NDN Blog

Beastly Economics

The President seems to be wanting to talk about the conservative economic record at the moment. So this might be a fun time to remember what yesterday told us about two recurring, contradictory and economically rather silly tax nostrums trotted out by Republicans. These are the laffer curve and the starve-the-beast hypothesis, supported by Art Laffer and Milton Friedman respectively. The first turns up from time-to-time in the President's speeches as a justification for tax cuts. It argues that, up to a certain point, tax cuts cause higher tax takes because of changed incentives. The second, confusingly, means almost completely the opposite. It argues that tax cuts lower government revenue (and hence spending), starving the beast in question.) Which is right? Turns out - drumroll - it's neither.

A splendid post at the scarcely Keynsian Wall St Journal picks up new figures put out yesterday by the Administration explaining why the tax cuts don't pay for themselves:

"The congressional Joint Committee on Taxation, using conventional analyses, says making the president’s tax cuts permanent would reduce federal revenues in 2016 by $314 billion. That is more than 10 times what the Treasury analysis suggests tax cuts would generate."

(There is more on this at Brad De Long's ever excellent blog too, where he also agrees with Rob's post below on previously high deficit estimates.) And what of the beast? Yesterday's events shed less light on that, beyond the President's admission that little had been done on his watch to curb entitlement spending. Its common knowledge that spending has increased mightily under what the Economist calls his "Big Government Conservatism." But beasts aside, sensible economic theory isn't much surprised by this. Americans are at present getting roughly the same ammount of Government for less money. It makes perfect sense for them to then want more of it, because they don't have to pay as much for it in taxes. The rub, of course, is that future generations do, through the now 4th largest ever deficit. I'm afraid I can't find a WSJ article to back me up on this, so the CATO Institute will have to do instead. So there you have it. Taxes go down, so do revenues. Taxes go down, government spending does not fall, but deficits get bigger. Come in Mr Laffer, and Mr Friedman. Your time is up.

The Hidden Cost of the Falling Deficit Forecast

Once again, administration officials are corrupting a branch of economic science, and the American economy will pay a much bigger price than they realize. This week, the Treasury announced that based on spending and revenue data through May, the 2006 budget deficit will be some $100 billion less than the Treasury estimated just last February. The White House used the new estimate to trumpet the success of its tax cuts – which makes no economic sense, because Congress hasn’t passed tax cuts since February that could affect current economic activity in any way.

That leaves two possibilities. Either the revenue estimators at Treasury and spending estimators at OMB are wildly incompetent, and only recently became so – which frankly is not very likely. Or, the Treasury and White House manipulated the February estimate upward -- for example, using the most pessimistic economic assumptions available and massaging pay-out formulas for entitlements – so they could claim progress for their controversial policies in July. For an administration that has pursued political gain at almost any price, time and again, that seems entirely likely.

When the senior economic agencies and officials of the United States Government produce deficit estimates which wouldn’t pass muster in economic forecasting 101, they mislead the capital markets. Tens of billions of dollars in investments are made assuming that these estimates are as accurate as humanly possible – and no private forecaster can do an equally authoritative independent estimate, because nobody outside government has the Treasury’s revenue datasets and OMB’s spending datasets.

When these estimates are manipulated for cheap political purposes, it corrupts vital information flowing into U.S. capital markets, impairing their basic efficiency and distorting the distribution and cost of investment capital. And if it becomes a pattern – and when has this administration given up any of its bad habits? – the markets could simply stop trusting government data, and then the American economy could really suffer.

Wednesday Morning Roundup

The headlines from today’s paper are not reassuring: terror in Mumbai, Baghdad boils, the Israeli incursion into Gaza continues, and spreads into Lebanon, Russian secret police publically arrest dissenters during an international conference about democracy, election troubles continue in Ukraine and Mexico.

Add to all this the troubling developments of the last few months – the Supreme Court’s challenge to much of the legal theory behind Bush’s war on terror, the growing belligerence of Iran and North Korea, the election success of Hamas, rising anti-Americanism in Latin America, the collapse of the Doha round of trade talks – and it is clear that American foreign policy – whatever today’s rationale is for it - is not achieving what we need it to. 

Josh Marshall at Talkingpointsmemo has had a series of thoughtful posts this week about the utter failures of Bush.  As he wrote last night: “Put simply, do we not detect a pattern in which the foreign policy neoconservatives strike out boldly on some foreign policy adventure, flop right down on their faces and then present the cause of their undoing as a novel insight wrestled from the maw of history when in fact, to everyone else except for them, this 'insight' was completely obvious and predictable from the start?"

Yesterday EJ Dionne had what I believe was a polite column, suggesting that the debate over the Bush era will be a challenging and difficult one for the 2008 Republican Presidential candidates.  He’s right.  The failure of the modern conservatives to do the basics – keeping the world safe and secure, fostering broad-based prosperity, paying our bills, resisting corruption – has been astonishing.  At a very simple level they’ve just blown it, big time, and a lot of what we have to do now in America is set a new course while cleaning up the mess they’ve left.   Bush’s recent admission that bringing the troops home from Iraq would be something left to his successor was in its own way an admission of failure, a throwing up of his hands, a nod to that they given it their best shot and had failed.

Our view here is that the monumental failure of conservative government is the most important political and intellectual story of our time, one with profound consequences for America and our future, and is something we as progressives must put front and center in the fall elections and beyond.   I reprint a portion of an essay we released hours before the State of the Union earlier this year (this essay and other ones on the topic of the conservative movement can be found at our Meeting the Conservative Challenge page):

“Tonight the President reports to the nation on the State of the Union. We will hear soaring rhetoric, powerful words, a President resolute and determined. We will hear of victories, progress, and pride. He will tell a compelling story – and very little of it will be true.  The truly compelling story of this decade is one that Bush doesn’t want told – the rapid and dramatic failure of conservative government.

Finally in a position of virtually unchecked power after decades in the political wilderness, modern conservatives have failed quickly and utterly at the most basic responsibilities of governing, leaving our nation weaker and our people less prosperous, less safe and less free.  Seduced by the temptations of power, these movement ideologues also quickly came to believe that the rules of our democracy did not apply to them. The result is one of the farthest-reaching episodes of corruption and criminal investigations into a governing party in our history.

To fully appreciate the State of the Union, we need a deep understanding of the conservative movement and its rise to power. Jumpstarted a little more than fifty years ago by William F. Buckley’s National Review, the conservatives began their long march to power by investing billions of dollars in a modern infrastructure to combat the entrenched position of progressives in government. They used this infrastructure – think tanks, for-profit media, superior and innovative forms of electioneering – to defeat an aging progressive movement, and now have more power than at any time since the 1920s.

In recent years America has learned what life is like under a true conservative government. With near absolute power, conservatives have pursued their agenda with little compromise or input from progressives. The latest chapter of the great conservative story – the Bush years – may have been one of political victories, but it has also been one of disastrous governance. The broad and deep failures of the Bush government should cause all Americans to reappraise the virtue of this grand conservative experiment, recognizing that even after 50 years and untold billions of dollars, they have yet to come up with a true alternative to 20th century progressive government -- which did so much good, for so long.”

I hope the NDN can make getting this conversation into the public debate one of our highest priorities for the remainder of the year. 

"Group to register young Latinos to vote through text messages"

I guess this entry could also have been in the Hispanic / Latino category as well... In prepping for the upcoming NPI event I found this news story from the Gannet News Service... Here are excerpts:

Group to register young Latinos to vote through text messages

WASHINGTON - Text messaging worked so well in rallying young Hispanics
to immigration protests this spring that political activists want to
apply the technology elsewhere: registering those young people to

The message is a simple one, said Maria Teresa Petersen, executive
director of Voto Latino, which plans to register at least 35,000 young
Hispanics nationwide through the text message initiative.

"You've marched," she said. "Now you've got to register and now you've
got to vote."

Voto Latino, founded by actress Rosario Dawson, is among a number of
political organizations targeting young Hispanics for voter outreach
efforts. The group plans to launch their initiative early next month...

"It's not just a question of who you can register now, it's who are
you influencing for the 2008 elections as well," said Antonio
Tijerino, president of the Hispanic Heritage Foundation...

Through text messaging, musicians at a concert, for example, can ask
their fans to text Voto Latino to register to vote. Those fans would
receive an immediate response from Voto Latino with instructions on
how to get a voter registration form.

They also could forward that message to their friends.

The use of the technology is even more prevalent among youth and
Hispanic cell phone users. About 65 percent of Americans between the
ages of 18-29 use text messaging; 54 percent of Hispanics use the
technology. By comparison, only about 35 percent of the general
population does, according to a recent study by the Pew Internet &
American Life project.

But despite the popularity of text messaging, political campaigns and
voter outreach groups have yet to tap the potential of the technology,
said Julie Germany of the Institute for Politics, Democracy and the
Internet at George Washington University...

New Commercial ratings system for TV networks

There is a story in Ad Age this morning - free subscription - about how the TV Networks will be altering the data used to determine cost for upfront ad buys for next season to account for DVR's and commercial skipping....interesting development.

Silk Purse - meet Sow's Ear

Lots of intriguing economic issues bubbling around the press today, much of it summed up rather nicely in the leading Times editorial this morning, Another Mission Accomplished. Following his trip to Chicago, Bush will today wax euphoric over a slightly lower than expected budget deficit of$300bn. If you see some lipstick in the President's pocket, it might well be the beginning of a concerted campaign to pretty up his pig of an economic record.

Yesterday, the President spun the line a little further in remarks at the swearing in of Treasury Secretary Paulson. He put the best possible gloss on the latest job creation and unemployment figures, before concluding that all of this was "leading to higher wages and a higher standard of living for our people."

Luckily for us, the lie of this pig-polishing exercise on these three claims - the economy is doing well, $300bn isn't actually a bad federal deficit, and living standards are rising for "our people" - was nicely disproved before the lipstick was dry, in three excellent papers by the Center on Budget and Policy Priorities.

First, they point out that the current recovery is much weaker than the average for comparable recoveries since the Second World War, with the noteable exception of strong growth in the corporate sector. Second, they point out that any reduction in the federal deficit is a combination of expectations management (previous estimates were on the high side) and a strong tax take from (guess who?) the very richest Americans. Even given that - the administrations claim that the current is low by historical standards only works if you count times of war and reagan's fiscal recklessness. Without those, its a whopper. And, finally, they profile new data on income distribution for the last year in which figures are available. It is here that the President's phrase "higher standard of living for our people" comes into sharpest relief. It notes

"an exceptional jump in income concentration in 2004. The share of the pre-tax income in the nation that goes to the top one percent of households increased from 17.5 percent in 2003 to 19.5 percent in 2004. Only five times since 1913 (the first year that this data set covers), and only twice since World War II has the top one percent’s share risen by as much in a single year (in percentage point terms)."

So, there you have it. In as much as the economy is doing well it is doing well for our [wealthiest] people. Despite this a new campaign is clearly underway to gloss up the President's economic record, going into November. No ammount of lipstick should hide the fact that - for the quiet majority of Americans - this is an oinking economic recovery complete with little trotters and a pink twirl-around tail.




Tuesday Morning Roundup

This one is a little longer than usual, as we have a few good ones left over from the weekend.   

The Times starts the day with an editorial questioning the President’s economic cheerleading, reminding us that deficits are still way too high and the governing Party has little so say about the central economic issue of the day, the decline in wages for most Americans. 

Ratings are in for the World Cup, and they exceeded everyone’s expectations.  Even though Spanish speakers are somewhere between 5-7 percent of the overall population, Univision scored at a third of all the Sunday’s final viewers.  The extraordinary performance of Univision throughout the Cup validates the strategic intent of the NDN Political Fund’s 5 month long "mas que un partido" campaign to speak to Hispanics using the powerful metaphor of soccer.

Rep. Peter Hoekstra, a close Bush ally, says in a letter to the President that some of the domestic spying by the Administration may have been “illegal;” Talkingpointsmemo has two worth reading: first a reprise of a post from the New Republic blog about the growing sectarian violence in Iraq; second, a compelling entry about an LA Times piece about the utter failure of the Iraqi police.

Gary Kasparov challenges the West to stop coddling the increasingly autocratic Russians; the Post’s Sebastian Mallaby has another in a series of thoughtful op-eds, this one challenging the notion there is little to do to stop global climate change; and as we battle over immigration, a thoughtful NY Times op-ed reminds us that the first permanent settlements of what is now the United States were Spanish.

Appropriately a judge finds the seizure of documents from a Member of Congress’ office legal; the McCain led takedown of Grover Norquist continues, as assertions of his corruption change a conservative movement leader’s reach; a LA Times education blogger discovers the $100 laptop, a device that could change education as we know it.  If Democrats are looking for big ideas I think putting “a laptop on every desk” of every child would be a very 21st century update of a “chicken in every pot.”

And in New York magazine this week, John Heilemann discusses the rise of Kos and the battle over Lieberman.  Features a few quotes from an NDNer. 

Let us know if we missed anything. 


Viral and Social Video Online: "A Campaign Game-changer..."

From today's Post, an article on viral and social video and the role they will play in upcoming political campaigns. Excerpts below:

While bloggers played a role in the last presidential election, most advertising and message delivery still comes from campaigns, political parties and interest groups with enough money to bankroll a television blitz. But the YouTube revolution -- which includes dozens of sites such as Google Video, Revver.com and Metacafe.com -- could turn that on its head.

If any teenager can put up a video for or against a candidate, and persuade other people to watch that video, the center of gravity could shift to masses of people with camcorders and passable computer skills. And if people increasingly distrust the mainstream media, they might be more receptive to messages created by ordinary folks.

"YouTube is a campaign game-changer, shifting the dynamics of how to reach voters and build intimate relationships," says Julie Supan, senior marketing director for the small, California-based firm, which by one measure now runs the 39th most popular Web site. "YouTube levels the playing field, allowing well-backed and less-known candidates to reach the same audience and share the same stage."

Even the seemingly simple act of posting footage of a politician's interview on "Meet the Press" or "The Daily Show" has a viral quality, because it can be seen by far more people than watched during a single broadcast...

While the site's amateur contributions range from nasty to uplifting to downright silly, they also restore a measure of fun to politics -- precisely what might appeal to younger people turned off by traditional speeches, ads and rhetoric. Supan says the modest viewing levels for politicians' pages reflect the pedestrian content of standard speeches and ads -- and will likely remain that way until they come up with behind-the-scenes footage or other eye-catching fare.

"At the end of the day," she says, "it's all about entertaining."

Ruth Marcus on the Lieberman race

I've already weighed in heavily over the past few days on the Lieberman race, so I won't be commenting that much more on it other than to comment on the commentary itself.  So much of what has been written about this race has been inaccurate.  An exception was a piece Ruth Marcus had in the Post today.  

In the piece she hits both sides with inconvenient truths.  For the Lieberman world, she makes it clear that the opposition and concern she felt while in Connecticut was something Connecticut voters themselves feel, not something cooked up by outside bloggers or Lamont.  

The Lieberman campaign seems still to be struggling to figure out exactly what happened up there.  But the math is pretty simple.  A third of the country opposed the Iraq war when it happened in 2003.  That means that perhaps as much as half of all Connecticut voters opposed the war when it happened; and this certainly means that more than half of all Democratic primary voters opposed the war three years ago.  And things have dramatically worsened since then. 

For the last three years Senator Lieberman has made his steadfast support of our troubled occupation perhaps his signature issue.  He just wasn't that he stood by the President.  He criticized other Democrats who did not share his view.  

So, he firmly identifies himself as a national spokesman on perhaps the most salient issue of the day; his position is deeply unpopular at home with all voters, particularly Democrats; rather than acknowledging the concerns of voters, and working to accomodate them somehow, he begins his campaign with an ad saying that we will have to agree to disagree on this one; and then gets insulted and angry that people aren't looking beyond this one issue to the totality of his career. 

But don't candidates lose all the time for being on the wrong side of a single, powerful issue?Don't people lose over voting for a tax increase, being anti-choice, even for just being a Democrat? Isn't this part of the game? And aren't all elections about the what you will do for the voters, not what you've done? Ask Winston Churchill, or Al Gore Sr. 

The righteous indignation of Senator Lieberman on the ability of Democrats to challenge him for his public stance on the war is a little much to take.  On this issue, whether he is right or not (and that certainly is not clear), he is wildly out of touch with his constituency back home.  But in her piece today Marcus also points out that the national community of internet activists, bloggers and moveon seemed to have become overly obsessed by this race, and that I agree with.  With so many critical races around the country for Senate, House, Governor and beyond, why is the one battle, over a safe seat, so important?  Much has been written about why the amount of energy put into defeating Lieberman has been worth it.  I think most of it is unconvincing. 

I agree that the way Lieberman scolded his fellow Democrats over the Iraq war, and then last week started collecting signatures for an independent run, have been two extraordinary mistakes - big enough mistakes to prevent him returning to as a Senator.   But given the limited resources we has as a movement, I also believe the amount of national effort going to be oust him is also an unfortunate occurrence.  I wish the passion, the energy, the time, the effort going to oust Joe had been directed in many other places.   But we are way beyond that now. 

Bill Clinton: Football Star?

The NDN blog, like the rest of the world, will soon leave the World Cup behind. Before it does i have one odd story to recount. In between the headbutting, yesterday's final coverage on ABC featured the staple broadcasters cut-aways to politicians, player's wives and random pretty-girls-in-the-crowd. We had a jowly looking Chirac, an anonymous looking Sepp Blatter, and an Italian stepford wife. In the packed bar where I watched the game only one of these got any reaction at all. And that was President Clinton. And what a reaction it was. I kid you not: the President appears, and the crowd errupts in cheers. The whole bar then begins a boisterous chant of "OLE! OLE! OLE! OLE! CLINT-ON! CLINT-ON!". I make no particular political point about this, beyond the fact that i was amazed. A bar packed with Europeans - nay a bar at least half packed with FRENCH Europeans- cheering an American President. It was a pleasant reminder of the way things could be.

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