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According to the Washington Post, opinion polls show that the public favors the GOP proposals for roll-backs of Federal spending, and rejects the idea of raising the debt ceiling. This is bad news for the Republicans – as long as the Democrats can communicate the facts, not always their long suite.
The Tea Party Republicans ran on a platform of no new taxes, tax rollbacks, and reduced spending. It appealed to a lot of people who could relate to the idea that if we the people have to live within our means, the government should too. It’s a simple enough concept to sell, but not an easy one to live with. In the same way, businesses have supported the Republican policies of reduced regulation – because the titans of industry don’t understand what’s going on either. Life is like that. While there is waste in government spending and a lot of needless regulation, the reality if that neither one is unreasonably high considering the size of the United States and the programs the government supports, and cutbacks in spending translate into cutbacks in services.
With the economy on the skids, federal spending has helped cities pay for police and teachers. Even programs which can be identified as wasteful, like our oversized prison system, have been a source of jobs in depressed areas. Every modern weapons system, even those the Pentagon says we don’t need, provides jobs. It would be one thing if we could transfer the money and the jobs to more useful programs – have the people building tanks repair bridges, have prison guards set up wind farms – but even if the skills can be transferred, even if the new projects are in the same areas as the old ones, the Republicans want budgets cut, not transferred. The budget cuts mean increased unemployment at a time when the economy is just slowly showing signs of revival. Unemployment means reduced spending, which spreads out – fewer movie tickets, fewer restaurant meals, less of everything. Close a factory and the stores that depend on the factory workers as customers also close. Close the stores and the movie theaters and gas stations feel the impact. At a time when we should be trying to keep factories open and hiring, when the economic recovery is weak, the GOP is offering policies which will make things worse all around.
It won’t take long to realize the mistake – not when there are fewer police, larger class sizes, people being dropped from Medicaid. We’ll feel the impact even before the layoffs spread, and we won’t like it.
A recent poll Really Long Link showed that a high percentage of people who claimed they had never benefitted from government programs, had – ranging from grants for education to Social Security and Medicare. Perhaps some people simply don’t realize that these are government programs – if only because they work too well. Politicians rail against the career civil servants, but the reality is that most of these programs work with incredible efficiency for the majority of people with far lower overhead costs than the private sector. The freshman Republicans in the House of Representatives are demanding Draconian cuts, and the old line leadership has lost control. This will be a formula for more lay-offs and a double dip recession. It will also be a lesson in civics, as people learn that checks and benefits they’ve taken for granted are really government programs they’ve complained about. It’s just a shame that people who already know how a civilized society operates have to pay to teach the ignorant – but it seems even that is a government program.
There are two observations about President Obama’s State of the Union speech, neither of which deal with the speech itself.
1 – Some people don’t understand economics
2 – These people will never be satisfied
Regarding economics, let’s try a couple of scenarios. Imagine an automobile dealership. The economy is lousy and nobody is buying any cars. You’re creating a new tax policy which, you hope, will increase spending, create more jobs and revive the economy. You can:
A – Reduce the employers contribution to Social Security by 50% so that it will cost less to hire a salesman.
B – Reduce the tax rate for people earning over $250,000/year so that they’ll buy a Rolls, Bentley, or Astin-Martin.
C – Reduce the tax rate for people making under $50,000/year so that they’ll be able to buy more Chevys, Hondas and Fords.
The correct answer is C. “A” represents trickle down economics, but the car realer won’t hire another salesman as long as the showroom has no customers. “B” may sell a car or two, and create a profit for the dealership, but there really aren’t that many people with that high an income, so the dealership can handle all the customers with its current staff. By getting money in the hands of a larger number of people, option “C”, the volume of new sales will make the dealership hire a new sales rep, possibly a new clerk, and hopefully even get the automobile manufacturers to open a new assembly line.
As for #2, there’s a line “you can’t spend yuour way out of a recession” but in fact, that’s the only way out. Simple supply and demand forces are okay for small things, but when the economy really goes sour, Keynesian methods, deficit spending, are the only viable method. Cutting back spending, as the far right wing is advocating, simply leads to more unemployment, which means less spending at the consumer level, and deepens the recession. The proper method should be to raise taxes on those who can comfortably afford to pay more, and borrow money as neccesary.
In spite of this, even as the President was speaking, and before either Paul Ryan of Michelle Bachman could give their replies, Senator Jim DeMint sent out a notice:
"Two years after the president's nearly trillion dollar government stimulus, unemployment has increased and remains high, families and businesses are still struggling and our national debt continues to skyrocket.
"When the president says 'investment,' he means bigger federal government and higher taxes. Americans sent a clear message in the 2010 elections. They no longer wish to 'invest' in President Obama's big-spending plans.
"Instead of growing the federal government, Washington should reduce its control and devolve education and transportation programs to the states that are better handled at the local level.
"The president spoke of a spending freeze, but we need spending cuts. Not a freeze at record high-spending levels. When you're in a car recklessly speeding toward a cliff, you don't hit cruise control. You slam on the brakes and reverse course.
"If President Obama is serious about fixing our nation's fiscal problems and his call for bipartisanship, he should start by joining Republicans in repealing the partisan ObamaCare law. This government takeover of health care is a threat to our economy and to our nation's health.”
The initial stimulus package was too small to deal with a fiscal crisis of this size, and to make things worse, about a third of it was wasted on tax cuts in order to get Republican support which never materialized (note that the stimulus was separate from the TARP program, meant to save the banks, which was a Bush program). Tax cuts are nice, but they add to the deficit and don’t do much to get us out of the recession, since the goal is to get money moving. Money that sits in a vault and doesn’t get spent doesn’t accomplish anything. How much money can you make if your customers come into your store, look around, and leave with the cash still in their pockets? The stimulus package kept things from getting worse, but it was too small to resolve the great recession.
More to follow.
We all have egos -- it goes with the species. Even so, politicians seem more self centered than almost anybody else. The most obvious examples are the late Ted Stevens of Alaska who warned that if he couldn't have his bridge to nowhere, he would resign from the Senate, which would presumably be bad for the senate, and of course Joseph Lieberman of Connecticut.) When an individual or a party wins an election, they conclude that the people have spoken and endorsed the party (or personal) platform.
It''s possible they have. More often though, it seems as if the vote is about the state of the economy. If things are good, people vote for the party in power. When things are bad, the vote goes to whoever is out. There aren't many people who pay attention to politics, but a lot who study their paychecks.
President Obama and the Democrats were elected at a time when the economy was in crisis. They enacted a stimulus package that was smaller and less robust than liberal economists recommended, and then walked away, focusing on healthcare reform. Healthcare reform was essential, but what we needed was jobs -- everything else could wait.
Two years later, the Republicans regained control of the House of Representatives. Their first action was to vote out the Healthcare Reform Law -- which is okay because they prioritized that. But instead of focusing on jobs, they seem to want to get to their underlying agenda -- shrinking government and outlawing abortion. This may motivate their conservative base, but the economic consequences of major cuts in the federal budget would be very harmful before there's a strong recovery. Each party seems to assume that an election is about their underlying agenda, but whatever to polls say, the real focus is on restoring the economy, not in technical terms of GDP, but in unemployment rate and home foreclosures.
Tip O'Neil said "all politics is local", and he came close, but it would be truer to say that all politics is personal. Neither party seems willing to focus on personal economics. This other stuff can wait until the unemployment rate if down to 7 - 8%.
The American people do speak on a regular basis, but it seems as if a lot of politicians only hear their own voices.
At the last election, the Republicans approached the health care reform law with the slogan “repeal and replace”. While they have passed a repeal bill in the House of Representatives (never mind that it’s unlikely to pass the Senate, and would be subject to veto by the President) they have not offered a coherent replacement. While the current law is cumbersome and inefficient, it is better than what came before. While the Republicans were correct in saying that a plurality of the people opposed the law, an Associated Press poll found that this number was composed of people who thought the law went too far, with those who felt it did not go far enough. The number combined those whom consider the law a government take-over of healthcare with those who consider it a sell-out to the insurance companies. Some of those who oppose the law may have been convinced by the blatant misrepresentations that Republicans have used.
Most of the provisions of the health care reform law were desirable curbs on the insurance industry. One of the most important provisions required the insurers to cover pre-existing conditions. These are medical problems that were present before the policy was purchased, and may result in either a policy which doesn’t cover that condition or anything related to it, or a total inability to buy health insurance at any price. This is particularly meaningful at a time when unemployment is high, and most of the unemployed have been laid-off. While group policies for large corporations usually cover everything, when an employee is laid off, they may be forced to find insurance on the individual market, which is both extremely expensive, and subject to the pre-existing condition provision. Also, insurers may accept premiums for years, and then, when something happens, compare medical records with the application for insurance. If the application by chance omits anything on the medical record, the insurer could, and did, cancel the policy just when it was needed. In one egregious case,l a newborn infant was refused heart surgery because it was a pre-existing condition. There have been studies which show that as much as 50% of the United States population has pre-existing conditions based on insurers definitions. According to the Kaiser Family Foundation, “even when offering coverage, insurers can exclude whole categories of illnesses related to a pre-existing condition. For example, someone with a pre-existing condition of hay fever could have any respiratory system disease – such as bronchitis or pneumonia – excluded from coverage
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What's the difference between Canada and the United States? Actually, there are a few, but one of the more interesting ones is that Canada is a nation where 30 million people have guaranteed health coverage, while the United States has 30 million people who have no health coverage at all. In the debate about repeal of the Affordable Health Care Act, we seem to forget that the primary purpose of the law was to make health coverage available to 30 million people in the United States -- the equivalent of the entire population of Canada.
The Affordable Health Care Law isn't perfect -- if it were it would come a lot closer to the systems in place in Canada, France, England and Japan, all of which have more complete coverage at lower cost with better results. The health systems in those nations cover a larger percentage of the population, who pay less, and live longer than the people in the United States. What we've been subjected to is a collection of cynical lies, so that you have to wonder if these people sleep at night
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After the 2010 elections, politicians and pundits, particularly on the winning side, were quick to spin the results and conclude they had a mandate for whatever positions they had espoused. It’s possible, of course, that there was a strong public sentiment in favor of the Contract With America, but it seems equally likely that the vote was based on dissatisfaction with the economy. It makes no difference whose fault it is, when it started, or what has been done – things are bad now, and so there’s the hope that somebody else can do better.
Part of this dissatisfaction is reflected in the call for smaller government. To be sure, many of those people calling for smaller government are actually concerned with the reach of government into everyday life, but in other cases, the message is simply that smaller government implies lower taxes. Again, without getting into partisan analysis, for the past two years we have been living with an Obama tax cut that came on top of the Bush tax cuts, but if the perception is that taxes are too high, that’s what molds opinion. Part of the problem may be that large sections of the Bush tax cuts were directed at specific types of income that affected a limited number of people: low tax rates on qualified dividends and long term capital gains. Another fact is that the Obama tax cuts were swallowed up by increased state and local taxes, which were raised in order to balance budgets decimated by the economic downturn. The tax cuts, which President Bush had said we could afford, and which President Obama said would stimulate the economy, failed in both cases. This caused the not unreasonable presumption that smaller government would be less costly, and a further tax reduction would force politicians to live within the nation’s means. The phrase “starve the beast” became one of several rallying cries
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During the Great Depression, people banded together and the union movement began. Jobs were scarce, and working conditions deplorable, and enforced by police and private security firms. That was a time when workers fought for the right to bargain collectively, to go on strike. In the years since, through politics in large part, unions have lost much of their acceptance. Now, it seems, unions are under attack – and although the reasons are complex, it seems as if envy is some part of the cause. The bail-out of Wall Street, where a small number of firms which paid key employees immense bonuses had brought the world economy to its knees was unpopular – but the bail-out of General Motors, which protected the jobs of tens of thousands of assembly line workers and mechanics all across the country, met with barely more approval. Now, the target seems to be teachers, with Chris Christie, governor of New Jersey, leading the fight. Mr. Christie has opposed tenure, the job security that has been one of the few significant benefits of the teaching profession, and has attracted national attention and some approval for his fight. Mr. Christie has said (per the New York Times):
“the most important thing for learning is the quality of the teacher standing in front of the classroom. All the rest of the stuff helps, enhances the process,” he said. “Parental involvement, the atmosphere in the school, the level of technology, all the rest of that enhances it. But if you don’t have a good teacher in front of the classroom, all the rest of that stuff is a sideshow.”
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There’s not much to add to the discussion of the attempted assassination of Congresswoman Giffords. A great deal has been written about the vitriol and invective that has been around for a while, and I’m inclined to accept that as true. We need to tone things down. A lot.
But the New York Times has a report that radio talk show hosts in Tucson are denying any contribution to the mood that might have sent an unstable person over the edge. In the same way, the on-line comments on the subject at the Washington Post web site have accusations and counter accusations. At a time when we should be looking at ourselves and asking “what did I do to contribute to this?’ we’ve looked, and found ourselves innocent of all offense. It’s the other guy
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In discussing economics, even at the lowest, most trivial level, it’s important to realize that the subject really isn’t a science. It’s not only not a science, it’s not even a soft science. Oh, it uses graphs and calls things “laws” and some stuff really does seem like universal truth – but about the best you can say for economics is that it’s psychology with a scorecard. If you read the work of well known economists, the also seems to be a measure of theology thrown in, and the same set of facts can be used to justify different beliefs.
This isn’t intended as a real introduction to economics, just as an answer to a question from a reader, so if anybody would like to offer corrections or emendations, feel free. Everything that follows is gross over-simplification. Unfortunately, it sometimes seems as if everything is
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Comments (1)
Comment by Anonymous
on Obama's State of the Union
Random Mumblers Table
Eventually the rise in the DJIA will improve conditions, if we can wait long enough and the market goes high enough. Personal economics relies a lot on mood and psychology. The false prosperity of the Bush years was based in large part on the housing bubble, on people believing they had an asset that could be converted to cash and used to finance purchases. If the stock markets ever go high enough to replace to severe loses to 401(k) holdings and restore a sense of prosperity, it may help the economy recover.
Unfortunately, that's not in sight yet, and with the Republicans demanding spending cuts, things may only get worse. Even so, President Obama's speech was a responsible effort to deal with both the downturn of the present and the needs of the future.