UpYoursMan
2011-09-11 18:49:03 UTC
"In the Republican alternative universe, allowing an income tax cut
for rich people to expire will “devastate” the U.S. economy, while
letting a payroll tax cut for working people to expire would hardly be
noticed. Cutting defense spending is economic folly; cutting food
stamps for poor children an economic imperative."
------------------------------
"The magical world of voodoo ‘economists’"
Op-Ed
By Steven Pearlstein
September 10, 2011
IF YOU CAME UP WITH A BUMPER STICKER that pulls together the platform
of this year’s crop of Republican presidential candidates, it would
have to be:
Repeal the 20th century. Vote GOP.
It’s not just the 21st century they want to turn the clock back on —
health-care reform, global warming and the financial regulations
passed in the wake of the recent financial crises and accounting
scandals.
These folks are actually talking about repealing the Clean Air Act,
the Clean Water Act and the Environmental Protection Agency, created
in 1970s.
They’re talking about abolishing Medicare and Medicaid, which passed
in the 1960s, and Social Security, created in the 1930s.
They reject as thoroughly discredited all of Keynesian economics,
including the efficacy of fiscal stimulus, preferring the budget-
balancing economic policies that turned the 1929 stock market crash
into the Great Depression.
They also reject the efficacy of monetary stimulus to fight recession,
and give the strong impression they wouldn’t mind abolishing the
Federal Reserve and putting the country back on the gold standard.
They refuse to embrace Darwin’s theory of evolution, which has been
widely accepted since the Scopes Trial of the 1920s.
One of them is even talking about repealing the 16th and 17th
amendments to the Constitution, allowing for a federal income tax and
the direct election of senators — landmarks of the Progressive Era.
What’s next — repeal of quantum physics?
Not every candidate embraces every one of these kooky ideas. But
what’s striking is that when Rick Perry stands up and declares that
“Keynesian policy and Keynesian theory is now done,” not one candidate
is willing to speak up for the most important economic thinker of the
20th century. Or when Michele Bachmann declares that natural selection
is just a theory, none of the other candidates is willing to risk the
wrath of the religious right and call her on it. Leadership, it ain’t.
I realize economics isn’t a science the way biology and physics are
sciences, but it’s close enough to one that there are ideas,
principles and insights from experience that economists generally
agree upon. Listening to the Republicans talk about the economy and
economic policy, however, is like entering into an alternative
reality.
Theirs is a magical world in which the gulf oil spill and the Japanese
nuclear disaster never happened and there was never a problem with
smog, polluted rivers or contaminated hamburger. It is a world where
Enron and Worldcom did not collapse and shoddy underwriting by bankers
did not bring the financial system to the brink of a meltdown. It is a
world where the unemployed can always find a job if they really want
one and businesses never, ever ship jobs overseas.
As politicians who are always quick to point out that it is only the
private sector that creates economic growth, I found it rather comical
to watch the governors at last week’s debate duke it out over who
“created” the most jobs while in office. I know it must have just been
an oversight, but I couldn’t help noticing that neither Mitt Romney
nor Perry thought to exclude the thousands of government jobs included
in their calculations — the kinds of jobs they and their fellow
Republicans now view as economically illegitimate.
And how wonderfully precise they can be when it comes to job numbers.
Romney is way out front when it comes to this kind of false precision.
His new economic plan calculates that President Obama would “threaten”
7.3 million jobs with the ozone regulation that, in fact, the
president had just canceled. By contrast, Romney claims his own plan
will create 11 million jobs in his first term — not 10, not 12, but 11
million.
When you dig into such calculations, however, it turns out many are
based on back-of-the-envelope extrapolations from industry data that
totally ignore the dynamic quality of economic interactions.
One recent example comes from the cement industry, which now warns
that new regulations limiting emissions of sulfur dioxide and nitrogen
oxide could close as many as 18 of the 100 cement plants in the United
States, resulting in the direct loss of 13,000 jobs.
Then again, where do you think all those customers of the 18 plants
will get their cement? Do you think they might get some of it from the
other 82 plants, which in turn might have to add a few workers to
handle the additional volume? Or that a higher price for cement might
induce somebody to build a modern plant to take advantage of the
suddenly unmet demand? Or perhaps that higher prices for cement will
lead some customers to use another building material produced by an
industry that will have to add workers to increase its output? And
what about the possibility that the regulation will encourage some
innovative company to devise emissions-control equipment that will not
only allow some of those plants to remain open but generate a few
thousand extra jobs of its own as it exports to plants around the
world.
Such possibilities are rarely, if ever, acknowledged in these “job-
scare studies.” Also left out are any estimates of the benefits that
might accrue in terms of longer, healthier lives. In the Republican
alternative universe, it’s all costs, no benefits when it comes to
government regulation. As they see it, government regulators wake up
every morning with an uncontrollable urge to see how many jobs they
can destroy.
If consistency is the hobgoblin of small minds, then these Republican
presidential candidates are big thinkers, particularly on fiscal
issues.
In the Republican alternative universe, allowing an income tax cut for
rich people to expire will “devastate” the U.S. economy, while letting
a payroll tax cut for working people to expire would hardly be
noticed. Cutting defense spending is economic folly; cutting food
stamps for poor children an economic imperative.
My favorite, though, is a proposal, backed by nearly all the
candidates along with the U.S. Chamber of Commerce, to allow big
corporations to bring home, at a greatly reduced tax rate, the more
than $1 trillion in profits they have stashed away in foreign
subsidiaries.
“Repatriation,” as it is called, was tried during the “jobless
recovery” of the Bush years, with the promise that it would create
500,000 jobs over two years as corporations reinvested the cash in
their U.S. operations. According to the most definitive studies of
what happened, however, most of the repatriated profits weren’t used
to hire workers or invest in new plants and equipment. Instead, they
were used to pay down debt or buy back stock.
But fear not. In a new paper prepared for the chamber, Republican
economist Douglas Holtz-Eakin argues that just because the money went
to creditors and investors doesn’t mean it didn’t create jobs. After
all, creditors and shareholders are people, too — people who will turn
around and spend most of it, in the process increasing the overall
demand for goods and services. As a result, Holtz-Eakin argues, a
dollar of repatriated profit would have roughly the same impact on the
economy as a dollar under the Obama stimulus plan, or in the case of
$1 trillion in repatriated profit, about 3 million new jobs.
It’s a lovely economic argument, and it might even be right. But for
Republican presidential candidates, it presents a little problem. You
can’t argue, at one moment, that putting $1 trillion of money in the
hands of households and business failed to create even a single job,
and at the next moment argue that putting an extra $1 trillion in
repatriated profit into their hands will magically generate jobs for
millions.
It took a while, but even Richard Nixon came around to declaring
himself a Keynesian. Maybe there is still hope for Perry and the gang.
http://www.washingtonpost.com/the-magical-world-of-voodoo-economists/2011/09/07/gIQARBiEIK_story.html
for rich people to expire will “devastate” the U.S. economy, while
letting a payroll tax cut for working people to expire would hardly be
noticed. Cutting defense spending is economic folly; cutting food
stamps for poor children an economic imperative."
------------------------------
"The magical world of voodoo ‘economists’"
Op-Ed
By Steven Pearlstein
September 10, 2011
IF YOU CAME UP WITH A BUMPER STICKER that pulls together the platform
of this year’s crop of Republican presidential candidates, it would
have to be:
Repeal the 20th century. Vote GOP.
It’s not just the 21st century they want to turn the clock back on —
health-care reform, global warming and the financial regulations
passed in the wake of the recent financial crises and accounting
scandals.
These folks are actually talking about repealing the Clean Air Act,
the Clean Water Act and the Environmental Protection Agency, created
in 1970s.
They’re talking about abolishing Medicare and Medicaid, which passed
in the 1960s, and Social Security, created in the 1930s.
They reject as thoroughly discredited all of Keynesian economics,
including the efficacy of fiscal stimulus, preferring the budget-
balancing economic policies that turned the 1929 stock market crash
into the Great Depression.
They also reject the efficacy of monetary stimulus to fight recession,
and give the strong impression they wouldn’t mind abolishing the
Federal Reserve and putting the country back on the gold standard.
They refuse to embrace Darwin’s theory of evolution, which has been
widely accepted since the Scopes Trial of the 1920s.
One of them is even talking about repealing the 16th and 17th
amendments to the Constitution, allowing for a federal income tax and
the direct election of senators — landmarks of the Progressive Era.
What’s next — repeal of quantum physics?
Not every candidate embraces every one of these kooky ideas. But
what’s striking is that when Rick Perry stands up and declares that
“Keynesian policy and Keynesian theory is now done,” not one candidate
is willing to speak up for the most important economic thinker of the
20th century. Or when Michele Bachmann declares that natural selection
is just a theory, none of the other candidates is willing to risk the
wrath of the religious right and call her on it. Leadership, it ain’t.
I realize economics isn’t a science the way biology and physics are
sciences, but it’s close enough to one that there are ideas,
principles and insights from experience that economists generally
agree upon. Listening to the Republicans talk about the economy and
economic policy, however, is like entering into an alternative
reality.
Theirs is a magical world in which the gulf oil spill and the Japanese
nuclear disaster never happened and there was never a problem with
smog, polluted rivers or contaminated hamburger. It is a world where
Enron and Worldcom did not collapse and shoddy underwriting by bankers
did not bring the financial system to the brink of a meltdown. It is a
world where the unemployed can always find a job if they really want
one and businesses never, ever ship jobs overseas.
As politicians who are always quick to point out that it is only the
private sector that creates economic growth, I found it rather comical
to watch the governors at last week’s debate duke it out over who
“created” the most jobs while in office. I know it must have just been
an oversight, but I couldn’t help noticing that neither Mitt Romney
nor Perry thought to exclude the thousands of government jobs included
in their calculations — the kinds of jobs they and their fellow
Republicans now view as economically illegitimate.
And how wonderfully precise they can be when it comes to job numbers.
Romney is way out front when it comes to this kind of false precision.
His new economic plan calculates that President Obama would “threaten”
7.3 million jobs with the ozone regulation that, in fact, the
president had just canceled. By contrast, Romney claims his own plan
will create 11 million jobs in his first term — not 10, not 12, but 11
million.
When you dig into such calculations, however, it turns out many are
based on back-of-the-envelope extrapolations from industry data that
totally ignore the dynamic quality of economic interactions.
One recent example comes from the cement industry, which now warns
that new regulations limiting emissions of sulfur dioxide and nitrogen
oxide could close as many as 18 of the 100 cement plants in the United
States, resulting in the direct loss of 13,000 jobs.
Then again, where do you think all those customers of the 18 plants
will get their cement? Do you think they might get some of it from the
other 82 plants, which in turn might have to add a few workers to
handle the additional volume? Or that a higher price for cement might
induce somebody to build a modern plant to take advantage of the
suddenly unmet demand? Or perhaps that higher prices for cement will
lead some customers to use another building material produced by an
industry that will have to add workers to increase its output? And
what about the possibility that the regulation will encourage some
innovative company to devise emissions-control equipment that will not
only allow some of those plants to remain open but generate a few
thousand extra jobs of its own as it exports to plants around the
world.
Such possibilities are rarely, if ever, acknowledged in these “job-
scare studies.” Also left out are any estimates of the benefits that
might accrue in terms of longer, healthier lives. In the Republican
alternative universe, it’s all costs, no benefits when it comes to
government regulation. As they see it, government regulators wake up
every morning with an uncontrollable urge to see how many jobs they
can destroy.
If consistency is the hobgoblin of small minds, then these Republican
presidential candidates are big thinkers, particularly on fiscal
issues.
In the Republican alternative universe, allowing an income tax cut for
rich people to expire will “devastate” the U.S. economy, while letting
a payroll tax cut for working people to expire would hardly be
noticed. Cutting defense spending is economic folly; cutting food
stamps for poor children an economic imperative.
My favorite, though, is a proposal, backed by nearly all the
candidates along with the U.S. Chamber of Commerce, to allow big
corporations to bring home, at a greatly reduced tax rate, the more
than $1 trillion in profits they have stashed away in foreign
subsidiaries.
“Repatriation,” as it is called, was tried during the “jobless
recovery” of the Bush years, with the promise that it would create
500,000 jobs over two years as corporations reinvested the cash in
their U.S. operations. According to the most definitive studies of
what happened, however, most of the repatriated profits weren’t used
to hire workers or invest in new plants and equipment. Instead, they
were used to pay down debt or buy back stock.
But fear not. In a new paper prepared for the chamber, Republican
economist Douglas Holtz-Eakin argues that just because the money went
to creditors and investors doesn’t mean it didn’t create jobs. After
all, creditors and shareholders are people, too — people who will turn
around and spend most of it, in the process increasing the overall
demand for goods and services. As a result, Holtz-Eakin argues, a
dollar of repatriated profit would have roughly the same impact on the
economy as a dollar under the Obama stimulus plan, or in the case of
$1 trillion in repatriated profit, about 3 million new jobs.
It’s a lovely economic argument, and it might even be right. But for
Republican presidential candidates, it presents a little problem. You
can’t argue, at one moment, that putting $1 trillion of money in the
hands of households and business failed to create even a single job,
and at the next moment argue that putting an extra $1 trillion in
repatriated profit into their hands will magically generate jobs for
millions.
It took a while, but even Richard Nixon came around to declaring
himself a Keynesian. Maybe there is still hope for Perry and the gang.
http://www.washingtonpost.com/the-magical-world-of-voodoo-economists/2011/09/07/gIQARBiEIK_story.html