Bush policies and the national debt

This chart says it all. The notion that our debt is simply a “spending problem” as claimed by Republicans is ridiculous.

  

The politics of the tax cut deal

WASHINGTON, DC - DECEMBER 07: U.S. President Barack Obama speaks during a news conference at the White House briefing room December 7, 2010 in Washington, DC. Obama held a news conference after he had announced a deal with Republicans to temporarily extend Bush-era tax cuts to Americans in all tax brackets. (Photo by Alex Wong/Getty Images)

Liberals are attacking President Obama on many fronts regarding the tax cut deal. They don’t like the deal itself, and many are also alleging that it’s stupid politics – he should have held out for a better deal.

Andrew Sullivan has a different take, explaining how a fight with his liberal critics actually helps him. Also, the deal itself will likely stimulate the economy, and a better economy helps his re-election prospects. I agree with Andrew.

  

51 percent of Americans want to keep or expand health care law

The Democrats certainly took a beating in the Midterms, but soon reality will set in for the GOP as well.

As usual, the Republicans are going to over-interpret their “mandate.” This fact about the public’s opinion on the health care reform law in instructive.

A majority of Americans want Congress to keep the new health care law or actually expand it, despite Republican claims that they have a mandate from the people to kill it, according to a new McClatchy Newspapers-Marist poll.

The post-election survey showed that 51 percent of registered voters want to keep the law or change it to do more, while 44 percent want to change it to do less or repeal it altogether.

Driving support for the law: Voters by margins of 2-1 or greater want to keep some of its best-known benefits, such as barring insurers from denying coverage for pre-existing conditions. One thing they don’t like: the mandate that everyone must buy insurance.

The fight over health care reform will be one of the defining battles over the next two years. Expect the Republicans to overplay their hand.

  

Don’t listen to conservatives for stock advice

I’m not suggesting that Obama policies alone are driving the stock market. Many factors, particularly earnings, drive the overall market.

But, many conservatives were quick to blame Obama when the market slipped in the spring, implying he was to blame as opposed to the economic crisis he inherited. Melissa Francis and some of the other conservative market worshipers at CNBC were just a few of the examples. Well, the market is now up, and we’re not hearing conservatives talk about it much any more.

  

The death of supply-side economics

One of the original supply-siders, Bruce Bartlett, explains in a brilliant op-ed why the ideas that worked so well in the early 1980’s are irrelevant today. Bartlett is promoting a new book, The New American Economy.

I continue to believe that what the supply-siders did was good for the economy, good for the country and good for the advancement of economic science. The best economists in the country were pretty clueless about our economic problems during the Carter years. It was widely asserted that the money supply had no meaningful effect on inflation, that marginal tax rates had no incentive effects, and that it would take decades or another Great Depression to break the back of inflation.

As all economists now know, these ideas were wrong. All economists today accept the importance of the money supply–perhaps too much; during the recent crisis many asserted that fiscal stimulus was unnecessary because an increase in the money supply was the only thing necessary to restore growth. (How this would have been accomplished when interest rates were close to zero was never explained.) All economists now accept the importance of marginal tax rates to economic decisionmaking, and organizations like the National Bureau of Economic Research publish vast numbers of papers on this topic.

During the George W. Bush years, however, I think SSE became distorted into something that is, frankly, nuts–the ideas that there is no economic problem that cannot be cured with more and bigger tax cuts, that all tax cuts are equally beneficial, and that all tax cuts raise revenue.

These incorrect ideas led to the enactment of many tax cuts that had no meaningful effect on economic performance. Many were just give-aways to favored Republican constituencies, little different, substantively, from government spending. What, after all, is the difference between a direct spending program and a refundable tax credit? Nothing, really, except that Republicans oppose the first because it represents Big Government while they support the latter because it is a “tax cut.”

Bartlett exposes the caricature that has taken over conservative economic thinking, the slavish devotion to dogma that makes it impossible to consider the circumstances of our new reality. Think about it. Talk to a conservative about economic policy, and the answer, regardless of the circumstances, is usually the same – spending bad, tax cuts good. I can teach a three-year-old to repeat that.

Bartlett goes on to explain why massive spending was necessary with the economic collapse we faced last year, and the obscenely stupid response of many conservatives who suggested addressing the problem with more tax cuts.

Bartlett was an adviser to Jack Kemp and helped write the Reagan tax cuts. This is a must-read for anyone who wants to understand the history of supply-side economics and why one of its chief architects is arguing that it doesn’t apply today.

  

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