The Big Lie: Part III

Ask conservatives what caused the financial crisis and you will hear that it was driven by government affordable housing goals that "forced" the GSEs, Fannie and Freddie, to pressure the private mortgage market into making loans to those who clearly couldn't repay them. These goals were the mechanism that compelled otherwise sound and sober lending institutions to make a mess of the U.S. economy. That's how the story goes.

The SEC has now filed suit against former GSE executives, and the story the SEC tells is very different. As has been reported by many independent analyses, the GSEs were followers, not leaders, in the sub-prime crisis. Furthermore, they got into the business belatedly not because of any government mandate, but because they were chasing market share and big bonuses.

For a good run-down of this, see Karen Petrou at Federal Financial Analytics.

The money quote: "the GSEs didn’t do it because they cared so much about the affordable-housing goals that, pressed by their regulator, they threw caution to the winds. They threw caution to the winds instead because they got paid better each time a breeze blew by."

PoltiFactoid

Jon Chait has an exceptionally smart column on PolitFact's bizarre choice to label the claim that the Paul Ryan budget would effectively kill Medicare as the "Lie of the Year."

The money quote

Is that [the Ryan plan] “ending Medicare?” Well, it’s a matter of opinion. At some point, a change is dramatic enough that it is clearly ending the program. If you proposed to replace Medicare with a plan to give everybody two free aspirin on their 65th birthday, I would hope Politfact would concede that this would be “ending Medicare,” even if you call the free aspirin “Medicare. . . .”

Does the Republican plan indeed end Medicare? I would argue yes. But it’s obviously a question of interpretation, not fact. And the whole problem with Politifact’s “Lie of the Year” is that it doesn’t grasp this distinction. Politifact doesn’t even seem to understand the criteria for judging whether a claim is a question of opinion or a question of fact, let alone whether it is true.

Matt Yglesias makes a similar point.

House Republicans voted to replace Medicare's existing single payer fee for service program with a different program, also called "Medicare," under which (in the words of Politifact) retirees "would receive 'premium support payments' from the government to help pay for the private insurance." Whether or not this change should be described with "harsh" terms is clearly a matter of ethical judgment. But it's obviously a big change. Mitt Romney, for example, lauded the plan as reflecting "the need to fundamentally transform Medicare." If friends of the plan describe it as fundamentally transforming the program, can it really be wildly illegitimate for its foes to describe it as ending Medicare? . . . This is a hair-splitting disagreement, not a gaping void of factual error and deliberate deception.

The Big Lie: A Follow-up

Joe Nocera, a NY Times financial columnist and co-author of All the Devils are Here, my favorite book on the financial crisis, has just published a column that fills out the Wallison/Pinto argument that Fannie and Freddie were behind the entire financial crisis. In his original (and very good) column on the government's official report on the financial crisis, he dismissed Wallison's singular dissent as a as a “lonely, loony cri de coeur”, a description for which (not surprisingly) Wallison took exception.

Now the SEC has filed suit against Fannie and Freddie for making “materially false” statements about the size of the companies’ investments in subprime mortgages. Nocera makes a good case that the charges are extremely weak. Read the column yourself for the particulars.

Nocera concludes the column with this:

After the S.E.C. filed its charges on Friday, I received an e-mail from Wallison, suggesting that the complaint proved that he had been right and that I had wronged him. I now concede that he is half-right. Loony though his theory may be, he’s sure not lonely anymore.

The Big Lie

First, a personal anecdote. One day in September or October of 2008, a time when it looked like the world was about to end, one of my colleagues--a stanch conservative and Rush Limbaugh devotee--came to my office and offered the unsolicited observation that Fannie Mae and Freddie Mac were responsible for the financial meltdown we were witnessing.

I found this observation odd at the time and I said so. As I pointed out, Fannie and Freddie were not mortgage originators. My view at the time, before I entirely understood the role Wall Street played in this mess, was that the primary culprits were private non-bank mortgage originators, such as Countrywide, Ameriquest, New Century, and IndyMac which made a practice of providing sub-prime mortgages (both new homes and refinancing of existing homes) to people who could clearly not afford them. They were able to do this because they did not keep the loans. They sold them off to investors, who would bundle together as mortgage-backed securities. Since they weren't on the hook if the mortgages went bad, they had no personal stake in sound underwriting principles. In short, they blew up the economy because they could make a lot of money doing it.

In any case, my colleague's view was that Fannie and Freddie--quasi government institutions--created the crisis because they "forced" lenders to lend to the undeserving poor.

This view has been widely repeated in conservative media outlets. Even Michael Bloomberg has repeated this story. Gretchen Morgenson, a highly-respected New York Times financial reporter, has also endorsed one version of this story.

Quite simply, this story is wildly at odds with the facts. It was cooked up by conservative ideologues who cannot abide the notion that a catastrophic financial collapse was brought on by people working in the private enterprise system and motivated by a desire for ever larger profits.

The government created a commission whose goal was to document and explain the causes of the 2008 meltdown. The official Financial Crisis Inquiry Report was predictably unable to achieve bipartisan agreement. The main report was endorsed by Democratic members and a minority report was endorsed by Republican members. This is not surprising. What was surprising is that there were TWO minority reports, one representing the views of all of the Republican members, except one. The second reflected the views of Peter Wallison, an American Enterprise Institute scholar, and it was only this dissent-from-the-dissent report that pushed the Fannie/Freddie-did-it line. Even the great majority of the partisan Republicans on the commission could not bring themselves to endorse a position that was so clearly inconsistent with the historical record.

How does Wallison support that which all of his colleagues rejected? Apparently, he relied on research by AEI consultant Ed Pinto that basically redefines "sub-prime" in such a way as to implicate the GSEs. For a detailed analysis of the Pinto research, see the work of Center for American Progress's David Minn. This graphic summaries it fairly well.

As you can see, the default rate of Pinto's "high-risk" loans look much more like the national average than actual sub-prime mortgages.

For a fair and comprehensive treatment of the financial crisis for those who don't want to wade through the government report, I would recommend All the Devils are Here by Bethany McClean and Joe Nocera. The basic story they and others tell is that, yes, Fannie and Freddie did get into the sub-prime mortgage business, but they were followers, not leaders. Fannie and Freddie entered this business fairly late in the crisis as an attempt to recapture some of the market share they had lost to the private market which had been originating sub-prime loans and selling them to Wall Street for years.

In his extremely negative review of Morgenson's book on the crisis, Robert Kuttner, though no apologist for GSEs, outlines who he sees as the worst offenders in the crisis in order of culpability.

1. Alan Greenspan's Federal Reserve, which lowered interest rates without increasing regulation, refused to enforce a 1994 law requiring prudent underwriting standards and turned a blind eye to abuses in the process of loan securitization.
2. The Office of Thrift Supervision, which let savings banks under its supervision engage in outlandishly risky practices.
3. The Wall Street firms that bankrolled subprime lenders and turned their high-risk loans into securities.
4. The credit-rating agencies that blessed toxic subprime securities with Triple-A ratings.
5. The SEC's failure to police those agencies
6. And, of course, the subprime lenders themselves.

This seems about right to me. The financial crisis, the effects of which we are still living through, was caused by a failure of government, but not the type of failure the Right would have you believe.

Paul Ryan's Ideological Blinders

Jon Chait just published one of the best analyses of the conservative world-view as espoused by the Right's unofficial guardian of the faith, Paul Ryan.

Chait points out how conservatives in general and Ryan in particular twist themselves into pretzels attempting to explain one of these three positions:

• despite all of the evidence, rising income inequality doesn't really exist
• it does exist, but it isn't a problem
• it does exist, and it is a problem, but it is a problem for which the only solution is, wait for it, shifting the tax burden even further away from very high income earners and onto the middle class.

Sometimes the rhetorical gymnastics required for this leads conservatives to oppose their own stated positions, as Ryan does in the speech Chait quotes when he accepts in principle the Warren Buffet secretary problem, despite the fact that he has formally proposed ending all taxation on interest, stock dividends, inherited estates, and capital gains the existing low taxes on which are collectively the main cause of the Buffet problem.

The Flat Tax: Bait and Switch

Rick Perry has rather predictably proposed a flat tax. Like the flat tax previously proposed by Steven Forbes, it is packaged in a dishonest way.

The selling point is that it is simple. You can fill out your taxes on a postcard! The problem with this is that the source of the real complexity in the tax code is NOT its lack of flatness. The tax code is bewilderingly complex because of the myriad of special rules, exemptions, and deductions. These features are built into the tax code because of the ability of powerful interests to lobby Congress for rules in the tax code that benefit them. 

So, if we want to simply the tax code, then we can easily do that. Many people have proposed it, but it never seems to happen. Why? It is because of the ability of powerful interests to spend large amounts of money to influence lawmakers. No one wants to give up their tax breaks.

So why is the flat tax a perennial favorite of conservative politicians? It is not about complexity. It is about shifting the tax burden away from the very wealthy onto the middle class. The flat tax dramatically lowers rates for high income earners and typically eliminates entirely taxes that fall disproportionally on the wealthy, such as taxes on capital gains, stock dividends, and inherited estates.

Herman Cain's 9-9-9 tax plan--which is also a type of flat tax--does the same thing. Paul Ryan's Roadmap (not a flat tax) did as well.

Here's a serious question: Are conservatives capable of supporting a tax plan, any tax plan, that does NOT effectively dramatically lower Warren Buffet's tax burden?

Does anyone seriously believe that the real problem in our society is that the very wealthiest Americans pay too much in taxes? Does anyone believe that the solution to the Buffet problem is to lower Warren Buffet's tax burden even more, while raising the burden on his secretary even more?

David Frum Eviscerates Rick Perry's "Jobs Plan"

No comment necessary. . . .

A powerful take-down.

The "Uncertainty" Fallacy

A consistent message from Republican politicians, conservative pundits and talk show hosts, and the Chamber of Commerce is that the jobless recovery we are in is the result of uncertainty in the business community brought on by the tax and regulatory policy of the Obama administration.

This claim is, not to put too fine a point on it, pure baloney. Employers aren't hiring simply because consumer demand for their products and services is depressed due to ongoing effects of the financial crisis. I could spend a lot of time laying out the evidence for this, but I don't have to. Lawrence Mischel of the Economics Policy Institute has already done this much better than I could have. His article is a devastating expose of the complete phoniness of the uncertainty argument.

It is a good read.

To get a clear indication of how phoney the "uncertainty" argument really is, see this rebuttal of Mischel's article by conservative think tank, American Enterprise Institute. It is a classic case of praising with faint damnation.

Two Reagans

As the years pass the Ronald Reagan administration looks worse and worse. Well, at least half of it does (more on that later). One of the best indications of the relative success of Reagan's economic policies is the incredibly poor quality of the writing that seeks to defend them.

This morning's USA Today offers an excellent example. In an essay entitled "The Reagan Stimulus vs. the Obama One" Paul G. Kengor seeks to show how Reagan's tax cut stimulus was a rousing success while Obama's fiscal stimulus was a complete failure. The essay gets off to a shaky start:

Reagan's initiative was the antithesis of President Obama's $800 billion "stimulus" that didn't stimulate. The 2009 version was the single greatest contributor to our record $1.5 trillion deficit. It was, plain and simple, what Reagan didn't do.

Obama's stimulus didn't stimulate? All of the independent economic analysts (CBO, Moody Analytics, etc.) that have looked at the 2009 Recovery Act have concluded that it achieved just about what the administration said it would. The problem wasn't the effectiveness of the stimulus. As I have written here before, the problem was that the economic hole we were in was much deeper than anyone knew at the time. This is not opinion. Recent revisions of GDP data have confirmed this. We are entering a very weak economic patch right now at least partly because the effects of the stimulus are pretty much over.

The stimulus was the "single greatest contributor to our record $1.5 trillion deficit"??? This one is a real howler. Anyone even marginally familiar with the data knows that the CBO predicted in January 2009 that the deficit for 2009 would be well above $1 trillion. This is BEFORE the stimulus was even proposed, and certainly before any of its provisions had taken effect. The deficit exploded in 2009 not because of the stimulus, but because of the financial crisis--tax receipts shrank and automatic safety net programs (unemployment insurance, food stamps, etc.) went up.

The opening paragraph pretty much sets the tone for the remainder of the essay, which is a hagiographic combination of remembered Reagan through a filter of selective amnesia and rose-colored glasses. He continues to extoll the virtues of the Reagan tax cuts:

The enemy that day was America's progressive federal income tax system. . . .

After a slow start through 1982-83, the stimulus effect of the cuts was extraordinary, sparking the longest peacetime expansion in U.S. history. The "Reagan Boom" not only produced widespread prosperity but—along with the attendant Soviet collapse—also helped generate budget surpluses in the 1990s.

Again, none of the primary claims in these two paragraphs are true. First, the main obstacle to economic growth in the first two years of the Reagan administration had nothing to do with tax rates. The chairman of the Federal Reserve, Paul Volker, had decided that he was going to once and for all wring inflation out of the American economy. He did this by severely restricting the money supply and raising interest rates to 21%. This is not a typo. Volker's plan worked, lowering inflation from 13.5% in 1981 to 3.2% by 1983. However, in the interim it had a devastating effect on the economy, which experienced the deepest recession since the 1930s. However, when Volker decided to declare victory over inflation and lower interest rates back to normal levels, the economy exploded. In comparison to this, the effects of Reagan's tax cuts was quite small. Indeed, the first round of tax cuts when the economy grew the fastest left the top rate at 50%, much higher than the 35% of today.

Second, Reagan devotees never tire of repeating the "longest peacetime expansion in U.S. history" line, despite the face that it simply isn't true. The Reagan expansion lasted 32 quarters from the Q4 1982 through Q3 1990. Pretty good, eh? Well, not as good as the 40 quarters of expansion from Q2 1991-Q4 2000 that began during the Bush I administration and continued throughout all of the Clinton years. Moreover, the Clinton expansion saw better job growth than the Reagan years (23 million jobs vs. 16 million jobs) and much better budget results, with Clinton leaving a substantial surplus and Reagan leaving a substantial deficit. Lastly, the Clinton economic performance occurred after two increases in the top marginal income tax rates, first in 1990 under Bush I (28% to 31%) and then again under Clinton in 1993 (31% to 39.5%). How Reagan's economic policy was responsible for economic growth during the Clinton administration is not explained. One might just as well argue that the economic policies of LBJ were responsible for all the good that occurred during the Reagan years.

In any case, comparing the Obama stimulus to the initial Reagan tax cut is a particularly pointless exercise, since the economic conditions that preceded them were wildly different. Reagan dealt with high inflation and high interest rates, but the Obama stimulus was passed during a deflationary period when interest rates were near zero.

Kengor feels it necessary to respond to the "myth" that Reagan's tax cuts were responsible for the deficit by pointing out "Tax revenues under Reagan rose from $599 billion in 1981 to nearly $1 trillion in 1989. The problem was that outlays all along outpaced revenue, soaring from $678 billion in 1981 to $1.14 trillion in 1989." The $599 billion in 1981 that Kengor cites was 19.6% of GDP that year. The nearly $1 trillion in 1989 he cites was 18.4% of GDP. Ironically, over the same period and using the very data he cites, spending went down as a percentage of GDP from 22.2% to 21.2%. So, even the data he cites demonstrates exactly the opposite of what he claims. Not only is it not a "myth" that the Reagan tax cuts caused the Reagan deficits, his own data proves it.

However, there was another Reagan, the Reagan of foreign policy achievements. In this arena Reagan was much more successful. His Teddy Rooseveltian policy of speaking softly and carrying a big stick was effective in helping to win the Cold War. He did not do this alone, as many Reagan sycophants insist. He had a lot of help from a Polish Pope, a Polish labor leader, and a man by the name of Mikhail Sergeyevich Gorbachev. Had Gorbachev been willing to fire on his own people to prevent change, events in the eastern block would have turned out differently. Nonetheless, Reagan deserves his not insubstantial share of the credit. Unfortunately, it is this aspect of the Reagan administration--the truly successful part--that contemporary Republicans have almost completely forgotten. Be strong, yes, but engage your enemies with relentless negotiation is an approach that the Bush II administration abandoned.

Even on tax policy, Reagan's demonstrable flexibility on the subject--lowering taxes when he could, but raising taxes when necessary--is an anathema to the modern GOP. Too bad.

Sarah as Kim

Has it occurred to anyone else what an attention whore Sarah Palin is? She shows up at Ames during the Iowa straw poll event--an event that is part of an election she is not a candidate in--just to bask in the attention she gets. Mike Huckabee isn't running either and he is there also, but at least he is playing guitar for several of the candidates.

The woman is the Kim Kardashian of the political world without the sex tape.

A Twofer

This is the first time I have referenced the same columnist's work twice in a row, but David Frum is on a roll.

A must read.

Less Politics, More Economics

Frum and the opening of the American mind

David Frum has two great columns that anyone interested in the current economic calamity should read.

Were our Enemies Right?

If Conservatives Were Right About the Economy

These are written by a man who has not changed his core beliefs, but who is also willing to subject his beliefs to empirical data.

What if the Two Parties were Alike?

Jonathan Chait asks this question and envisions an era of unprecedented partisan warfare unseen since before the Civil War.

In 2006, Democrats won a landslide victory at the polls, sweeping to majorities in both houses of Congress. And then, the Democrats proceeded to do … hardly anything at all. Their agenda consisted mainly of halting George W. Bush’s domestic agenda. Even on the Iraq war, the unpopularity of which fueled the Democratic wave, the party did not make a serious effort to defund the campaign. Ultimately, Democrats funded a troop surge.

The rough equivalent would be if Republicans this year wound up expanding the Affordable Care Act to cover illegal immigrants. (To make the parallel between 2007 and the present more exact, we’d have to imagine that Republicans control the entire Congress, not just half, and that President Obama has lost about a quarter of his current popularity.) This scenario, of course, is unimaginable.

What are we to make of the contrast? One conclusion is that the GOP is the more disciplined, parliamentary party. I’ve made this case myself. But that is not the only implication, or the most disturbing. Why didn’t the Democratic Congress behave under Bush like the Republican-controlled House has behaved under Obama? Why didn’t it simply refuse to fund the Iraq war or to threaten financial cataclysm by holding the debt ceiling hostage unless Bush, say, raised taxes for the rich?

Democrats will have learned from history. It will not be pretty.

Partisan Hackery on Magnificent Display

I read USA Today. Every day. In this morning's paper the editors published a very good op-ed entitled What would Reagan do? Not what today's GOP is doing.
The basic point of the article is that Reagan had a proven track record of compromising with Democrats and raising taxes when necessary on several occasions. He even decried threats to not raise the debt limit. All of this stuff is a matter of historical record and can easily be checked.

As is their custom, the paper offered the opportunity for an opposing viewpoint. They got one from Lee Edwards, a fellow at the Heritage Foundation and author of The Essential Ronald Reagan. Since the facts cited by USA Today are indisputable, I was curious to read what Edwards would offer in rebuttal.

His approach was pretty simple: ignore the USA Today article, botch some statistics, and misstate some data--a more confrontational person would accuse him of lying, but that's not my style. Quoting from his response:

Reagan raised the debt ceiling some 18 times because he was confident that in the long run, his program would create jobs and substantially increase government revenues as they did, nearly doubling between 1980 and 1990.

This is the same type of mendacity (whoops, I should watch my civility) that I complained about with Joe Scarborough and Jim DeMint. Edwards cites meaningless raw numbers that indeed show that revenues increased from $517 billion to slightly over $1 trillion in the 1980s, nearly doubling. However, if you simply index the numbers to inflation, which was much higher in the 80s than it is now, the increase is from $1.2 trillion to $1.5 trillion in constant 1985 dollars, an increase of only 26%. An even better metric is to look at revenues as a percentage of GDP. In 1980 they were 21%. The figure in 1990? 19%. In other words, the data shows exactly the opposite of what Edwards claims of them. Reagan's policies lowered, not raised, the amount of revenue the government collected compared to the size of the economy.

Next, he claims the following.

The act (Regan's tax cuts) produced 92 months of economic growth--the longest period of peacetime economic growth in the post-WWII period--and 17 million new jobs in the Reagan presidency. 

The 92 months he refers to is from the 2nd quarter of 1982 through the 3rd quarter of 1990. The government doesn't publish monthly GDP data. It provides quarterly data. The quarters both before and after this period saw a substantial decrease in growth. After a drop in growth in the 4th quarter of 1990, the U.S. did not experience a single quarter in which growth fell until the 2008 calamity, a period of 28 years! This is a substantially longer period of uninterrupted growth than the 92-month figure quoted by Edwards. Furthermore, in the Clinton administration alone more than 22 million jobs were created, again substantially outpacing the jobs-growth figure of the Reagan years. This performance occurred after Bush I and Clinton raised marginal tax rates on the wealthy, something Heritage Foundation fellows do not typically mention.

Finally,

Here at home, by the end of the Reagan presidency, the federal deficit as a share of GDP had fallen from 6.3% in 1983 to 2.9% in 1989.

Notice, he is aware of the % of GDP data. He just cites it selectively only when it supports his overall point and ignores it when it doesn't. Since the earlier statistic Edwards cited about government revenues compared 1980 to 1990, you might wonder why this statistic compares 1983 to 1989? He picks 1983 as his baseline (two years into the Reagan presidency) because the deficit was artificially high due to the deep recession the country was in. If you instead use as your baseline 1981, the year Reagan was inaugurated, the deficit as a % of GDP was 2.8%. And when he left office in 1989? It was 3.0%.

And what does Edwards have to say about the points made in the USA Today editorial regarding Reagan's willingness to compromise and to raise taxes when necessary that he was presumably rebutting? Nothing. He simply ignores them.

This is partisan hackery at its highest level.

What is our Political System Really Like?

I sometimes think that everything you need to know about our political system, present and past, is revealed in Monty Python's The Life of Brian. I used to think it was a comedy. Now it seems more like a documentary.

For example, what has the liberal state done for us?

 Or, how does Congress go about doing the people's business?

Finally, how should we understand the various factions within the new conservative movement?

DeMint on Spending and Taxes

To follow-up on the Scarborough post, Jim DeMint (R-South Carolina) makes the following argument in USA Today for a spending reduction-only solution to the deficit.

In the the 8 years since 2003, our debt has risen nearly $8 trillion. Lack of tax revenue? No. Tax revenues have risen 20% since 2003. Yet, over that time, spending has risen a reckless 60%.

First, you could, as he does, describe this as too much spending. You could just as well describe this as evidence of Congress 's unwillingness to raise enough revenue to pay for its spending priorities.
Second, he makes it sound as if there has been a steady, relentless rise in spending since 2003. However, the great majority of this increased spending is a direct result of the financial crisis, over which Republicans seem to suffer amnesia. The GOP want to leave the impression that Obama's policies have somehow led to massive amounts of new spending. The stimulus provided less than $500 billion in new spending spread out over three years ($300 billion was in tax cuts). From 2007 to 2009 the deficit exploded from $160 billion to $1.4 trillion. If you remove the stimulus, in 2009 the deficit still would have been over $1.2 trillion.
Third, why select 2003 as the baseline? He does this to divert attention from the budgetary consequences of the two Bush tax cuts, the Medicare prescription drug benefit, and the Iraq War all of which the GOP supported and which cumulatively had a much, much larger impact on the deficit the the 2009 stimulus. If you instead take 2000 as your baseline, the last year before GOP policies began affecting the budget, you get a very different picture.
Fourth, and most importantly, DeMint uses the same dodge that Scarborough did. He looks at raw numbers instead of looking at the numbers relative to the size of the economy. In 2003 taxes as a percentage of GDP were just over 16%. In 2010, they were under 15%. Perhaps we do have revenue problem after all? It gets even worse if you take 2000 as your baseline. In that year taxes were over 20% of GDP. In fact, since 2000 taxes have dropped as a percentage of GDP by about 6% and spending has increased by about 7%.
This is precisely why you need a balanced approach to address this problem. The genesis of the problem is equally balanced.

Scarborough on the GOP and Taxes

Joe Scarborough thinks that the media is being mean to Republicans because commentators have described the GOP’s intransigence on taxes as part of raising the debt limit and reaching a larger deficit reduction deal. Richard Cohen says that the GOP “has become a political cult”. The New Republic’s Jonathan Chait describes tea party conservatives as the party’s “Hezbollah wing.” Even David Brooks describes the GOP’s attitude towards taxation as having “no sense of moral decency.”

Scarborough is outraged by this. Why? Well, he thinks that these same columnists have not been as hard on Democrats. This betrays that weird Washington-only attitude that fairness demands that you must always treat both parties exactly the same in all instances. More importantly, he attempts to make the substantive point that Republicans are being savaged in the media because they “dare to stand athwart history and growl “not this time.”” In other words, the GOP is actually doing something praiseworthy and simply do not deserve the abuse. What are their virtues? There seem to be two. First:

For 50 years, the federal government has grown at a sickening rate. Whether Republicans or Democrats run the White House, Washington’s establishment always gets its way — bigger budgets, bigger deficits and higher taxes.

In 1980, the annual budget was $590.9 billion. By the beginning of the next decade, the yearly budget was $1.253 trillion. In 2000, the budget was up to $1.789 trillion in annual outlays, and by 2010, it was up to $3.456 trillion. After a decade of Obama’s budgets, the CBO projects our annual budget will explode to $5.451 trillion in 2020.

Whenever I read stuff like this it reminds me of Sean’s Connery’s admonition to an enemy in The Untouchables: “Always brings a knife to a gun fight.” I am hard-pressed to recall an instance in recent years in which statements on economic policy by prominent Republicans fails to make them sound economically illiterate. Responding to their mind-numbing repetition of half-truths, partisan slogans, basic misconceptions, and misleading statistics is just too easy.

This passage by Scarborough is an excellent example. He bemoans the runaway spending by pointing out that the budget has grown from $591 billion in 1980 to nearly $3.5 trillion in 2010! But this is an almost childish comparison. Of course, the budget gets bigger as the years progress. This happens because the economy gets bigger, the population increases, and inflation, well, inflates the numbers. The only meaningful measure of the size of the government budget is to view it as a percentage of GDP. In 2007, the last year before the catastrophic effects of the financial crisis, the federal budget was 19.6% of GDP. And what was it in 1980? 22.2%. Not so "sickening", is it? True, in 2010 at 25.4% it is at a post WWII high. But this is almost entirely due to the effects of the financial crisis. GDP is depressed and spending on budget items that always go up in bad times—unemployment insurance, food stamps, Medicaid, etc.—have drastically increased. When the economy recovers, spending will no doubt return to more normal post-war levels.

I honestly cannot know if Scarborough is economically illiterate or just makes witless arguments like this because they are the only tools he has when trying to defend the indefensible. Either he is a partisan hack or staggeringly uninformed. I can’t think of a third option.

Scarborough’s second defense of current GOP attitude towards taxation is captured in this passage:

As media types blast away at their barbaric Republican opponents, it is worth noting that just last year the GOP won the largest nationwide landslide victory in modern history based in large part on its pledge to oppose tax increases. Over 230 members of the House signed the no-tax pledge while 40-plus Senate members also signed to oppose tax increases.

The GOP have been unfairly criticized because they are only doing what they said they were elected to do—adhere to Grover Norquist’s no-tax pledge. But this is a strange defense of a policy. Pledging not to raise taxes under any circumstances is precisely the fanatical pathology that Brooks, Chait, and Cohen were lambasting. To defend their doing so absent any substantive defense of the policy itself but only because they promised they would do it is like defending the mafia hit man because he faithfully follows the Cosa Nostra code. The important issue is not faithfulness to a code or practice, but rather the practice itself. Is it defensible?

Scarborough ends his essay with a passage that makes me think that not only does he not understand elementary economic data, he doesn’t even understand the dynamics of the party he defends.

That doesn’t mean a grand bargain is out of reach this session of Congress. If Obama moves forward with specific cuts on entitlement programs and Pentagon expenses, Republicans must work aggressively to close loopholes that favor billionaires and multinational corporations. I am quite confident that even tea party members would be fine with Warren Buffett paying more than a 14 percent income tax rate and would be happy to see the world’s largest corporation, GE, pay more in taxes than their own household.

The proposals he mentions: to cut the military budget, to close loopholes that favor the wealthy, and to end the preferential treatment of investment income over wage income are precisely the sort of things that the GOP has vowed not to do. Warren Buffett pays an absurdly low tax rate because capital gains and stock dividends are taxed at a much lower rate than wage income. The GOP position on this issue expressed in the Paul Ryan Roadmap is to eliminate taxation on investment income entirely! House Republicans have already stated that they will not agree to eliminate multi-billion-dollar tax breaks on oil companies or eliminate tax provisions that reward companies for moving jobs overseas. The very no-tax pledge that members of the party have signed forbids even closing loopholes and eliminating deductions as a way of increasing revenue.

If Scarborough had fairly and accurately related the current GOP attitude on taxation, perhaps he would be more sympathetic to those who describe them in the most unflattering terms.

The Two Parties are NOT Alike

YouGov has a poll that, as Kevin Drum points out, tells you everything you need to know about the current state of American politics.

The Skinny on the Stimulus

It has become common wisdom that the economic stimulus enacted in Feb. 2009 "failed." This judgment is typically based on the fact that Christine Roemer--then the head of Obama's council of economic advisers--predicted that the stimulus would lower the unemployment rate to 7% by now. Obviously, that didn't happen.

However, the reason that didn't occur is not because the stimulus failed to stimulate the economy by the predicted amount. It did. Independent economic analyses from the CBO to Moodys estimated that the stimulus indeed added or saved about the same number of jobs that the Obama administration predicted. The problem wasn't a lack of stimulative effect, but a failure to accurately estimate how deep the recession would be. Ezra Klein has a great post on this explaining that a much bigger stimulus than the $780 billion we got was called for, but that it is unclear whether--even if it were politically possible--we could have efficiently spent the $2 trillion in stimulus that would be required to fill in the hole created by this economic calamity.

The Best Article I have Read on Contemporary Economic Policy

These article by Bruce Bartlett, one of the original supply-siders, lays out in clear terms most of what you need to know about economic policy in the last 50 years.

The money quote:

Many of my friends believe I have abandoned supply side economics and become a Keynesian. (Among conservatives there are few insults more damning than to be labeled a "Keynesian.") But as I try to explain in my book, my views haven't changed at all; it's circumstances that have changed. I believe that my friends are still stuck in the 1970s when tax rates were considerably higher and excessive demand (i.e., inflation) was our biggest economic problem. Today, tax rates are much lower and a lack of demand (i.e., deflation) is the central problem. I really don't understand why conservatives insist on a one-size-fits-all economic policy consisting of more and bigger tax cuts no matter what the economic circumstances are; it's simply become dogma totally disconnected from reality.

Political Discourse and Intellectual Honesty

Before Rene Descartes published his famous Meditations on First Philosophy, he submitted a manuscript to seven prominent contemporary intellectuals and basically asked them to give him their best shot. He then published the Meditations with seven objections and replies. Not all of Descartes replies were persuasive, but the important part of his story is that Descartes had the intellectual honesty to take criticisms of his critics seriously, publish them and respond publicly, allowing readers to decide who has the better ideas.

This brings us to the current debate about the Ryan Medicare proposal. Consider the following claims from prominent conservatives.

Part D is popular and successful. It actually beat its cost projections — a near miraculous exception to just about every health care program known to man.
- Charles Krauthammer

They also note that the Medicare prescription drug benefit also uses a competition model. Consumers have been adept at negotiating a complex marketplace, and costs are 41 percent below expectations.
- David Brooks

The prescription drug benefit came in 40% below cost projections because it harnessed the power of choice and competition.
Paul Ryan on Meet the Press

The Ryan plan rests largely on the claim that allowing beneficiaries to negotiate with private insurers on price and benefits will successfully control costs. This promise is bolstered, Ryan and his supporters argue, by our experience with Medicare Part D, otherwise known as the Medicare Prescription Drug benefit passed by the G.W. Bush administration in 2003. At the time, the OMB predicted that it would cost a certain amount, but subsequent experience has shown that the real costs are substantially lower than predicted. Viola! The marketplace does control costs after all.

However, there is a huge problem with this argument. Just Google "Ryan Medicare Part D" and you get a lot of hits with quite serious criticisms of this Medicare-Part-D-Proves-That-The-Market-Works argument.

Ezra Klein offers the clearest account of these criticisms. These responses concede that the costs of Medicare Part D have been lower than projected, but reject the inference that the reasons for this have anything to do with market comptetition.

• Based on recent experience, the Medicare actuaries expect the drug benefit to grow by 9.7% annually. Yes, this is lower than the original OMB estimation, but it is still much higher than what it would have to be to make Ryan's plan work. To work the costs cannot grow more than the rate of inflation, which will certainly be well below 9.7%.
• Medicare drug costs have risen slower than expected, but so have drug prices generally. The reason for this seems to be that fewer blockbuster drugs have come on the market since 2003 when Medicare Part D was enacted and several very popular drugs have become available as generics.
• Finally, Medicare Part D costs have been lower than estimated because the original projection expected 93% of Medicare enrollees to take part in the program, whereas only 77% have.

In short, the reasons why the costs of Medicare Part D have risen less than anticipated have nothing to do with the magic of marketplace for individual choice, but rather with boring technical factors.

I don't know if this is the last word on this debate. Maybe there are good conservative responses to these criticisms of the standard defense of the Ryan plan. The important point is that very smart and very well-read conservative commentators such as Brooks and Krauthammer don't even make the effort. They simply pretend that these responses don't exist. They just uncritically parrot Ryan's original talking point about costs coming in lower than expected as though that were all we needed to know.

Perhaps I am naive. I don't expect those who play the role of a public intellectual to always be right. I don't even expect them to publicly admit errors when they are shown to be wrong, though that is nice when it happens. What I do expect is for them to acknowledge and take seriously the positions of their opponents. If they think their opponents are mistaken, then they owe us reasons for why they think this. But simply ignoring opposing views does them and the public a terrible disservice.

Ezra Klein Asks Paul Ryan 8 Questions

This is another one of those instances in which there is a really interesting conversation on the blogosphere.

It begins with Ezra Klein asking Paul Ryan 8 questions about his plan to transform medicare from a defined benefit program into a voucher program (Ryan prefers to call it "premium support", but that semantic difference is not important in the context of this exchange.).

Ryan was nice enough to respond to Klein's questions.

Finally, Klein responds to Ryan's response.

This is a fascinating exchange and says a lot about the Ryan plan and its critics, of which Klein is certainly one.

Paul Ryan Inspires a Return to Goldwater 1964

The blogosphere is alive today with commentary on the Democratic victory in the special election in the heavily Republican district of NY 26.

Despite initial Republican denials, the key factor clearly seems to have been the losing Republican candidate's public endorsement of Paul Ryan's plan to finance marginal tax cuts for the wealthy by privatizing Medicare and substantially reducing benefits.

From the left-of-center Chait explains this huge blunder by the Republicans. From the right-of-center, David Frum offers similar remarks here and here. For a good sense of how delusional the conservative movement has become on this, please read Jonah Goldberg's NRO article that advocates doubling down on the Ryan plan.

The contemporary conservative movement offers a peculiar mix of blind partisan hackery devoid of any interest in public policy (Health Care Reform, Cap and Trade, Climate Change, etc.) along with a suicidal devotion to politically toxic policy prescriptions.

Tea Party Economics

There seem to be four persistent economic myths among tea party types and other populist conservatives. Unfortunately, none of them of true.

Myth 1: We should be worried about inflation. Here's a chart plotting the consumer price index all the way back to 1985.

 

Yes, inflation is up from the depths of a profound deflationary recession, but by historic standards inflation is quite mild. Responsible conservative economists, such as Greg Mankiw, acknowledge as much. Sometimes this argument goes on to criticize the way in which core inflation is calculated. It is the core inflation rate that the Fed uses to guide monetary policy, and core inflation excludes volatile items, such as energy and food. The problem with using energy and food prices to calculate the inflation rate is not just that they are extremely volatile. It also worth remembering that prices in these areas are often controlled by international events beyond the reach of governmental fiscal or monetary policy.

Myth 2: The current deficit is because the government is spending too much. This is intended as a swipe against Obama fiscal profligacy. However, what is actually the source of the current deficit?

As you can see, about half of the deficit is caused by a drop of tax receipts brought on by a weak economy in crisis. What about the remainder, all that excess spending?

Here's where the extra spending comes from: increased outlays for income security (food stamps, unemployment insurance, etc.) and Medicaid, both of which have increased also because of the financial crisis. The deficit is almost entirely due to the effects of the recession, not current fiscal policy.

Myth 3: We are harming the economy because the dollar has gotten so weak. Well, how weak is the dollar relative to historical standards?

 

It is about as weak as it was in 1995 and the current decline is not nearly as dramatic as it was during the Reagan administration.

Myth 4: "We have a spending problem not a tax problem." This bromide is trotted out routinely by conservatives as a way of explaining why deficit reduction policy cannot include even the smallest increase in revenues.

As the data clearly shows, the surpluses of the Clinton administration were caused by less spending AND higher taxes. Similarly, our current predicament is the result of both higher spending AND lower tax receipts. Furthermore, current tax receipts as a percentage of GDP are the lowest they have been since the Truman administration.

All of the myths are the result not of a serious analysis of the current economic conditions, but from partisan hackery from Obama's political opponents.

Is Obama a Moderate Republican?

One of the best aspects of the blogosphere is that sometimes a particularly interesting or controversial post will stimulate a discussion among other bloggers on the same topic.

That occurred yesterday with Ezra Klein's excellent piece about how bizarre it is that Republicans oppose Obama so vehemently when his policies are are very much in line with what a moderate Republican in the 1990s would have proposed.

Klein of Joe comments in basic agreement with Klein of Ezra and adds his own media spin on the story.

Kevin Drum is not so sure. He believes that it is tactics that have changed, rather than substantive Republican positions.

Ramesh Ponnuru ridicules Ezra Klein's argument with examples of policies that George W. Bush pursued that had a Democratic pedigree.

Ezra responds to Ramesh and Kevin here and here.

Owning Your Own Home is a Great Investment: NOT!

The claim that home ownership is a great investment has so deeply penetrated our national consciousness that it isn't even questioned. It is just assumed as an axiom of common-sense economics.

It is hard to think of a more widespread fallacy. Not only is home ownership not a great investment compared to the available alternatives, it is a lousy investment. Consider the following data.

As you can see from this chart, over the last 20 years national housing prices have lagged behind what an index fund based on the S&P 500 would have returned by a considerable amount. This is true even if you include markets in which housing prices grew faster than the national average (I included data for Washington D.C.). Surprisingly, the data is pretty much the same.

But, some will argue, this looks at a relatively short period of time. It fails to include the 1980s, when housing prices rose substantially. The problem with this line of argument is that over the long run the stock market rose even faster. Consider the data covering the post-war era.

A home that was purchased in 1945 for $10,000 could be sold in 2010 for $176,000--a huge windfall, right? The same $10,000 invested in the Dow Jones Industrial Average in 1945 would sell in 2010 for just under $700,000. If you index this for inflation, it looks even worse for housing. Of the $166,000 in profit all but $47,000 is eaten up by inflation.

Lastly, many will object pointing out quite rightly that home ownership serves two functions--that of an investment and as, well, a place to live. True, we must consider that returns from the stock market would have to purchase equivalent rental housing. Fair enough. However, we must also consider the associated costs with home ownership that do not apply to rental property. For example, a $500,000 home purchased with a 10% down payment will accrue over the life of a standard 30-year fixed mortgage at 6% slightly more than $1,000,000 in interest payments. Even with those payments being tax deductible, one still pays an extra $700,000 in interest over the life of the loan. Add to that approximately $300,000 in property taxes and insurance and $50,000 in repair and upkeep and we are now back to over $1,000,000 in extra costs over the life of the loan. That leaves a renter with $2,900 a month to pay for housing costs. Anywhere in the country outside of perhaps Manhattan $2,900 a month will cover a very nice and spacious rental property.

There may be all sorts of good reasons for home ownership. Seeking a good investment is not one of them.

Health Care Vouchers are a Really Bad Idea

Paul Krugman has an excellent post explaining why we shouldn't treat health care as a free market commodity.

I keep encountering discussions of health economics in which patients are referred to as “consumers”, after which the usual mantra of freedom of choice is invoked on behalf of voucherizing Medicare, or whatever.

We used to know better than this.

Medical care is an area in which crucial decisions—life and death decisions—must be made; yet making those decisions intelligently requires a vast amount of specialized knowledge; and often those decisions must also be made under conditions in which the patient is incapacitated, under severe stress, or needs action immediately, with no time for discussion, let alone comparison shopping.

That’s why we have medical ethics. That’s why doctors have traditionally both been viewed as something special and been expected to behave according to higher standards than the average professional. There’s a reason we have TV series about heroic doctors, while we don’t have TV series about heroic middle managers or heroic economists.

The idea that all this can be reduced to money—that doctors are just people selling services to consumers of health care—is, well, sickening. And the prevalence of this kind of language is a sign that something has gone very wrong not just with this discussion, but with our society’s values.

History Lives

I saw The Conspirator over the weekend, a reasonably good courtroom drama about the trial of Mary Surratt, who was convicted and hanged for her role in the plot to assassinate Abraham Lincoln.

The plot, which included John Wilkes Booth, Lewis Powell, David Herold, Samuel Mudd, John Surratt, and George Atzerodt, was hatched in Mary Surratt's boarding house at 541 H Street in Washington, D.C..

The house still stands, though it is now a Chinese restaurant. I find it odd that it has not been designated as a historical landmark.

Ryan and Medicare Cost-Shifting

Ezra Klein has an excellent article explaining why Paul Ryan's plan to transform Medicare into a voucher system is opposed by many who would otherwise be sympathetic to this approach. It is not because they oppose bringing competition into health insurance decisions, but because they oppose cost-shifting as a way of addressing the budget deficit.

The Ryan Budget

I had thought that I might write something on the Paul Ryan budget proposal, the "Path to Prosperity," but I needn't bother. The blogosphere is already deluged by much better analysis than I could ever muster. The best left-of-center critiques I have read come from Ezra Klein, Paul Krugman, and Jon Chait. What's interesting is that these criticisms are not primarily ideological. They primarily focus on  technical aspects of Ryan's proposal that make it implausible and unworkable even from the narrow standpoint of lowering the deficit.

Chait offers a follow-up column in Newsweek that is more ideological and describes Ryan as an Ayn Rand "nut" who is motivated more by a desire to pursue Randian class warfare than by any sincere desire to reduce the deficit. As he points out, Ryan voted for all of the legislation that drove the deficit up during the Bush years: the Bush tax cuts, the unfunded Medicare prescription drug benefit, and the unfunded wars in Iraq and Afghanistan.

Sidney Lumet (1924-2011)

A truly great figure of American film died Friday. Sidney Lumet, director of such classics as Network, Dog Day Afternoon, and 12 Angry Men, died Friday of lymphoma at the age of 87.

In the many articles that have been written about him since his passing, all emphasize that he was a New York story-teller who made serious films on substantive issues. His career, which spanned 6 decades, is so vast and varied it is difficult to narrow down his 10 best films, but he will probably be best remembered for a decade of work from 1972-1982, when his career reached its critical and commercial peak.

One of the subjects he often returned to was corruption in the New York police department. This is the central theme of a trilogy including Serpico, Prince of the City, and Night Falls on Manhattan. In many ways, Prince of the City is perhaps his most controversial film at least measured by the wildly divergent reactions it has inspired. This is made abundantly clear by tributes to Lumet published this weekend by Entertainment Weekly. Martin Scorcese writes "he was a New York filmmaker at heart, and our vision of this city has been enhanced and deepened by classics like Serpico, Dog Day Afternoon and, above all, the remarkable Prince of the City". In the same issue Owen Gleiberman writes "I confess I’ve never had much patience for Prince of the City (1982), the Treat Williams cop epic that was supposed to be the director’s magnum opus of men in blue. To me, it’s convoluted and sterile."

I have got to say that I am with Scorcese on this one (not bad company to keep!). Lumet was nominated for an Oscar for Prince of the City, oddly as a screenwriter rather than director. It is a 2-hour and 47-minute portrayal of the tension that arises when a corrupt cop decides to get himself clean while protecting his former partners. This gut-wrenching dilemma is at the heart of the film, which also exposes the unsavory details of how the justice system uses undercover cops who attempt to root out corruption that they used to be a part of. Treat Williams gives a star-making lead performance as Danny Ciello, and Jerry Orbach (later of Law and Order fame) gives the best film performance of his career as Ciello's mentor. Prince of the City is based on a true story told in a novel by Robert Daley. Interestingly, one of the prosecutors who befriends Ciello (and threatens to resign when the Justice Department debates whether to prosecute their star witness for past transgressions) is based on Rudolf Giuliani, a then-rookie federal prosecutor who, of course, later became mayor of New York and Republican presidential candidate. If I were pressed on the subject, I would have to list Prince of the City as one on my top ten favorite films of any era.

Sidney Lumet's 10 best films

12 Angry Men  (1957)
Lumet's first film starring Henry Fonda. Action takes place exclusively within the confines of a jury deliberation room and centers on the rush to convict on scanty evidence. The success of this film made Lumet's career as a film director, though he had already been working successfully in television for years.
Fail-Safe  (1964)
One of the best Cold War dramas centers on an accidental U.S. nuclear attack on the Soviet Union. It is a serious version of Dr. Strangelove, which was released the same year. Henry Fonda stars again as the U.S. President seeking to avoid a global holocaust with mixed success.
Serpico  (1973)
Based on a true story, the first--and best-known--of Lumet's police corruption trilogy. Al Pacino stars as NY Detective Frank Serpico, who wants to expose corruption when no one wants to listen.
Murder on the Orient Express  (1974)
Arguably the best of the many Agatha Christie adaptations, this star-studded mystery showcases Lumet's talent outside of his usual New York setting.
Dog Day Afternoon  (1975)
An enormous hit, this story inspired by actual events portrays a failed bank robbery and hostage crisis. Al Pacino stars as the pathetic Sonny who needs the money for a sex change operation. John Cazale (Fredo in The Godfather) co-stars in his next-to-last film before his untimely death in 1978.
Network  (1976)
Lumet's most acclaimed film. I do not rank it as his best only because much of the credit goes to screenwriter Paddy Chayefsky. Network won Oscars for best actor and actress (Peter Finch--posthumous award, and Faye Dunaway) and best original screenplay. "I am mad as hell, and I am not going to take it anymore" has become an international catchphrase. Rocky swept the remaining Oscars that year.
Prince of the City  (1981)
See above. For my money, Lumet's best film and one of the best American films by anyone.
The Verdict  (1982)
Paul Newman stars as an aging, alcoholic, down-and-out ambulance chaser who gets the case of a lifetime. Containing great performances, it was nominated for Oscars in all major categories, but failed to win any.
Night Falls on Manhattan (1996)
The last of Lumet's police corruption films, Andy Garcia stars as a cop-turned-D.A. who must expose police corruption that reaches into his own family. James Gandolfini co-stars as a corrupt cop and Richard Dreyfus has a nice supporting role as a liberal defense attorney. This is an excellent film that failed to get much of an audience.
Before the Devil Knows You're Dead  (2007)
Lumet's last film, completed when he was 83, is also one of his best. It is a classic crime drama in which bad deeds escalate beyond the control of the perpetrators and an entire family is destroyed. Philip Seymour Hoffman and Ethan Hawke star. Marissa Tomei has a eye-opening role that began something of a comeback.

Some New Conservative Objections to Health Care Reform

In March, 2011 the CBO issued updated estimates to the costs of the 2010 Patient Protection and Affordable Care Act (PPACA), otherwise known as ObamaCare. These updated estimates led to a new round of conservative complaints.

• On March 21 the Republican House Energy and Commerce Committee released a statement claiming that the costs of PPACA had risen by 54%.
• A March, 23 a Wall Street Journal editorial announced that the costs of PPACA had risen by 8.6% since the original CBO estimate a year earlier.

The Washington Post fact checked this and concluded that both figures were inaccurate, and that the projected costs for PPACA have not substantially changed at all.

The gist of the Post article is that the House committee and Journal numbers come from comparing different time frames for the revenue and expenditure aspects of the bill. If you don't trust the Washington Post's fact checking, then you can read the CBO's explanation for yourself.

The money quotes:

The difference is primarily attributable to the different time periods the estimates cover, and not to substantial changes in the year-by-year estimates.

and,

In its ongoing monitoring of developments, CBO has seen no evidence to date that the steps that will be taken to implement the legislation—or the ways in which participants in the health care and health financing systems will respond to the legislation—will yield overall budgetary effects that differ significantly from the ones projected earlier. Therefore, the evolution of the estimates does not reflect any substantial change in the estimation of the overall effects of PPACA and the Reconciliation Act from what was projected in March 2010.

So, the costs of health care reform and its effect on the deficit have NOT changed substantially since it was originally passed.

Another criticism leveled by conservatives is that the effect PPACA will have on the deficit over the next ten years has been deliberately obscured by including 10 years of revenues, but only 6 years of expenditures. This assertion does not withstand careful scrutiny for two reasons.

First, the expenditures during the first 3 years are relatively small, but so are the revenues. Starting in 2014, both the revenues and the expenditures rise substantially. The CBO estimates that PPACA will reduce the deficit in the 2011-2021 period somewhere in the range of 100-150 billion dollars.

Second, in the out years when all of the revenue and expenditure provisions of the bill have been phased in, the deficit reduction is even larger. This is because the savings and revenues grow faster than the increased expenditures.

 
See the original CBO report for details.

The simple fact is that PPACA is essentially a market-oriented attempt to insure more people and lower health care costs that Republicans would almost certainly support were it not for the fact that it is Barack Obama's plan.

'Hypocrasy' doesn't quite capture it

The Washington Post's Greg Sargent provides an illuminating link to a 2007 National Review interview with South Carolina Senator Jim DeMint--Tea Party booster and ultra-conservative firebrand--in which DeMint praises Mitt Romney's ability to "take some good conservative ideas, like private health insurance, and apply them to the need to have everyone insured.”

As Sergant points out, this attitude lies in stark contrast to DeMint's current attitude. A DeMint aide has leaked to the press "But he [DeMint] would never consider backing Romney again unless he admits that his Massachusetts health care plan was a colossal mistake.”

So how is it that in 2007 DeMint praised RomneyCare, but in 2011 he thinks it was "a colossal mistake?" The answer, of course, is that in the intervening time Barack Obama and the Democratic Congress passed a national health bill closely modeled on Romney's Massachusetts plan.

It is difficult to imagine a more vivid example of how the current Republican party is utterly uninterested in public policy or serving the interests of the electorate. Instead, they formulate positions solely on narrow partisan grounds. If Obama is for it, then they are against it. Period. Full stop. This attitude is appalling, very easy to understand, and disastrous for the country.

Conservative Taxophobia

Jon Chait has just published an excellent essay on the conservative fixation on tax cuts.

Highly recommended for anyone who wants to understand this phenomenon.

The Modern Right: The New Marxists

One of the enduring themes of the Superman comic book series is the existence of an alternate world—Bizarro earth (Htrae) in which everything is backwards. In Bizarro world lives a Bizarro Superman and a Bizarro Jimmy Olsen, etc.  The motto of Bizzaro world is “Us do opposite of all Earthly things!”

The modern conservative movement increasingly resembles Bizarro Marxism, the underlying philosophy of the communist system, opposition to which practically defined the conservative movement in the post-WWII years. With the fall of the Berlin Wall, opposition to communism has understandably faded in prominence. Nonetheless, the conservative movement has recently—bizarrely, if you will—begun to mimic their former adversaries, in a Bizarro sort of way.

Modern conservatism shares many characteristics with Marxist thinking.

• Both are obsessed with class struggle. Marxists see the struggle through the lens of exploitation in which the capitalist bosses exploit the workers by appropriating the value of the labor. Modern conservatives see the same phenomenon, except the roles are reversed. According to your average Rush Limbaugh listener, it is the hard-working entrepreneurs who are exploited by the lazy masses who benefit from the capitalists’ hard work without contributing much of their own. I have never met a committed conservative who wasn’t mindful—seemingly on a daily basis—of the danger poor people (and their liberal champions) posed to the health of society and their own prosperity and security.
• Both hold monomaniacal world views. For the Marxist, all phenomenon can be explained by the conflict and inevitable economic exploitation of the workers by capitalist bosses. For the modern conservative, all phenomenon can be explained by the absolute value of liberty and the wretched human tendency to try to limit it. Conservatives generally interpret “liberty” narrowly as the ability to make a profit with minimal interference from the government. To be sure, some conservatives are also concerned with family values, and others are concerned with a robust form of nationalistic militarism. There is even one strand of conservatism—exemplified by G.W. Bush and other neo-cons—that believes in spreading democracy throughout the world, by force if necessary. However, these other concerns sharply divide the conservative movement and come and come in popularity (the neo-con movement seems particularly out of favor these days, except perhaps in the pages of the Weekly Standard). The only persistent feature that unifies all conservatives is a near-fanatical devotion to tax cuts—especially those aimed at high-income earners—and lessening the regulatory burden on business. The distinguishing characteristic of the monomaniac is the attempt to explain virtually all phenomena—however unlikely that explanation may be—by invoking the favored universal principle. Many conservatives have argued that the recent catastrophic financial collapse was the result of too much government regulation! To anyone who knows anything about the 2008 crisis, this account is, to put it mildly, at odds with reality. Neo-Marxists will explain failures in education in terms of teachers, administrators, and policy-makers exploiting their students. Freudians will explain artistic achievement in terms of sexual psychology, and so on. Matt Groenig once parodied the mono-maniacal college professor shouting the phrase “The nation that controls magnesium controls the universe!”
• Both offer class descriptions in starkly moral terms. For the Marxist, the capitalist is described in the most disparaging fashion and the entire thrust of history and the duty of the leaders of the communist struggle is the annihilation of capitalist domination, and, by implication, individual capitalists. The working masses, on the other hand, are portrayed as universally honest, hard-working, and decent, tainted only when acting as a tool for capitalist propaganda (class membership and class consciousness are not the same). So too, the modern conservative has a peculiar tendency to associate material success with moral virtue. The wealthy are understood as hard-working, creative, and talented individuals whose success comes  entirely from their superior character. The unsuccessful are described as lazy welfare queens who mooch off of the success of others.
  Of course, this is nonsense. This moral interpretation of class membership completely ignores factors that determine success that are beyond our control, such as one’s circumstance of birth and simply benefiting from the luck of being at the right place at the right time. Yes, many wealthy people are very smart and hard-working. Other wealthy people, through a combination of greed and hubris, nearly destroyed the world’s economy. Indeed, many conservatives remain deeply uncomfortable discussing the great financial crisis of 2008 where the primary culprits were clearly wealthy and highly educated. It turns out that not all looters and moochers are poor folks.
• Both believe in a Manichean world view in which the universal forces of light and darkness vie for supremacy. The only difference between them lies in the identities of the good guys and bad guys. Otherwise, both Marxists and modern conservatives see world events as a rather simplistic morality play. The tragedy of this is that it ignores the vast majority of ordinary people who are neither Goldman Sachs traders nor professional street beggars, such as people like, well, me and everyone  I know.

On the backs of. . .

One of the phrases I wish would disappear from public discourse is one that is routinely used--typically from those on the Left--to push back against any suggestion that a favored interest group should sacrifice. Donna Brazille recently remarked on ABC's "This Week" that Wisconsin's budget deficit should not be balanced "on the backs" of members of public unions. Missouri Senator Claire McCaskill made a similar comment soon after (I forget where).

The problem with insisting that sacrifice should not be borne on the backs of an interest group is that it is endlessly repeatable. OK, if Group A should bear no burden, then neither should Group B, nor Group C, and so on. At the end of this we arrive at our destination: No one should contribute at all and the problem goes unsolved.

A much better approach is an appeal for shared sacrifice. Members of public unions should refuse to agree to cutbacks in benefits UNLESS other interest groups are willing to do their part as well.

The "He Said, She Said" Phenomenon

Many left-of-center media critics have repeatedly bemoaned the fact that the MSM has a tendency to frame partisan and ideological disputes, especially about economic policy, in the form of "One side thinks this, while another side thinks that." The problem with this approach is that it is often inappropriately applied in cases in which there really is a strong professional consensus on one side only. Reporting these as a "he said, she said" story is neither accurate nor objective.

"Walter Cronkite reports that Neil Armstrong has landed on the moon, but Bart Sibrel says that it was all staged on a Hollywood set. News at 11:00."

There are two reasons the media does this. First, they have been relentlessly criticized by the Right for years for  liberal media bias. As a consequence of this many in the media--eager to inoculate themselves from this criticism--have taken the opportunity to frame every Left-Right dispute as though each side were equally correct.

Second, most reporters are simply not very knowledgeable about economic issues, which are often quite technical, so "he said, she said" frees them from having to delve too deeply into a subject for whicxh they have little comfort or expertise.

I ran across a perfect example of this in today's USA Today. In a story entitled "Shutdown's risk to recovery disputed". Richard Wolf opens with:

"Would a partial government shutdown--or the spending cuts needed to avoid it--risk the nation's economic recovery and nascent job creation?
President Obama says it could. Republican leaders in Congress say it wouldn't. Economists are split roughly down the middle."

The story goes on to cite three sources claiming that the Republican plan to cut an additional 61 billion in spending would threaten the recovery. Who was cited? Goldman Sachs, Moody's Analytics, and the chairman of the Federal Reserve. None of these sources have any association with the Democratic Party of Liberal political causes.

But, the report goes on to note, "More conservative economists began firing back this week." The article cites two examples. The first is from Stanford University economist John Taylor. Who is John Taylor? He was Under Secretary of the Treasury for International Affairs during in the George W. Bush Administration. He was also a member of the President's Council of Economic Advisers during the George H. W. Bush administration, and Senior Economist at the Council of Economic Advisers during the Ford Administration. His role as a public intellectual to is essentially support whatever economic position that reflects current Republican views. For a complete run-down of Taylor's role as a reliable spokesman for party policy, see the results of Jon Chait's extensive research on the subject. Chait concludes that "John Boehner citing John Taylor as a supporter of his program is about as meaningful as John Boehner citing Mitch McConnell."

The second example is from Douglas Holtz-Eakin. Who is Mr. Holtz-Eakin?  He served as a Senior Staff Economist on President George H.W. Bush's Council of Economic Advisers and was Chief Economist for the Council of Economic Advisers to President George W. Bush. He was later hired as chief economic policy adviser to U.S. Senator John McCain's 2008 presidential campaign. Recently, Holtz-Eakin became president of American Action Forum, a Conservative think tank. Since joining American Action Forum, Holtz-Eakin has appeared on Fox News to argue against the Obama health care bill.

There you have it. The only two professional economists the USA Today article cited who question whether the suggested GOP House budget cuts would threaten the recovery are life-long Republicans with deep professional ties to GOP politics and the conservative movement. These are hardly non-partisan sources. The article could have just as well cited NY Times columnist Paul Krugman as a critic of the proposed GOP budget cuts, but what would be the point? His partisan credentials are as well established as his economic expertise.

So two deeply partisan spokesmen disagree with three non-partisan analysts. This is what USA Today refers to as economists "split roughly down the middle." Very roughly I'd say.

Feelings and Facts: How to Respond to Economic Crisis?

There is considerable sentiment coursing through the national consciousness that goes something like this:

"We got into this economic mess through a binge of overspending, so now is the time to cut back."

This is an understandable reaction. Like the drunk who wants to put his life in order, to cure a crisis brought about by overspending, stop overspending and become a teetotaler, fiscally speaking that is. As emotionally satisfying as this sounds, it is also terribly misguided.

There is a good word for this economic theory. It is called Hooverism. David Leonhardt has a good article on our current fixation on this utterly discredited economic theory. The Republicans in Congress are pushing aggressively for a return to Hooverville, despite the fact that a slew of recent non-partisan economists have given various estimates about how these policies will increase unemployment and decrease growth.

What is the source of this current fixation on Hooverian economics? There are three underlying  reasons.

• Psychologically, is is a common sense response to crisis brought on by overspending. Nonetheless, the vast majority of professional economists believe that when weakness in demand in the private sector  leads to unemployment and reduced growth, the best response is increased government spending. Unfortunately, although the 2009 stimulus achieved pretty much what it was designed to achieve, it has become an article of faith that it failed. President Obama's spectacular ineptitude explaining and promoting his own policies is the primary culprit here.
• Ideologically, the Republican party is commented to small government as a matter of principle. This point cannot be overemphasized. Jonathan Chait wrote a widely-discussed article about this a several years ago. Republican commitment to small government is a core principle in a way totally unlike Democratic commitment to activist government. Republicans will oppose activist government intervention in the economy as an a priori principle, even when the policy succeeds. An excellent contemporary example of this is TARP and the GM bailout. By any objective measure, these policies were a huge success. TARP will almost certainly turn a profit and the GM bailout saved hundreds of thousands of jobs at a time of dire crisis, revitalized a core of the American manufacturing sector, and will almost certainly end up costing the government nothing. Yet, it is still an article of faith among tea-partiers and other conservatives that these were bad policies.
• Politically, the GOP has no incentive to favor policies that would improve the economy as long as there is a Democrat in the White House. I know that this sounds hopelessly cynical, but it is nonetheless I think an accurate assessment of the current political climate.

The U.K. offers a clear test case of these two responses to economic crisis. The U.K. has initiated severe budget cuts and tax increases in an effort to reduce the national deficit. How their economy responds will provide conclusive evidence regarding how best to respond to an economic downturn.

Blake Edwards: 1922-2010

Blake Edwards died December 15, 2010 at 88. He was one of my favorite directors in the 1960s. He had an amazing string of really good films in the first half of the decade. He also did a few excellent comedies later in his career ("10" in particular).

• 1991 Switch
  A loosely-based remake of reincarnation/gender bending fantasy "Goodbye Charlie" of the 1960s, Ellen Barkin plays a misogynistic murder victim who is reincarnated as a woman. Jimmy Smits plays the very confused best friend of the deceased. 
• 1987 Blind Date
  A minor effort, but quite funny, this Bruce Willis/Kim Basinger story of a blind date gone bad. John Larroquette has a hilarious supporting role as the insanely jealous ex-boyfriend. 
• 1979 "10"
  Edwards' last great film, this Dudley Moore/Julie Andrews vehicle about the perils of male menopause made a star out of Moore and introduced us to Brian Dennehy and Bo Derek. 
• 1965 The Great Race
  An incredibly entertaining sprawling epic comedy in the vein of "It's a Mad, Mad, Mad, Mad World" starring Jack Lemmon, Tony Curtis, and Natalie Wood. It focuses on a early 20th century fictional car race from New York to Paris. Lemmon's Dr. Evil is a foil for Curtis's The Great Leslie. 
• 1964 A Shot in the Dark 
  A follow-up to the previous year's The Pink Panther 
• 1963 The Pink Panther
  Edwards and Peter Sellers famously hated each other, but they collaborated very effectively in a classic series of Pink Panther comedies in the 1960s and 1970s. The first two were the best. 
• 1962 Days of Wine and Roses
  A classic story about alcoholism with Jack Lemmon (in his first dramatic role) and Lee Remick. Booze destroys their marriage and nearly destroys them. Bleak but very good. Classic Johnny Mercer/Henry Mancini theme song of the same name.
• 1962 Experiment in Terror
  A very good bank robbery thriller with Lee Remick and Glenn Ford. Remick is the terrorized suburban victim, Ford is the helpful FBI agent, and Ross Martin (pre-"Wild, Wild West") as the very bad bank-robber/kidnapper. 
• 1961 Breakfast at Tiffany's
  A beloved film starring a luminous Audrey Hepburn at her peak and George Peppard in a sanitized version of Truman Capote's story. It includes the classic Johnny Mercer/Henry Mancini theme "Moon River".

Of his many talents, he was also a great story teller and a life-long sufferer of clinical depression.

Below is an interview with Larry King that contains the funniest story about an attempted suicide you'll ever read. I recall seeing him tell the same story on the old Tom Synder show Tomorrow.

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EDWARDS: Oh, yes. My depression has been with me most of my life that I can remember. I have spells of it.
KING: Still?
EDWARDS: Yes, still. I haven't for quite a while.
KING: Do you take medication?
EDWARDS: I'm not on it now. I was.
KING: Did Julie help?
EDWARDS: Oh yes. Yes. I don't think I could have gotten -- that sounds melodramatic, but I really don't think I could have gotten through without her.
KING: It is clinical, right? I mean they...
EDWARDS: Yes.
KING: Someone would look at you and say hey, there's no reason for you to be depressed.
EDWARDS: No, it's clinical.
KING: So it's not explainable?
EDWARDS: No. No. It has nothing to do with lifestyle and things like that.
KING: Did you ever think of harming yourself?
EDWARDS: Excuse me?
KING: Ever think of harming yourself?
EDWARDS: Yes. In fact, I can tell you some very funny stories about that.
KING: Tell me one.
EDWARDS: OK. I had decided that the time had come. I didn't want to live anymore. I went up on a bluff in Malibu where we lived. I had decided on the method, which was probably to slash my wrists, because I figured I could bleed into the lawn and nobody would notice it. And, I got a straight razor blade and I sat down in a chair on a beautiful sunny day looking out at the Pacific. I'm in my tennis shorts, and as I prepared to do the deed, I felt a wet nose at my ear and I responded. It was my Great Dane and he knew something was going on. He just knew and I said "Get away. Go away." I pushed him away and finally he became so almost abusive trying to get me to stop doing whatever it was I was doing. I had locked him up in my studio, but I could see him through the glass because it was all glass studio.
KING: He knew?
EDWARDS: Yes, he knew. He was jumping and running and whining. You could hear him. And I thought well, in a little while that won't make any difference. I won't have to worry about him and I'm ready to do it again. And I feel this wet soggy thing at my crotch, and I look down and it's a tennis ball and our other dog, our retriever had now brought me a tennis ball and he knew what the hell was going on and he kept fetching this tennis ball and I kept saying, "Go away," and throwing the tennis ball.
KING: This is the suicide gone wrong.
EDWARDS: Right. So finally, I figured, I know what I'll do. I'll throw this ball over the cliff. It will go down on the beach. By the time he finds it and retrieves it...
KING: You're dead.
EDWARDS: I'm dead, right? So I wind up and I throw the tennis ball and I dislocate my shoulder, and I fall over backwards in the chair and I decided at that moment that today was not the day for it.
KING: The gang that couldn't shoot straight.
EDWARDS: So I turn around and I started back toward the house feeling just terrible, and I thought oh, wait a minute. You know, always the one to worry about other people and I thought that razor blade's in the lawn somewhere. So I went over looking for the razor blade and stepped on it and cut, opened my heel up about that deep and ended up in the emergency in Malibu saying "hurry up or I'm going to bleed to death." That was one suicide attempt.