Ryan’s Reactionary Tempest

Paul Ryan’s at it again.

Ryan, as head of the House Budget Committee, has proposed a new budget. That’s not all that surprising.

What is notable is that Ryan has gone far beyond his role as proposer of federal spending plans and taken on the much larger task of specifying how the government will raise the money to be spent. Never mind that this is the purview of the House Ways and Means committee. When Ryan sees a chance to push his right-wing extremist agenda, he jumps on it.

Aside from his vicious (heartless, self-serving, destructive) plans to cut $4.6 trillion in spending from federal spending, Plundering Paul proposes cutting the already-low tax rates for the richest Americans to a mere 25 percent.

And he’ll do this in “revenue-neutral” manner, no less, with the standard “elimination of deductions to be specified later”.

In other words, by magic.

It’s amazing what is possible when one is unconstrained by silly things like math and logic. Behold the magic asterisk, that wonderful, supernatural device that allows one to conjure up tax revenues out of air, out of thin air, with unspecified deductions melting away.

If only his revels now were ended.

Nearly three trillion dollars of spending cuts would come from government healthcare spending. Turning Medicare into a voucher program might sound good to some, but it’s a certain route to disaster. The U.S. healthcare system is broken. We spend 17 percent of our GDP on healthcare – much more than any other developed nation – and our healthcare outcomes put us close to the bottom of the pack. Just when we had started to reform our broken system, when we had finally started to correct some of the many failures of American healthcare, Ryan wants to send us back to the medical Dark Ages.

That “Path to Prosperity” that Ryan speaks of is only a path for the already-rich, and it’s actually a highway paved with gold. Too bad no one who’s poor will be allowed past the toll booths.

Ryan’s goal evidently is to transform the federal government into the true, massive failure that he and his Republican cronies have always claimed that it was. Then they can point to the failure as proof of their claims, and then proceed to dismantle all of the hard-won progress we’ve made.paul-ryan-uncomfortable

Not to mention the fact that he wishes you were dead.

The “debt crisis” and impending disaster that the Ryan Budget claims to forestall is the same crisis – and disaster – that Republicans have been predicting for years. The same debt disaster that still hasn’t occurred, despite their repeated warnings of doom. The same crisis that Republicans manufactured themselves by blocking any reasonable budget agreements.

But Ryan needs a manufactured crisis in order to justify throwing 35 million Americans off of health insurance. To provide rationale for cutting education and infrastructure spending. To warrant deep cuts to food stamps and housing assistance. You know – the sort of things that keep people alive through times like this.

Ryan’s hyper-ideological budget needs to be banished, like an insubstantial pageant faded, leaving not a rack behind. It’s a reactionary recipe for anti-progress.

Viral Inequality

It’s hardly news when a video “goes viral” these days. “Going viral” just means that people are passing something along to more people, and those people are passing it along, and those people are passing it along. Sort of like, well, a virus.

Happens a lot with the internet. It happened before the internet, too. I remember seeing faded fifteenth-generation photocopied jokes passed around the office, long before anyone had dreamed up the prefix “http”.wealth inequality

Going viral just mean that people think something is interesting enough or important enough to send it to others.

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A recent virality that came my way is a video clip about wealth inequality in the U.S.

Inequality, like viruses, is not new. Americans talked about it in the 70s, back in the days when, by some measures, it was actually decreasing. They talked about it more in the 80s. And maybe a little less in the 90s, maybe because it didn’t seem to be getting much worse then. And then more again in the Aughties.

In truth, they never should have stopped talking about it. Inequality has been increasing in the U.S. pretty steadily for decades. It increased severely in the 80s, with the Reagan Revolution of decreasing taxes and “regulation”.

Inequality increased in the 90s, too, despite having a Democratic President and an economic boom. That boom did lift nearly all boats, but it lifted the richest boats a lot more than the poorest.

And the Aughties. That shouldn’t be much of a surprise. Having a President intent on slashing already-low tax rates for the wealthiest is a sure-fire way to increase inequality.

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Admittedly, there have been many other factors at play in increasing inequality in America. Increased global trade and decreased labor clout among them. Economists are still sorting out the exact reasons why the richest have been getting so much richer than everyone else. Some conclude that it’s mostly an increase in the “returns to skill”, whatever that means.

And there arguably are benefits to increased inequality. Giving people more incentives to work harder and produce more could create more wealth for everyone in the long haul. And wealthy people save more of their money, providing funds for future capital growth. That can be good for an economy.

Picture1But how much incentive do people need? Do $60 million bonuses really motivate CEOs to work all that much harder and smarter than $6 million bonuses? Does having a $1 billion payoff for creating a successful new company really help the economy that much more than having a $100 million payoff?

Or instead, are such insanely huge incentives actually destructive? Do they cause people to use any and every method at their disposal, ethical or not, to fight and kick their ways to the top? Lead people to do things that harm their companies and the country, in their all-out attempts to make just a million more? Lie, cheat, steal, deceive, delude, distort, betray, swindle, defraud, abuse, anything it takes?

To me, there’s no doubt. It’s possible for incentives to be too big, and we’re long past that point.

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Anyhow, this viral video is a great overview of the wealth inequality problems America’s facing these days – well worth the few minutes it takes to watch.

We might not be certain what is causing the huge increases in inequality that we’ve been seeing since the 1980s. But there’s little reason to believe that it’s a good thing, either for the economy as a whole, or for the masses of Americans who are seeing their relative financial positions deteriorate.

And it’s clear what can and should be done about it. Restore the progressive tax system we had, redistribute wealth intelligently and productively, and enact smart regulation to ensure that growth benefits everyone, not just the 0.01 percent.

Sequester THIS, Republicans. We’ve Had Enough.

The sequester looms. Republicans in Congress are insisting on large cuts in federal government spending – except to defense – along with more tax cuts on top of all those that have already been passed. Rather than compromise on their severe demands, they’re blocking any agreement. Barring an agreement by Friday, broad, arbitrary cuts to most government programs will automatically take hold.

Never mind that economists believe that sharply cutting the deficit now, with the economic recovery still fragile, could throw the economy into another recession. If you don’t believe that, take a look at Europe. Yes, they’ve had other problems. But Europe’s insistence on “austerity” – harsh spending cuts – with economies already weak have sent that continent into its second recession in five years. And Republicans want to do the same thing to the U.S. economy.

Abruptly cutting the deficit now isn’t just unnecessary – it’s senseless and destructive. State and local government spending as a percentage of GDP is still well below its levels in 2008 and 2009, the result of lower tax receipts and mandatory spending cuts on those levels. Businesses remain wary of expanding, with the recovery weak and Congress seeming intent on sabotaging it. Consumers are starting to show a little confidence, but high unemployment rates and lingering consumer debt still cast a shadow across them.

Standard macroeconomics says that federal government deficit spending when the economy is below its potential isn’t just okay – it’s necessary. Someone has to fill in for the lower spending of state and local governments, business, and cautious consumers. If not, the economy could take years to dig its way out of the huge hole it fell into in 2008 and 2009. And the federal government’s the only one out there big enough to do it.

It’s not that the deficit doesn’t need to be reduced. It does. But it’s already been declining on its own, as the economy has started growing again. The federal budget deficit for the 12 months ending February 2010 was nearly $1.5 trillion. The deficit for the 12 months ending January 2013 was just over $1 trillion – a decline of 43 percent. And it will continue to decrease, so long as the economy continues to recover.

The right time to decrease the deficit a lot is when the economy is expanding solidly. As it was when President George W. Bush took office in 2001. We actually had a federal budget surplus then. We were starting to pay down our public debt, the way we should when the economy is growing. But instead of letting that continue – paying off some of our debt when we could so we’d have a cushion when we needed it, Bush slashed taxes, particularly for his rich cronies. That surplus turned into a deficit within months.

We do need to make longer-term plans for decreasing the deficits, but that needs to be done with a combination of gradual spending cuts and tax increases, mostly for the rich and super-rich. Income inequality has been increasing enormously in the U.S. for decades, and a lot of that is the result of less progressive taxes. That needs to be reversed. Instead of withdrawing financial support for those most in  need, we need to be investing, in better education and training, in improved infrastructure, and expanded health care for Americans.

That needs to be done with a spirit of compromise and give-and-take. Not the “take-your-ball-and-go-home”, “my-way-or-the-highway” attitude of Republicans. They’re willing to sacrifice the entire economy, risking hundreds of thousands of lost jobs, if they don’t get everything they want. Holding the entire country hostage in order to reward their rich donors with even more tax cuts.

We shouldn’t reward that kind of political brinkmanship. Hell – we shouldn’t even tolerate it.

It’s time to stand up to the Republican extremists and tell them we’ve had enough of their bullying and strong-arm tactics. We want progress on the federal budget, and we want it now.

This country deserves better than what the Republicans are giving it.

What the Heck Does “Progressive” Mean, Anyway?

“Progressive” is a problematic word. What does it mean, exactly? Are “progressives” more or less “liberal” than Liberals? Even within this Institute – and “progressive” is our middle name – there’s a broad diversity of political views.

I can only speak for myself. While I view myself as a political centrist, I believe laws should be based on what’s best for our society as a whole, not on any particular religious or moral code. And that political decisions should be guided by the best scientific research and data, taking into account our society’s goals and values. This usually seems to put me left of center on most issues.

I also believe that our society’s main goal should be the greatest good, for the greatest number, for the longest time. Not  “to each according to his needs”. Communistic socialism has shown that it doesn’t provide great good to a great number. Capitalism does a better job, but pure capitalism has proven to be far from ideal as well. The right kind and right amount of government involvement in an economy can and does improve on many market outcomes.

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Beyond that, I like to think about Teddy Roosevelt. Teddy was a Republican when he was President. After leaving office he went on to found the Progressive Party, which made a good showing in the election of 1912. Some of the Progressive Party’s positionsBull Moose Party Charter Member Certificate may not sound revolutionary today, but at the time they were pretty extraordinary:

  • A National Health Service
  • Social insurance for elderly, unemployed, and disabled
  • Minimum wages for women and women’s suffrage
  • An 8-hour workday
  • Farm relief
  • Workers’ compensation for work-related injuries
  • An inheritance tax
  • A Constitutional amendment to allow a Federal income tax
  • Citizens’ referendums (decide on a law by popular vote) and initiatives (petitions)
  • Judicial recall (allowing popular vote override of court unconstitutionality rulings)
  • Strict limits and disclosure requirements on political campaign contributions

While the specifics differ now, most of these positions apply to my vision of “progressive” today. Treating women – and everyone – fairly, both socially and legally, is progressive.

Decreasing the influence of money in our political system is progressive.

Providing financial and healthcare support to those who need it most is progressive.

Requiring the people who can most afford it to pay a larger share of government expenses is progressive.

Hardly an exhaustive list. But you get the idea.

Progressives, quite simply, want real progress. Social, political, and economic progress. Not just for the richest people. For everyone.

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Speaking of progressive, let’s talk taxes. By coincidence, progressives I know advocate a progressive tax system. That means that richer people don’t just pay more taxes, but a larger percentage in taxes. Our federal tax system generally is progressive, but there are many exceptions. And despite this, income inequality in the U.S. has been increasing for decades.

There are good arguments for progressive taxes. The richest can most afford to pay more taxes, and they feel the least pain in paying them. Progressive taxes and redistribution increase fairness. A strong and healthy working class can help the economy. Poverty imposes lots of long-term costs on a society. Redistribution – at least up to a point – can pay off.

There also are arguments against progressive taxes. Conventional economics says they decrease economic growth, though recent research is bringing that idea into question. Some call redistribution “theft” or “social warfare” that punishes the most productive people for being successful.

I might be able to go along with some of that, if higher incomes were 100% due to certain people working harder and being smarter than everyone else. But lots of people are smart and work hard. The fact is, plain dumb luck plays a big role in whether a smart, hard worker becomes a millionaire or becomes homeless. Some of that luck might be in being born to the right parents, or it could be being in the right place at the right time.

Yeah, some differences in income are due to working smarter or harder. But far from all.

So it comes down to balancing rewarding hard work and taking care of the most vulnerable in society. And right now, the U.S. leans far too lightly on the latter.

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At the end of the day, we need more progress and more progressiveness, in our tax system, in our economy, and in our society.

And Evergreen’s here to push for just that.

Yes, Mr. President — the Sequester IS a Bad Idea

President Obama talked a lot about the “sequester” in his State of the Union speech. This is the  trillion dollars’ worth of budget cuts that will automatically go into effect this year if the federal government doesn’t reach a new budget agreement. As the President pointed out, “Democrats, Republicans, business leaders, and economists have already said that these cuts … are a really bad idea.”

And they are.

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The U.S. economy is recovering, but slowly. The severity of the Great Recession has left the economy weak. Unemployment has dropped from the 10 percent it was at in 2009 to less than 8 percent now, but it’s still higher than it should be. The economy’s growing, but only at 2 to 3 percent a year.

Decreasing the deficit now will just slow the recovery even more. Economists estimated that the deficit reduction agreed to in January will shave more than 1 percent off of economic growth. Cutting further would make things worse. The European Union is in its second recession in 5 years, mostly because of cutting their own budget deficits too much when their economies were already weak. The U.S. so far has avoided a second recession so far, but we might not if we follow the same path.

Also, the sequester cuts would be arbitrary. They would cut spending without regard to which programs or departments might be best. Random cuts make for bad government. But then, that might be what Republicans are really after. Making government less effective lets them point and say, “See – government is bad. We need less government.”

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It’s normal for deficits to increase during recessions. Governments receive less taxes because people and companies have less income. And governments spend more because more people are in need. A deficit during a recession actually is good for the economy, because it offsets decreased spending by businesses and consumers.

The deficit / debt does have longer-term costs, of course. For one, we have to pay interest on the debt. But then, with interest rates at 2 percent, now’s not a bad time for the government to be borrowing money.

But contrary to popular belief, governments never really have to pay off their debt. People mistakenly think of the government like a household. Households have to pay back any money they borrow, so they think governments work the same way. In fact, governments can keep borrowing money to pay back what they borrowed earlier. So long as the total debt doesn’t grow faster than the economy, the debt becomes smaller and smaller relative to GDP.

It’s not that deficits don’t matter at all. But they don’t matter nearly as much as most people think.

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The real problem with the debt is that we don’t pay it down during expansions. Unless there’s a full-scale war, there’s no justification for deficit spending during expansions. And yet the U.S. ran huge deficits during the 80s and during the 2000s.

Why? Politics. Both Reagan and Bush the Younger hated taxes and any federal government programs that didn’t benefit their corporate cronies. Their modus operandi is to cut taxes, creating enormous deficits, which they then use to argue for decreased government spending. This destructive, self-serving tactic left us with increased debt and less capacity to deal with economic downturns.

President Clinton proved we don’t have to have deficits during expansions. By the time he left office, we had a budget surplus. Of course, that only lasted until Bush the Younger pushed through his sweeping tax cuts, which threw us right back into deficit.

Republicans don’t care about deficits when they cause them. Just when others do.

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The bottom line is that the sequester is a bad idea. Even worse is Republicans’ threat to no raise the debt ceiling unless they get their way. Playing games with the full faith and credit of the United States, whatever the reason, verges on treason. They’re threatening to harm the entire country if they don’t get what they want.

In truth, the federal deficit already is decreasing, even without any dramatic austerity measures. Yes, the federal government needs to take reasonable steps towards gradually reducing the deficit, as the economy continues to recover. But not with knee-jerk spending cuts in the middle of a fragile recovery.

The deficit isn’t a crisis right now, and we don’t need extreme measures to deal with it. The only crisis is the debt ceiling one that Republicans have manufactured for their own purposes.

Ayn Rand is Fiction

Just a reminder that Ayn Rand’s writings are fiction. That means she made it all up. It’s not how the real world works, any more than Stephen King’s scary stories are. It’s alluring for the richest of the rich to believe that their wealth is proof of their inherent superiority, but that don’t make it so.

What’s more, Rand’s extremist ideas clearly are the product of her traumatic life experiences. As a recent Tom Hartmann post points out,

Ayn Rand hated governments and democracy. She considered them systems of mob rule. She grew up in Russia, and as a child watched the Bolsheviks confiscate her father’s pharmacy during the Russian Revolution. Likely suffering from PTSD from that incident, Ayn Rand devoted her future writings to evil government, including the “evil” of its functions like taxation, regulation, and providing social services to the poor and sick.

Corporate Profits are Soaring, and That’s Bad

U.S.  corporations made $1.8 trillion dollars in profits – after tax – in 2011, the highest level on record, even after adjusting for inflation. Corporate profits now are 12 percent of GDP, nearly the highest they’ve been since 1950.

And that’s too high.

In Econ 101 they teach the Gordon Gekko-like mantra that Profits are Good. Profits reward companies for making good products and keeping costs low. How can profits be “too high”?Corporate Profits

If markets were  perfectly efficient and competitive, it would be hard to argue for any “just right” profit level. But you have to ask, why are profits soaring. While many things affect profits, signs point to a lack of efficiency and competition as a core cause of the current run-up in profits. And that’s bad. For the economy, for consumers, and for workers.

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I see it as two tug-of-wars that corporation constantly have to wage. One is with workers, and one is with customers. Normally, these two forces keep corporate profits from getting out of hand. But conditions now are such that there’s little check on corporations, and they hold the upper hand in both of these battles. To the detriment of most of the country.

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If corporations are making lots of profits, then workers might expect some of that to be passed along to them. They’re the ones doing the work, after all. Shouldn’t they share in the spoils?

Unfortunately, whether corporations have to share the wealth depends on the relative bargaining power of labor. With unemployment rates high, employees are too scared of losing their jobs to demand much of anything. Not to mention that union membership is low and falling. Corporations needn’t fear organized opposition from unorganized workers. And even if they did, there’s always the threat of moving operations overseas.

So corporations have have much more influence than labor. They’re easily pulling workers right into the mudpit.

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Corporations’ other tug-of-war is with their customers. In theory, corporations have to serve their customers and provide them with good products at the low prices. But the reality’s not that simple.

Dwayne Andreas of ADM infamy once famously said, “The customer is our enemy.” Customers want as much as possible for as little as possible. All customers do is bargain prices down and whittle away at corporations’ profits.

But customers — consumers — must have bargaining power to do this, and that depends on competition. If corporations have to compete hard for customers, customers can force companies to lower prices and pass along some of the would-be profits to them.

tugofwarBut these days, many factors are conspiring to decrease competition. High industry concentrations, large market shares, network effects, intentional incompatibility, high switching costs, abuse of patents – the list is long.

And don’t underestimate the importance of information. Accurate, clear, and accessible information is critical for markets to work efficiently. Customers have to be able to compare products and prices, or else there’s going to be little real competition, no matter how many products are out there.

With products growing more complex, getting good information about prices and products is hard to come by, internet or not. Googling “cell phone reviews” brings up 116 million results. And have fun trying to figure out which reviews were written by the cell phone companies themselves.

These problems are decreasing competition in industries across the economy, allowing corporations to take more and more money from consumers, resulting in unprecedented profit levels.

That puts consumers right in the middle of the mudpit alongside the workers.

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Soaring corporate profits have serious implications for the economy. In the midst of a slow recovery, we need consumers who are willing and able to spend. For that they need to have money and feel confident about the future. Embattled workers who fear for their livelihoods don’t make good consumers.

And then there’s the inequality factor. Income inequality has been growing for decades. Higher corporate profits just make that worse. It’s the rich who own stocks, and higher profits are just going to make them richer.

And what’s the message from the Right? Cut already-low tax rates, and decrease spending on those most in need. Stop regulating corporations, and stop trying to protect consumers.

We need to be moving in the opposite direction. More responsible regulation of large corporations, particularly financial institutions. More protection of consumers and workers. And more financial support for those in need.

How to pay for this? That’s a topic for another post. But for now, let me just note that corporate tax rates also coincidentally are at near-all-time lows.