's nothing in there that confirms what you already think you know and are determined to keep believing no matter what.

(Caroline Baum bills herself as "a Bloomberg View columnist, writing about the macro-economy and the intersection beween [sic] politics and economics. My specialty is exposing economic nonsense.")

"Growth Fellow"?

Over at the "George W. Bush Institute," Ike Brannon ("Growth Fellow" at the G.W.B. Institute and Director of Economic Policy and Congressional Relations at the American Action Forum) denounced, "Luddites, Lumps of Labor, and a Laundry List of Illogic" back in May.

As Brannon confessed, "The hackneyed trope of a lazy columnist is to take down someone else’s column, but alas, that is precisely what my column will do." Lazy columnist and hack that he is, Dr. Brannon didn't bother to actually know anything about the lump-of-labor fallacy claim he invoked.

Being even lazier that Dr. Brannon, I'm confident it is enough to mention that he is a "Growth Fellow at the George W. Bush Institute" to refute whatever the fucking moron might have to say. Sounds like a affectionate nickname for somebody's malignant tumor: "I went to the clinic the other day for a colonoscopy and was relieved they didn't find a 'growth fellow'."

Meanwhile, sometimes I stumble across recitations of the lump-of-labor catechism that I missed at the time. Here's one whose untimeliness has become timely again by the juxtaposition of the 2003 Bloomberg column to an advertisement for a current Bloomberg feature: "Lump-of-Labour Fallacy Gussied Up for a New Era" and "Flying Robots"!

Ms. Baum bills herself on twitter as "a Bloomberg View columnist, writing about the macro-economy and the intersection beween [sic] politics and economics. My specialty is exposing economic nonsense." The unintentional ambiguity of the last claim is refreshingly frank. So I wrote to Madam Baum (and her editor):

Dear Caroline Baum,

Your twitter profile says that you write about the "intersection beween politics and economics." Obviously that should read "between." But that's not why I'm writing. Your profile also states that your "specialty is exposing economic nonsense." Way back in 2003 you wrote about the lump-of-labor fallacy being "gussied up for a new era." Well, here's an opportunity to expose some economic nonsense, provided you can admit being misled in the past.

A few years before Bloomberg published your column, my first article on the history of the fallacy claim was published by Routledge in an anthology edited by Lonnie Golden and Deb Figart, Working Time: International trends, theory and policy perspectives. Seven years later, the Review of Social Economy published my second academic article dealing with the history and substance of the fallacy claim. Since then I've continued archival research and have finally traced the claim down to a 1780 pamphlet by a Lancashire magistrate named Dorning Rasbotham. To make a long story short, the argument has always been a bait and switch, red herring, straw man argument. But to make that short story longer, it is fascinating to trace through history the imaginative and varied ad hoc "explanations" that expositors of the fallacy have appended to the ubiquitous but utterly fictional "belief in a fixed amount of work."

Anxieties about unemployment may be founded or unfounded but in either case they have nothing to do with an erroneous belief that the amount of work to be done is fixed in the long run. In fact, the fallacy claim (that is, the claim that the fallacy exists, not the alleged  fallacy) has been refuted repeatedly by economists -- to no avail. Many more economists have recited by rote the fallacy claim without once addressing or even acknowledging the challenges to the fallacy claim's authority.

Having watched my research on the history of the fallacy claim similarly ignored by economists and columnists alike, I have taken to building robot economist puppets of the worthies who recite the bogus claim as if it were gospel. My current rogues' gallery of robot economists includes Paul Samuelson, Paul Krugman, Richard Layard, Jonathan Portes, Lawrence Katz, David Autor, Ryan Avent, Matthew Bishop and Clive Crook (the last three being columnists for The Economist magazine). I've posted short videos of the puppets dancing and chanting their fallacy claims at http://ecologicalheadstand.blogspot.ca/2012/07/thoughts-and-dreams-about-machines-new.html

Cheers,

Tom Walker

The challenge, of course, will now be to construct a Flying Robot Baum (reminds me of the flying monkeys from The Wizard of Oz). I suppose just replacing the arms with wings should do it.

Bill Keller Joins The Cut Social Security Gang

In today's New York Times, former editor Bill Keller has an especially obnoxious column about baby boomer entitlement.  I am not going to dispute at all his listing of various selfishnesses that we baby boomers have indulged in from Gordon Gekko type follies to self-obsessing about 60s music and other such stuff.  Fine.  However, partway in the column morphs into yet another of these Social Security bashes by yet another of the Very Serious People, all for the purpose of reducing the deficit to save the future generations from the awful selfishness of the otherwise overly entitled baby boomers.  I grant that he briefly mentions taxes and defense spending, but only to dismiss them as insufficient to solve the problem (that is, by raising the former and cutting the latter).  Social Security is what must be seriously hit.

Now good old Dean Baker takes him to task pretty strongly today at http://www.cepr.net/index.php/blogs/beat-the-press .  He focuses on how rich Bill Keller is, and how he will not be affected by cuts the way most people will be.  He also brings up the point that it is health care costs that are most responsible for the dramatic upsurge in past and projected future entitlement spending, which Keller simply said nothing about, thereby really making himself look Seriously Foolish.  That is a killer for Keller right there.  While he did not comment on Keller I also note Bruce Webb's latest post on angrybear in which after going through a lot of useful analysis he recites his old ditty: "If privatization is necessary, it won't be possible.  If privatizatization is possible, it won't be necessary," which about sums it up, at http://www.angrybearblog.com/2012/07/a-social-security-ditty-if.html#more .

Let me add two more points particularly to Dean's justified screed against Keller's pompous silliness.  One is that he left out the matter of economic growth.  We know how the surplus that Clinton left got turned into the current massive budget deficit.  There were the tax cuts, vaguely recognized by Keller.  There were those two wars, not quite fully finished, which Keller did not name but did also vaguely note defense spending.  But then there was the recession, which has been the biggest souce of the problem.  If this could be overcome and we could return to growth of the sort we have previously seen, this would do wonders for alleviating the deficit, and also for putting us back into the second condition noted by Bruce Webb, that we would not need a privatization fix for social security because it would easily fund itself.  Of course cutting Social Security and other spending while raising taxes threatens to be the sort of growth-killing austerity we see all those Europeans dragging themselves down with, thus undercutting the effort to get growth going again.

The other point, which may be the key to the real tendentiousness of the hypocrisy of this column, is that he is calling for sacrifices by the baby boomers while guilt tripping the lot of us, the people who would really pay for his proposed social security changes would not be baby boomers at all, but those very young people he is supposedly standing up for against our wickedness.  Everybody knows that any changes will affect neither those already on SS, which includes some front end baby boomers already along with some set that will be due to get onto it pretty soon, which will probably expand the set of the unaffected at least haflway down into the baby boomer pile, with only some of the rump end tagalongs vulnerable.  No, while changing cost of living indexes may affect even current recipients, the effects will be much greater down the road for those much younger who are supposedly being protected, and of course any increases in future eligilibity ages will be borne by those much younger than baby boomers.  Keller is basically selling a fraud here.

So, we are back to one of my favorite lines.  Those seeking to convince the young on the basis of the spoiled wickedness of the baby boomers that they should support cuts in future Social Security benefits are being told in effect, "Accept definite cuts now in your future Social Security benefits, because otherwise you might have to accept some cuts in the future to your future Social Security benefits!"  Gag.

Romney’s Ignorance on the Palestine Economy

Kasie Hunt and Karin Laub report that Mitt Romney can’t even get the basic facts right:

The economic disparity between the Israelis and the Palestinians is actually much greater than Romney stated. Israel had a per capita gross domestic product of about $31,000 in 2011, while the West Bank and Gaza had a per capita GDP of just over $1,500, according to the World Bank.

Romney had claimed that Israelis made only $21,000 while Palestinians made $10,000. So the economic disparity is actually much greater than Romney claimed. But the real protest comes from the assertion by Mr. Romney that it was cultural differences that led to this disparity. Hunt and Laub continue:

Palestinian reaction was swift and pointed."It is a racist statement and this man doesn't realize that the Palestinian economy cannot reach its potential because there is an Israeli occupation," said Saeb Erekat, a senior aide to Palestinian President Mahmoud Abbas. "It seems to me this man lacks information, knowledge, vision and understanding of this region and its people," Erekat added. "He also lacks knowledge about the Israelis themselves. I have not heard any Israeli official speak about cultural superiority."

TalkingPointsMemo has been all over this story noting that even Benjamin Netanyahu attributes much of the weakness of the Palestinian economy to Israel’s occupation. Perhaps it is time for Mr. Romney to come back the United States so he can focus on whatever domestic nonsensical rhetoric he has in store for this election.

Vote Against

Robert Reich’s description of this election sounds right to me:

....the White House doesn’t want to take any risks. Polls give Obama a slight edge in the critical eight or so battleground states, so, the thinking goes in the Obama camp, why say anything that might give Romney and the GOP a target?  

Besides, polls also show Romney isn’t well-liked by the electorate.

So Obama has decided to campaign as the anti-Romney. 

.....Romney’s advisors assume Obama can’t possibly be reelected with the economy this bad. Just 44 percent of registered voters in a Washington Post-ABC News poll earlier this month approve of the job the president is doing on the economy, while 54 percent disapprove. Even more encouraging for Romney is that 41 percent of those polled “strongly” disapproved of Obama’s economic performance, while just 21 percent “strongly” approved — an enthusiasm gap of major proportion. 

So Romney’s advisors have concluded that all Romney has to do between now and Election Day is avoid a mistake that might give Obama and the Democrats something to shoot at.
Romney has decided to campaign as the anti-Obama. 

The two anti-the-other-guy strategies fit with a ton of negative advertising that’s just begun but will reach mammoth proportions after Labor Day. Much of it will be financed by super-PACs and by political fronts already taking in hundreds of millions of dollars in secret donations. Romney’s camp hopes to out-negative Obama by almost two to one.

So what’s the logic in voting for one of these guys?  The campaign is all but telling us we have to decide which one to vote against.  Unfortunately the voting system itself doesn’t give us this option.

But it could.  A simple reform (too late for 2012 alas) would be to allow voters an option, either to cast their vote in favor of the candidate of their choice or against the candidate they oppose most strongly.  These votes would be tallied as either +1 or -1.  On election night, after a race like the one we’re having now, we would find out, not who got the highest number of votes in favor, but who has the least negative.

In a narrow, who-wins-and-who-loses sense, the result would be nearly the same.  (Life could get interesting, however, for minor parties.  My reform might require a two-stage election to narrow the field to only two candidates.)  The main point is the message.  It would be clear to everyone what kind of government we have: not the one we, or even a modest plurality of us, want, but the one we despise a bit less.

PS: I’m still in hiding.  This post doesn’t count.

So Who Should Be Paying for Government Spending?

I omitted something from my frustration with the claim by Ari Fleischer the very well to do pay too much in taxes, which I hope our graph and a little more commentary addresses. The graph shows total government spending (Federal, state, and local) relative to GDP over the past 40 years (1972 to 2011). The fact that this ratio has been near 36% for the past three years is not a good indication of the share of income devoted to government spending for the future. In fact, this ratio dipped below 30% during the Carter years and the last two years of the Clinton Administration. But notice that the fiscal restraint we saw during these periods evaporated when Republicans were back in the White House. I thought it was Republican orthodoxy that we should eventually get around to a balanced budget, which would seem to suggest that total taxes – Federal, state, and local – would have to be around 30% of GDP. And yet Ari appears to content that the top 5% of the population has an effective Federal tax rate near 24%. OK – I know the rich do pay state and local taxes so I’m sure that their total tax bit is above 24% even in this world of regressive state and local tax burdens. Now it is true that Ari served a President who not only gave us tax “cuts” (more like deferrals in my opinion) as President Bush increased defense spending and bragged about giving us a prescription drug benefit. So maybe Ari – like others in the Bush White House – came to believe that money grows on trees. But in the real world, governments do face long-term budget constraints where deficits today equate to future tax liabilities. So if the rich are paying too much – as Ari claims – then the rest of us must be paying too little. So how high do the effective tax rates – inclusion of Federal, state, local, and deferred tax obligations – have to go for the rest of us?

Ari Fleischer Tells the Readers of the Wall Street Journal That They Are Stupid

Ari tries to make this case:

Yet President Obama says that "for some time now, when compared to the middle class," the wealthy "haven't been asked to do their fair share." He's right that the system isn't fair, but not because the top 1% pay too little. It is because they pay too much.

He tries with a few canards that have been debunked repeatedly – such as looking at the share of Federal taxes paid by each quintile of the population. To be fair, he also shows each quintiles share of national income on the way to comparing each quintiles effective tax rate – as long as we consider only Federal taxes. After all – no one really pays state and local taxes. Yes – I know Greg Mankiw loves to do the same thing. But any serious discussion of the tax burden cannot omit state and local taxes. And let’s read on:

We learned during the 2008 campaign that he believes in spreading the wealth around. And recently we learned he doesn't believe that successful people made it on their own. Without the government, the president tells us, job creators and entrepreneurs would not be able to make it in America. It's really the other way around. Without job creators and the successful, the government wouldn't have any money. So next time Mr. Obama meets someone in the top 1% or even the top 20%, instead of saying they're not paying their fair share, he should simply say thank you.

The only thing Ari left off was Art Laffer’s cocktail napkin!

Mostly Incommunicado

My apologies to anyone who wants me to respond to them, but I'm off-duty for the next few weeks.  It's wind and water until you here from me again.  Don't let anything important happen out there in the world.