This is a long one, so I’ll keep most of it under the fold.
If you didn’t notice, there was quite a lot of pushback on my Krugman piece, and some of it I think was much deserved. So…
Let’s take Krugman’s larger thesis into account for a moment. Essentially Krugman is arguing for a larger stimulus. The one we got, he argues, wasn’t big enough. All it did was patch some holes in state and local budgets rather than go the next step and actually stimulate the economy. This is true as far as I can tell. I would gladly support more stimulus spending especially. I think we’re in essentially a balance-sheet recession. More spending makes sense especially at the interest rates Krugman is talking about. During a recession high levels of government spending can help turn around the economy; I think that keeping taxes as low as possible during a recession makes sense for similar reasons.
What worries me is that there really are structural problems that may get swept under the proverbial rug when stimulus dollars come in to bail out state and local governments.
Take Arizona, for example. Like Colorado Springs, Arizona has been under the sway of a bunch of anti-tax zealots. (They’re zealots for other reasons, too, but we’ll talk about that some other time.) In any case, low taxes are much more important to the legislators in Arizona than actually governing. So we get laws allowing concealed weapons to be carried without permits, but we can’t manage our budget even well enough to remain in possession of our own Capitol building. Our legislature refuses to raise taxes even though it means we have to let a bunch of state parks go to gravel – despite the fact that state parks are a major part of the tourist industry in Arizona. And while some states face real problems with overly powerful and entrenched teachers’ unions, Arizona is not one of them and yet still plans to cut millions from public education.
The anti-tax ideology is so deeply ingrained here that Jan Brewer, of all people, had to lead an effort to get a measly 1-cent sales tax passed by voter ballot – which it did, by a reasonably wide margin. There is some disconnect, I suspect, between the voters and the legislators here. I’m not sure it’s enough to throw the bums out, but I hope it is.
So I take Krugman’s point on the anti-government rhetoric being a driving force behind some of the structural problems facing the country. What I worry about in these instances is that all these stubborn, ideological lawmakers who refuse to raise taxes will end up taking a bunch of stimulus money and not having to own up to their own politics. They get bailed out. They get to slash spending on basic services, keep taxes low, and still get the money they need. Then what? They get reelected and do it all over again.
Where I depart from Krugman is this: I don’t think anti-government rhetoric has been the driving force across the board, nor does all deficit-hawkishness stem from anti-government rhetoric (anyone who wants to close up the budget deficit via tax hikes could be considered a deficit hawk, after all). I think this is a huge oversimplification. I think there are structural problems that are not related to anti-government rhetoric at all, but rather to mismanagement of money, spending levels that outpaced realistic revenue projections, and promises made to public sector workers that were too generous*. The public pension gap is a very real problem and hasn’t come about solely because of the anti-tax crowd.
States like New Jersey have enormous budget shortfalls and yet rank at the top of the taxation tables. Whether or not you agree or disagree with moves that Chris Christie has taken in New Jersey, the state government there for years spent more than it could realistically afford to spend. Perhaps this was merely too much exuberance during the boom years.
Either way, the structural problems in Jersey are different from those in Arizona or California, Colorado Springs or Los Angeles. From one state to the next, fundamentally different problems exist which defy broad assessments. While I support more stimulus spending, I worry that in each instance it will mask the underlying budgetary problems facing state and city governments. States that have spent too much won’t have to cut back on spending they never should have taken on; states that have under-taxed and substituted governance for ideology will be able to take the money and run.
Perhaps stimulus shouldn’t be tied to any sort of accountability. I’m not sure that’s the point of stimulus. But I do think that whenever we hand out money – whether it’s going to AIG or Alabama – we should require something in return, some proof that the money is going to not be misspent, that it won’t simply go to perpetuating bad behavior. Maybe some sort of Race to the Top for state and city governments.
Furthermore, I do think taxes are going to have to go up. We’ll probably end up with some sort of national sales tax or a VAT, as Bruce Bartlett has advocated on numerous occasions. I hope we can do this after the recession lifts. I think slashing government spending during a recessions is a bad idea, too. So long as private dollars aren’t flowing as people scramble to fix their balance sheets, lenders remain hesitant to lend, confidence remains low, I don’t see any serious problem with stimulus money keeping the boat from sinking.
I just think that we should couple all of this with accountability – not just from government but also for private companies on taxpayer life-support. We need to do away with the notion that any of these institutions or bureaucracies or banks or automakers can never fail – or else they’ll fail constantly and never pay for it.
And finally, I’ve mentioned this before, but I think one of the best ways to alleviate state budget woes would be for the federal government to take over Medicaid from the states. This would immediately free up a great deal of money that could go directly to patch up shortfalls in other state programs. Medicaid, meanwhile, would become a more universal program and would likely become more efficient, less prone to state budget woes. As Tyler Cowen notes:
The real fiscal problem is spending contraction at the state level (expanding and contracting spending are not symmetric in their effects; contracting spend hurts more than expanding spending helps). The correct fiscal policy move would have been, and still is, to take Medicaid away from the states and make it fully federal. This would give state budgets a huge break, and help employment, yet as a one-time change it reduces the moral hazard problems from ongoing outright grants.
* [As a side note the above link on pensions is to a post by Kevin Drum which I heartily endorse. I’m not sure how we go about getting private sector pay and retirement benefits up to snuff, but it’s a worthwhile project. It’s also one of the downsides to globalism and a reason that I think a market economy, which I think is – like globalism generally – an undeniably good thing, requires state services like health care in order to keep society fair for workers, to boost economic mobility, and to keep consumer and worker confidence stable. One doesn’t have to be anti-public-sector to recognize some of the flaws in the current status quo. And the status quo only worsens if the economy doesn’t recover, as the future burden on taxpayers increases disproportionately with the promises made. Similarly, one can be pro-market and still realize that we need to do more to make society more equitable.]
Just Some Fuckhead
Jayzus Criminy!!!!!!!! Die in a fire, E.D. Kain!
cleek
maybe i wasn’t reading closely enough, but i didn’t find anything to disagree with.
i’ll try again later.
Spaghetti Lee
Thing about letting politicians own up to their rhetoric is that a lot of innocent citizens would suffer in the process. One of my core reasons for being economically left-wing is that I don’t believe in the sort of automatic, inevitable recovery that will happen if we just leave things alone. Similarly, if Arizona stops getting bailed out and simply crashes, I’m not sure whether it would get back up. And given the ripple effect something like that would cause, it’s not something I want to risk.
DougJ
A lot of good points here.
One thing, though — it seems to me that while, yes, different states have problems for different reasons, I don’t see that as an argument against federal help for states. Maybe Jersey needs it because of fucked-up pensions and AZ needs it because of anti-taxation ideology, but all are in particularly bad way because of the recession and none can create debt as easily as the federal government.
Dexter
This posts sounds quite reasonable. What am I missing?
EDIT: You can also put GA along with AZ. The Sonny the Governor and all the legislature will do anything so that they don’t have to raise taxes. The education cuts are piling up. OTOH, Sonny gave the a giant tax cut to all his rich business buddies and the latest scheme is to do away with the income tax (which is 45% of state revenue).
stuckinred
WASHINGTON — The House has passed a $26 billion jobs bill to protect 300,000 teachers and other nonfederal government workers from election-year layoffs.
Poopyman
@cleek:
Not even the VAT?
Other than that, “need accountability with stimulus money”. Uh-yep.
freelancer
TF; DR (Too Fucked; Didn’t Read)
Dave
I can’t wait to hear how this post kills puppies and makes unicorns cry. Personally, I think it’s nice that someone touches on the concept of moral hazard as it applies to the states. Arizona deserves to go belly up.
In regards to pensions … another part of the problem is rosy projections made back in the day that never panned out.
Dexter
@stuckinred:
So that means Pelosi and Obama are pandering to the evil teacher’s union. Outrage is going to start soon.
suzanne
I personally think we should only give stimulus to companies that pay their CEOs a maximum of 50x the salary of the lowest-paid employee. Why are we contributing to this ancien regime bullshit?
nepat
Some of this is semantics. We need to strike the word “stimulus” from our vocabularies since it’s become Republican code for stealing from taxpayers. Instead we need to declare our public infrastructure a priority worthy of investment in and of itself and just go for it. The investment doesn’t have to buried inside a larger and politically toxic “stimulus.” We just explicitly state that in order for our beloved small businesses to thrive, they depend on a reliable infrastructure.
Spiffy McBang
Now you’re arguing a different point than Krugman is (which is fine). He’s been beating the short-term drum for a while now, and you’re talking about the long-term systemic issues. So you’re agreeing with his main point, the need for stimulus given such low bond rates, and I think he’d agree with what you’re saying about accountability.
Consensus achieved! Everyone’s happy! Let’s throw a party!
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Jim Pharo
Thoughtful piece, would benefit from an even sharper blue pencil (I know it’s tough!).
Re: your point about “requiring” something in return for gov’t benefits. You might notice how this concept applies for ordinary humans, who might be required to switch TV signal formats and receive a voucher for the cost, but for millionaires, we shovel cash at them in the (ultimately misguided) hope they will somehow turn it into jobs. Just imagine if we instead gave ordinary humans $50 to buy a converter (or not), and gave millionaires tax reduction upon presentation of proof of a job “created.” The best way to ensure the money is spent is to give it to those who need it most. Crazy, huh?
Also, your point about public pensions shows your lack of historical perspective. Bringing down everyone’s compensation is a project that business has been working on since, well, forever. They’ve been successful in the private sector, getting rid of actual pensions in favor of far-less rich 401(k) plans, not to mention other ways they’ve shifted costs onto workers. But they’ve been less successful in the public sector. It might be nice to think about raising everyone else’s compensation rather than lowering the compensation of public employees. The ones I know are hardly mini-Rockefellers.
Finally, I think you get this but am not sure. Raising taxes a miniscule amount is ONLY a political thing, not an economic thing. Every government (plus every citizen) would benefit from a 10 cents a gallon tax increase to pay for roads, etc. Instead, when the price of gas goes up 10 cents, the money raised is given to oil company shareholders — who do who-knows-what with it. Either way, the economy is “harmed” by ten cents a gallon. The only difference is whether the money goes to build roads (nice to have AND stimulative since contruction workers actually need the money), or goes to billionaires (who probably add it to the pile — NOT stimulative).
If you think about it, there’s a trend. As much as possible, the “haves” push as much burden onto the “have-nots” as possible. Think of how we talk about gov’t spending: first we have to cut kids, the sick and old people, and under NO circumstances can we ask hedge fund managers to contribute even five cents more. Sounds wrong to me…
Raoul
What I see here is essentially a backtrack from the previous column- no defense of durable lamps or gravel roads- taxes got to move higher- global economy demands essential governments services- basic Keynesian stuff. The one idea, VAT, is really dead on its tracks.
Spiffy McBang
@nepat: At which point the Republicans take anything that remotely looks like stimulus, and a lot of things that don’t, and call them stimulus to demonize them.
At some point Dems/progressives have to start winning the media battles and the war of words, and find a way to dictate the definition of the things they’re trying to do.
Alex S.
I would say that the ideological rigidity of the republicans is a structural problem. Theoretically, the two parties should be fighting for the median voter, but the Republicans don’t do this anymore.
I give a lot of blame to Grover Norquist who forces every Republican lawmaker to sign a no-tax-increase pledge. And well, every possible tax increase is fodder for a primary opponent.
Bill Arnold
nepat
Particularly since we can borrow for it at 2.8 percent (or something very close to that), not secured by anything but the trustworthiness of the US Federal Government.
I think we’re collectively insane as a nation to not be borrowing/spending massively more than we are on infrastructure projects.
blahblahgurgleblegblah
I have a neat idea. It’s not a new one. In fact, it was tried seventy years back. Let’s build stuff. Like …things. Is that tangible enough for you?
How about funding new public transportation systems that use electricity instead of petrol? Such as subways, above street rail cars, and electric buses? China has a neat idea, a bus that’s larger than a two lane highway which drives _over_ traffic:
http://www.popsci.com/cars/article/2010-08/chinas-straddling-bus-carries-passengers-overhead-lets-traffic-pass-underneath
Or, perhaps, we could electrify our roads and bridges to charge electric cars as they drive. And, hey, as long as we’re spending money on transportation infrastructure… we might as well fix those crumbling bridges that keep threatening to collapse at any minute.
I know, these projects wouldn’t be “shovel ready”. Well, the same was said of projects two years ago that were never funded which could have been “shovel ready” by now.
You want to stimulate the economy with spending? Let’s stop giving money away with no strings attached to international banks and multinational corporations. Let’s instead build useful things here in the United States. Things those companies would actually use in the long run anyway. Along with citizens. Those non-corporate entities this government was formed to represent.
Steve V
I largely agree with all of this, but the atmosphere hanging over all this discussion is a messaging campaign going on for decades now by political conservatives to make the notion of raising taxes another “third rail” or whatever in American politics. If anyone proposes even a 0.5% increase in the federal income tax, all hell will break loose in this country thanks to that intensive and successful campaign. The looming “expiration of the Bush tax cuts” will get very ugly, I’m afraid.
QDC
@Poopyman:
I’m not an expert, but my understanding is that VATs are generally thought to allow higher levels of taxation as a percentage of GDP with lower impact on growth than income taxes. Hence the widespread use of VATs in European countries with extensive welfare states. I’m also told that they can be made progressive through refund systems (and by retaining income taxes for high earners). As I said, not an expert, but the idea seems reasonable.
Also the phrase you quote did not appear in the original post, and the reference seemed to be to holding states whose budget problems are the product of ludicrous anti-tax policies accountable. Why did you alter it to make it sound more like a right wing talking point?
James Hare
Epistemic closure is just as possible on the left as the right. At least our front pager admits much of what we ask conservatives to admit. Must he agree with us all the time and cease being a conservative to be acceptable?
I agree on federalizing medicaid. Spending for that is counter-cyclical so it makes sense to leave in the hands of the federal government. All of our counter-cyclical spending should be handled by the federal government. What’s wrong with bringing that up?
What’s wrong with advocating more taxing? What’s wrong with pointing out that stimulus that covers up state failures gets bad politicians off the hook? There are well-run states and poorly-run states and this recession has hit all of them. Should California be allowed to patch up its budget holes to detriment of well-managed states like Vermont (just to get two very liberal states with totally different budget outlooks).
TL;DR- Give the guy a chance! RTFP!
suzanne
AZ also needs help because of our housing market going to shit. It’s not purely ideological. As the Prop. 100 vote proved, we’re not reflexively anti-tax.
Lirpa
Strong points here, IMO. I think the feds would do well to take over Medicaid costs as it is inhumane to cut such services at this level of poverty. (Universal health care would be even better!) It wouldn’t help with your concern over bailing out bad habits because states could use what they would have spent on Medicaid to fund their stupid habits. I suppose you have to give the emergency help and then fix the underlying illness later. I also appreciate that Medicaid helps states according to their populations, which makes a lot more sense than dividing the pie into 50 similar sized pieces like they have done with anti-terror funding.
I have no problem with putting strings on state aid – I wish all the government aid doled out the past two years had strings akin to what Congress put on the auto bailout. The problem is that there are no cut and dried answers to the myriad of overspending/undertaxing problems the states face. What about changing the repayment costs according to how well states do at fine tuning their budgets by 2015? All bail outs will begin to be repayed in 2015 and states who have taken steps to start bringing their balance sheets under control pay 3% interest, those who haven’t pay 6% interest or some such.
I despair that such solutions are too rational and could prove too effective to get politicians behind them, however.
horatius
Oh Noes. Not the dreaded VAT. VAT disproportionately taxes middle class and poor people. If you want a VAT with subsidies paid for by a 90% tax rate on the top 1%, count me in. Also, throwing those who don’t comply into jail, (the top 1% that is) would be even better.
Shinobi
VAT and national sales taxes make the baby jesus cry. WHY DO YOU HATE THE BABY JESUS.
Or more seriously, everything you wrote about except that was great.
Sentient Puddle
I think the only place I would possibly find any sort of disagreement with this would be if we were to parse specific states and find budgets that were fiscally responsible before the recession, and now are in dire straits because they can’t come up with the tax revenue. But eh, that’d be pretty pedantic.
This really is a hard problem either way. Aid to states certainly should be contingent on them fixing their problems, but different states are fucked up in different ways. Tailoring stimulus to address all the fucked-upedness…yeah, not a job I’d want to have.
(Oh and I suppose I should note that when I say “states,” I do also include cities, counties, etc. But I don’t want to have to type that out every single time.)
matoko_chan
nope, you can’t.
not in your party.
we have been essentially pro-market since the great depression and all we got was screwed when the invisible unregulated hand of the market punched american families in the face.
that is what the Econopalypse that Ate America was all about.
you need to own that free market bullshytt right now.
also too, you just threw states rights under the bus like all glibertarians.
i read your passionate advocacy for state control of homosexuals and abortions.
/spit
tomvox1
Yes. For the middle class. But raise ’em like hell for the rich. They’ll still be rich and it will solve a lot (though not all of course) of our budgetary problems. The top tax rate after the JFK cuts was 70%. And the rich were still rich. All anybody is talking about now is allowing them to go back up to 39.6% for the top. That and preventing oligarchical hand jobs such as trying to slash/repeal the Estate Tax or cut capitol gains taxes. All “tax hikes” are not created equally.
mistermix
On VAT – why is this such a popular idea versus raising the income tax rate a few points? Putting aside all the other issues (such as states already having a high sales tax, the regressive nature of sales tax, etc.), let’s just take a purely pragmatic approach. We already have the machinery to collect a national income tax. We don’t have that machinery to collect a national sales tax. It would cost money and be a big disruption to collect it. Why bother when our income tax rates aren’t really that high, from a historical perspective.
Elia Isquire
I thought this was an eminently reasonable post, that raises an interesting issue about moral hazard and the states. I’m inclined to say the citizenry shouldn’t suffer for pol incompetence, so maybe a race to the top idea would be a better way to provide aid without ignoring mistakes and mismanagement. I’d like to hear more thoughts on this.
I’m glad EDK is blogging here now and I hope he continues to do so.
Martin
Something that I’ve not seen addressed is that, at least to my eye, it appears the states which send excess tax revenue to the Feds are generally more fucked than the states that receive excess.
At nearly opposite ends of the services spectrum are California and Texas, yet Texas is seeing California-size budget deficits this year. I don’t think local attitudes toward taxation are the problem. I think the problem is that the redistribution of the tax base at the federal level works okay when revenues are there, but when they aren’t, the donor states get hit doubly hard and the beneficiary states have something extra to coast on.
For all the complaints about California’s out-of-control budget, the state has NEVER run a budget deficit that exceeded the federal tax/benefit gap. Texas’s shortfall is in the same ballpark this year.
I don’t think this problem reflects particularly well on either economic ideology – it sure as fuck won’t get solved with tax cuts, but whatever subsidy systems we have working at the federal level don’t work during economic downturns. I wouldn’t mind seeing something as direct as ‘the federal government will provide stimulus to those states that make excess contributions to the tax base, proportionate to the size of the excess’. That’d piss off a bunch of states, but it’s a position that could be easily justified with the public.
fasteddie9318
Right; VATs are workable when they help pay for large social welfare systems and come paired with tweaks to make them more progressive, like additional income taxation and refunds/exemptions for basic (i.e., food and basic clothing) purchases. But close your eyes and try imagining either of those things happening here. Once the Eloi get us Morlocks to the point where we’re willing to accept a VAT, the game will be over and we’ll be forever shipping our money off to the government so it can be laundered and distributed to the Galtian Elite, who will no longer have to pay taxes like the bottom 95% scum do.
Lurked
@Jim Pharo:
A well-known Soviet-era joke:
Alexei lived next door to Ivan. Ivan had a goat and always had fresh goat milk and cheese, and could sell the kids for extra money. One day a magic spirit appeared to Alexei and said “You have worked hard and been a good man and I will grant you one wish.” Alexei said “Ivan has a goat and I do not.” The spirit said “Very well, do you want to have a goat?” “No,” said Alexei, “I want you to kill Ivan’s goat.”
Dave
I think it’s hard to argue that someone like, say, AIG should fade away for moral hazard (and all its employees lose their jobs) and then argue that Arizona and their lobotomized government should get a free pass for running their state into the dust. If Arizona went bankrupt, people would leave for better-run states, companies would relocate to better-run states, and everyone would get an object lesson in why taxes are such a critical part of the social contract.
tomvox1
Sales taxes are de facto regressive taxes and fall disproportionately on the less well to do as a percentage of income, leaving them with less overall disposable income to pump back in the greater economy. Poor idea, even if it comes from a “reasonable conservative” (oxymoron?) like Bartlett. Not too mention it’s so darn European to talk about a VAT, n’est pas? What’s next, free prenatal care?
Martin
@QDC: I think the only real benefit of VATs is that they are much harder to game as compared to income taxes. Your taxation is broadly distributed and in many cases completely hidden from view. Makes it hard both for individuals to route around it and for legislators to dick with it for partisan gain.
It’s doesn’t really have much different impact on growth.
les
Kinda duh, but well said. Right now, the recession swamps everything; if we don’t get the economy moving, state and local budgets can’t recover, whatever the reason they’re in terrible shape. The shortfalls overwhelm the structural issues at the moment, I think; and the only player capable of doing anything is the federal gov’t.
That said, I still think the overwhelming structural issue is decades of preaching from the republican/libertarian right that government is the problem–not just anti-tax, but anti-government, anti-bureaucrat, anti-regulation, and on and on–it gets you the simple minded tax cuts forever breed, but also government by people who don’t believe in government; and so don’t care if it works, see it as a way to enrich themselves and their buddies, just another part of crony capitalism; who are simply in it to rule, not to govern. The Bush/Cheney admin, writ large–or small and venal if you prefer.
Agoraphobic Kleptomaniac
I feel like this is a shiny keys post. No kidding that bad legislation and idiotic state legislatures are to blame for their budgets.
This. Is. Not. News.
But we can’t just let infrastructure go to crap just because we want new management. I mean, I Imagine what Obama would do if he bailed out the states would come into that state and say “Ok, here’s some temporary money, but here are the things you have to conceed” or “By the way, it was the failure of your state leadership that caused the rest of America to come in and bail you out”.
I mean, we are talking about thousands of children who won’t be getting educated. Are you willing to allow this to happen for a couple years until the public gets mad enough to throw the bums out (most likely requiring an entire political shift in ideology).
Furthermore, these local politicians *aren’t blamed*.
I got a phonecall from my sister-in-law who lives in Arizona in early 2009 and she was complaining that they were reducing Kindergarten to a Half-Day. Guess what she said… “Thanks a lot Obama!” It took a little explaining that there was no way that it could have been Obama’s fault.
So, while I generally agree with your premise of “Stupid state leaders shouldn’t get handouts”, I don’t have faith that Dangling purse strings over the heads of the populace is the way to get structural political change.
suzanne
@matoko_chan: Are you trying to converse in free verse, or are you fucked up again?
SATSQ, I suppose.
JGabriel
E.D. Kain @ Top:
Agreed, though I suspect we disagree on who is oversimplifying. (C’mon, Erik, you set yourself up for that one. The grammatical ambiguity of ‘this’, in the last quoted sentence, practically demands that someone take advantage of it.)
I don’t think even Krugman would disagree with any of that. Krugman’s point is that too low taxes, and anti-government rhetoric, are a major problem for the states and for our political discourse in general – not that they are the ONLY problem.
.
QDC
@fasteddie9318:
I’m not sure I agree. Our current dysfunctional politics of taxation are split between don’t raise taxes at all, and raise taxes a little bit on the very rich. Wouldn’t the VAT–a broad based tax that has the largest impact on the middle class–be the least attractive tax to raise? I’d take my chances on a system with a VAT + some high income brackets and bet that the high income brackets are to go-to for additional revenue. But I might have missed your point.
matoko_chan
@suzanne: im fucked up by my body chemistry even when im not crunck.
its a bad endorphin biofeedback loop from trying to communicate truthsay to priggish twodigit dimbos.
orogeny
Maybe a dumb question, but would it be possible for the Feds to require states to apply for stimulus money, giving specifics as to what they plan to do with it, estimates of number of jobs created or preserved, and plans to address government deficiencies that led to the need for the money? It seems like this does two things, requires state leader to admit mismanagement if it caused the problem and would demonstrate to the public what the stimulus money is accomplishing.
Wouldn’t this be preferable to just giving the states a lump of cash and then trying to figure out afterward what was done with it?
Tom
@Dave:
As for the 6 million Arizonans who don’t have the money to relocate to a neighboring state’s FEMA refugee camp, well, fuck ’em.
El Cid
From what I hear from coworkers and talk radio, there simply is little understanding of what terms like “deficit” and “inflation” mean.
The reason we don’t have jobs, for example, is somehow caused by the deficit. Spending is bad, they all falsely imagine themselves to balance their own family budgets and debt each month (mortgages? car payments? student loans?), and if they didn’t they’d go in the hole and lose what they got and obviously the government is just like them.
Somehow the big deficits and debts mean that companies know that there are soon to be gigantic tax increases plus all the new financial regulations are just about taking more of the small businessman’s money, and any way soon we’ll be working for the Chinese, either because they own us outright or they’re going to demand we pay up right now and we’ll have no choice but to let them take over.
Inflation is all about us and soon to come even worse, and the government and the librul media are lying about it and keeping it hidden, and it’s because of all the inflation that they’re not making any more money and many of their bills like health care are going up.
The deficit isn’t a major scoring issue in polls, but to the extent many ordinary people express such outrage about it, few that I hear from have the slightest idea what they are talking about, nor do they care.
Jim
You miss the key point in the tax / deficit debate: when there’s massive unemployed resources (as is usually the case in capitalism and certainly is now) there’s no reason to borrow or tax in order to spend. There’s no reason to worry about deficits.
We have control of the currency and do not need to borrow or tax in order to spend. Inflation is not a risk when we have massive unused capacity. The government should finance its spending through the printing press and cease doing so when unemployment is eliminated. Spending should be cut back when we’re approaching capacity which provides a sound basis for inflation control.
The whole debate between austerity and deficits is false. Austerity and debt limits are not forces of nature. They’re human constructions that can exist only within the iron cage of the orthodox finance view of capitalism.
Jim
commentsongpe.wordpress.com
Dave Fud
This is exactly what I want to read from a conservative. Solid thinking, step-by-step extrapolations from the main point, solid conclusions, and making liberals think about ways to better design government programs to ensure they are effective.
What a breath of fresh air. I agree with what you have said, but if I have to pick from between wasting some spending or no spending, I will pick some waste every time. But it is good to see someone push the liberals among us to improve spending initiatives if possible.
Belafon (formerly anonevent)
Interesting, and strong federal government conservative argument. Can’t wait to see when you get called a RINO.
I actually agree with most of your stuff, except the timing. I don’t think you can bring in accountability at this moment to fix things. We’re still in the epidemic stage, and at this stage bringing the problem under control is more important than making sure every dollar is accountable.
I will definitely agree, though, that when things are more stable, that states like AZ need to be punished for thinking that they can cut taxes and get bailed out. My thought on how to fix that goes like this: The federal government loans states money, but the states are expected to pay it back. States that pay more in taxes than they receive can count this difference toward payment. Otherwise, the states have to show improvements in infrastructure and public services to count toward repayment.
The idea comes from yesterday, when I modified someone’s comment. They original said that the US should not give money to Afghanistan if the leaders were not willing to use it effectively, and I changed it to Mississippi. I should have used Arizona instead.
Dave
Here’s a solution: promise every GOPer that the top marginal tax rate won’t be higher than the third highest tax rate Reagan had in 1984, which is the Year of Perpetual Sunshine in GOP mythology.
Oh yeah, that rate was 45%.
IrishGirl
For all those who say AZ deserves to go belly up….think before you speak. Not everyone living here is a teabagging wingnut. I’m as liberal as they come and stuck here with all these nutbags and there’s a lot more like me. Unfortunately, we don’t have the numbers YET to take over the state. We will eventually. But it doesn’t mean that we should all suffer because its been controlled by of a bunch rich, conservatives who don’t give a damn really governing the state.
E.D. Kain, sounds like you’re writing as if AZ is your home state? True? Then how can you say, let them suffer the consequences when you know those politicians won’t suffer a thing and the average person, like me, will.
fasteddie9318
@QDC:
The top 2% have been looking for a way to shift more of their (already too light) tax burden on to the middle class for, well, most of the past century at least, and the VAT would be the perfect way to do it. This is why opening the door to it even a little is a bad idea. Like I said, if a VAT came attached to comprehensive social welfare and extra taxation for the wealthy/tax relief for the rest of us, then OK. But in America the first is a non-starter and the second highly unlikely. Anytime somebody talks about a national sales tax or a VAT, substitute “let’s go fuck the poor and middle class some more so that we can cut the rich an even sweeter deal.”
BTD
@cleek:
I liked the above the fold so much that I took no chance and stopped there.
Great above the fold.
This is my type of conservative.
El Cid
@IrishGirl: I think most time when people say things like that it’s a sarcastic outburst targeted at the retrograde politician involved.
It’s like saying that if Alabama or Mississippi (i.e., right wing ass-hat politicians) hate the US government so much, why don’t we just pull out all federal funding, let them keep their taxes they would have sent to the Treasury, and pull out all federal contracts, bases & the like.
I don’t literally desire, say, the poor white and black populations of such states to now become utterly devastated, but just to get back at inane rightist rhetoric.
Omnes Omnibus
This kind of post might have made a good introduction to the jackals. Starting by finding reasonably common ground and establishing bona fides as a “reasonable conservative” and then branching out into more controversial territory might have prevented some of the howling. Ah well, live and learn.
Michael D.
I HAVE A QUESTION!! It may or may not be related to this post.
Conservatives always say that cutting taxes stimulates the economy. If that’s the case, then why did the Republican government of Georgia cancel the back-to-school sales tax holiday?
Just asking.
Poopyman
@QDC:
The phrase in quotes was my “shorter Kain”. Sorry if that wasn’t clearer.
tt crews
E.D, Concerning your reference to New Jersey’s high taxes and budget shortfall–
The tax table you reference is for NJ real property taxes. The State does not raise money through property taxes. The State raises revenue through, primarily, income and sales taxes. Property taxes are used for revenue by county, municipal and school districts.
There is a relationship between state aid to municipalities and schools and the level of property taxes. However, property taxes are not used to pay the state budget and it is not the state budget that drives property taxes so high.
taylormattd
What the fuck are you talking about?? Really, I literally don’t understand the meaning of the words you write:
There is ZERO connection between your first paragraph (noting that republican winguts don’t have to pay a price for anti-tax rhetoric) and your second paragraph (bitching about alleged ‘too generous’ promises for public sector workers.
what do these have to do with each other? How does republican perfidy about taxes (and accepting federal money) relate at all to whether public employees should have nice health or retirement benefits?
How? How is this not just another “we spend too much on public employees” rant, dressed up with an unremarkable observation about how republicans are hypocrites?
suzanne
And let’s not forget that we Arizonans didn’t elect Brewer. We elected the glorious Janet, and, DAMN, do I miss her.
taylormattd
@BTD: Lol. Sadly, the above the fold was the only reasonable thing about the post.
ksmiami
But Ed this is the part where you lose me – the people who decided to take public jobs decided that instead of making millions on wall street, that they would give up current earnings for a smaller salary and decent pension plan. It was a deliberate choice and now you can’t go back on those contracts esp. because the workers did a lot of thankless and dangerous work needed to run a city or county. Additionally, state pensioners are not the problem. Our appetite for endless wars is, as expected by many people on the anti-war right and left, bankrupting us slowly, but surely. Empires cost money and we need to decide if it is worth destroying small pissant nations, blowing up hardware and bodies, or would we be better served with improved infrastructure, a stronger safety net and free wifi for everyone. I know what my choice is. What’s yours?
Delta
When more conservatives start talking like this, I will know they have returned to the land of the sane.
Of course stimulus shouldn’t be tied to any particular demands of the receiving states when the entire nation is in or just climbing out of the deepest recession since WW II. Right now, I’m content to throw money at everyone, even those who don’t deserve it, like my own state, California. Yes, we have serious structural issues which make the state essentially ungovernable at the moment, but to refuse to help the state until the structural issues are resolved means stopping any hope of recovery in its tracks.
I can’t agree that “anti-government rhetoric” is not to blame for these issues. It’s the anti-government rhetoric that allows politicians to continue telling the public they support balancing the budget and cutting taxes, as if it was possible to do both. They have a large percentage of the population convinced that if only the federal government stopped funding “pointless” scientific research and the states cut employees’ compensation, then our entire budgetary problems would magically be solved. Until the GOP leadership starts talking about budgetary realities, the magical thinking will continue on the right.
JGabriel
Me:
Except for this:
Not sure how I missed that on the first go round. I don’t think those promises were too generous, I think they were based on ignorance of how thoroughly the GOP would trash the economy.
.
Omnes Omnibus
@ksmiami:
Can’t be emphasized enough.
Bob Loblaw
States like New Jersey have enormous budget shortfalls and yet rank at the top of the taxation tables. Whether or not you agree or disagree with moves that Chris Christie has taken in New Jersey, the state government there for years spent more than it could realistically afford to spend. Perhaps this was merely too much exuberance during the boom years.
Perhaps it’s sustained income inequality along racial lines. Perhaps people in Camden and Newark really do require a higher degree of public services to maintain even the lowest of living standards. Perhaps cutting urban services while protecting upper class white property tax levels will never fix the long term budget problem. You can’t leave 15% of the state to rot with no job prospects or income growth and expect not to have to pay for it through government subsidies. Perhaps.
BombIranForChrist
I’ve always said that one of the greatest curses ever to befall a conservative state would be for it to actually live according to its conservative ideals.
Many of these states have this anti-tax zeal while at the same time taking more money FROM the government than it ever pays in taxes.
Similar, I think, to what you are saying, I strongly suspect that a lot of Conservative of the Dumb Variety support will quickly disappear when people actually … live … under conservative … governance. The entire Bush presidency was a glimpse into this, and he spent a huge ton of government money on education and the prescription drug bill!
It’s actually a problem that faces the GOP if they win in 2010. It’s a problem that’s already being picked up on oh so slightly in the media, and it is this:
“Ok, Mr. GOP Big Shot. You say you want to cut spending. What spending do you actually want to cut?”
And there is the problem. There is a small corps on the far right that want to basically cut everything, but there is an extreme reluctance to get specific by most because most understand the Great American Secret: That Americans LOVE their entitlements and will vote out of office anyone who tries to take them away.
THAT is why one of the most knee-jerk, circle-jerk conservative presidents ever, George W. Bush, signed a whole shitload of spending bills. Because he wanted to get re-elected. And he knows what Americans actually want. “Free” stuff.
wengler
E.D Kain, what I can’t stand about your writing are your huge throwaway assumptions.
You ever think that these things may be connected? The south comes dead last in teacher union participation AND in student scores. Teachers’ unions prevent cuts of millions of dollars from public education. I know. I’ve been on strike for education money before. Not for more money for teachers or more of them cushy teacher benefits that seem to exist only in the minds of non-teachers, but simply for money for educating students.
Teachers across the land are getting thrown out of jobs by the thousands because localities can’t make ends meet and you gotta talk about how overly powerful they are. Seriously, some of your ideas are OK but your assumptions are totally off base.
JGabriel
E.D. Kain @ Top:
Actually, given how extensively the Bush administration, and GOP state administrations, exaggerated revenue projections based on the “less taxes = more revenue” rhetoric/lie, shouldn’t that read:
.
Agoraphobic Kleptomaniac
@Belafon (formerly anonevent):
Bingo. This is a visible way to implement EDK’s proposal, without the harm to the general public who otherwise would be punished for a state legislature that is largely beyond their control.
pandera
Dude – you’re a Democrat. Sorry, I didn’t mean to blurt it out like that and startle you but there it is. You’re liberal on social issues and an advocate of some common sense fiscal ideas while still acknowledging that government does, and must, play a huge role in the success of the “free” market. Welcome.
russell
What you’re talking about here is some kind of moral hazard. If we bail out the states, folks in the states who made the policies that got them in a bind won’t have to answer for their bad governance.
I have a confession to make: when I hear the phrase “moral hazard”, I want to punch somebody in the nose. I understand that it’s an economic term of art, but it always seems to be used to explain why we shouldn’t do some useful, necessary thing.
There are all kinds of hazards, moral and otherwise. Not providing necessary public services presents a number of hazards. Not fulfilling contractual obligations to public employees, likewise.
Etc etc etc.
If we can find a way to make state and local governments accountable for any stimulus money they receive, fine. Let’s do that.
If not, let’s spend the money anyway.
“The one idea, VAT, is really dead on its tracks.”
I agree with this.
At some point we will need to enhance revenue. Maybe the economy will grow like Jack’s Beanstalk and revenue will just coming pouring in like a magic waterfall.
More likely, we’ll have to raise taxes.
The federal income tax is currently the only federal tax that is significantly progressive, and it is only progressive up to about $350K. That’s a lot of money, but some folks make a thousand times that much.
Before we institute a VAT, I’d like to see the Bush tax cuts rolled back for high earners, per Obama’s proposal, and I’d like to see an additional bracket added for very high earners, say folks making a million or more a year in income.
Hell, make it five million.
I’m not suggesting this to “stick it to” rich people. I’m suggesting it because they have the money, we need the money, and a progressive tax scheme creates the least overall pain.
The “VATs inhibit growth the least” argument is interesting, and it’s true that they have them in Europe, but they also have generally more progressive income tax regimes in Europe than we do here, both personal and corporate.
We need the freaking money.
Erik Vanderhoff
And finally, I’ve mentioned this before, but I think one of the best ways to alleviate state budget woes would be for the federal government to take over Medicaid from the states.
Yes and no. It is not at all clear that this would make Medicaid more like Medicare. While this would likely free up funds at both the state and county levels, where would these workers go? You’d have an enormous period of employment instability.
Furthermore, Medicaid encompasses far more than just medical care. What about the HCBS and EPSDT/NF waivers? There’s all kinds of things to consider.
If you’re freeing up Medicaid, what about TANF? A big revolution in TANF was to have it run by the states, making them more responsive to the needs of the state or county. Medicaid is run by the states with the same idea. How do you address that fundamental conflict?
geg6
Other than the national sales tax and the VAT ideas, this may just be the first post of yours, E.D., that I can agree with. A national sales tax is just too, too regressive and a VAT just screws the same people as a national sales tax unless we cut their taxes (actually, probably MY taxes) even more than the Obama cuts.
Otherwise…well, you are learning.
catpal
About New Jersey budget problems – mostly due to
Republican Gov Christine Todd Whitman lowered income taxes in New Jersey, – she rolled back the 1 cent sales tax, – and — her decision to withhold billions of dollars that should be going into the public employee pension funds over the next few years – still carried forward to today.
Another math-challenged Republican Lowered taxes while Costs Increased.
Another Republican Tom Ridge did the same thing in PA – pension funding was withheld and is causing budget problems today.
Chris Christie is a fiscal accountability joke – “Treasury figures show 34 people making $100,000 or more in Christie’s office, compared with 24 for Corzine in April 2009. ” – but yet he froze other state salaries.
Midnight Marauder
@BombIranForChrist:
A “small corps on the far right?” You are talking about an increasingly growing group that includes the Senate Minority Leader and pretty much every other Republican in a Congressional leadership position and currently running for office this fall. It’s why I can’t agree with this analysis from Kain:
What Republican Party have you been watching for the last 50 years?
THE
matoko,
What makes you think that corporatism and crony capitalism is “pro-market”?
Anonymous At Work
Two things.
First, regarding this line: Where I depart from Krugman is this: I don’t think anti-government rhetoric has been the driving force across the board, nor does all deficit-hawkishness stem from anti-government rhetoric (anyone who wants to close up the budget deficit via tax hikes could be considered a deficit hawk, after all).
Krugman’s complaints aren’t targeted at deficit-hawks, but deficit-peacocks that disguise their anti-government rhetoric behind deficit worrying. Nor, I think, is a lot of deficit-hawkiness a result of anti-government rhetoric generally, but a result of short-term selfishness: I want what the government gives me but don’t want to pay for what the government gives others. Fine in theory at the individual level, but collectively makes things fall apart.
Second, regarding Mastermix’s question about the calls for VAT. VAT is a new taxation system, radically different than what we have now. The reason for people calling for it rather than a few extra points on the income tax is that if the income tax is raised a few extra points, the world won’t end, in contrast with many VAT-proponents prophesies. American voters may realize that taxing the rich can bring in more money for basic amenities. That’s the reason for a lot of these calls.
A secondary reason is, in theory, VAT provides a more direct (not necessarily better) and visible feedback mechanism between government spending and taxation. “Want a new fleet of aircraft carriers? Then it’ll cost you a dime every time you shop.”
Zifnab
@Dave: While cathartic, this idea is ultimately rather foolish. Arizona doesn’t live in a vacuum. If the state were to crash, fallout could spill out to New Mexico, Utah, and California.
And, honestly, it’s the Arizona voter’s job to hold Arizona accountable. Punishing the entire country because you’re afraid Arizona might benefit is rather foolish and shortsighted.
nepat
@Bill Arnold:
So sayeth none other than David Brooks, unable to make the simple connection between our pathetic, decaying infrastructure and his pathetic, decaying political party. There is real political (and pragmatic and necessary) opportunity here, but we’re stuck in this sizing-the-stimulus debate. Forget about it. Start a new debate on infrastructure alone. Let the Republicans defend decay and rot.
BobS
Is there more than one person posting as ‘E.D.Kain’?
General Stuck
Well, we can’t very well let the states go under and face default, so whether you call it stimulus or bailout we will need to help them stay above water. And that could be distilled down to individuals and the safety net. If this money needs to be borrowed, then it needs to be.
Bill Murray
Saying NJ is high on the US tax table is not the same thing as saying NJs taxes are too high.
I think it is at least as likely that mismanagement of money comes from the same place as faux-deficit hawkery. But those are just opinions
Mark
@pandera – exactly right.
I have a friend who claims to be an independent. A centrist. She called me ‘partisan’ because I told her there was not one current republican I would vote for.
And I challenged her to come up with exactly one policy issue where she agreed with the republicans. She gave me some gobbledygook about republicans being more careful about budgets and spending. I told her she must have been smoking crack throughout the entire bush administration (and reagan too.)
So she said the democrats weren’t good for small business. Really? Aren’t health care costs the #1 issue holding back small businesses? Didn’t the democrats just pass health care reform that might control those costs?
It seems that there’s a strain of ‘so-called’ conservatism that obsesses over the notion that “the democrats aren’t perfect” but ignores the abject failure of the entire republican party. ED is a perfect example of this kind of thinking.
kay
There’s a lot there, but I really question this.
Medicaid and Medicare are very different. Medicaid is a means-tested, “social welfare” program rather than an entitlement insurance program, like Medicare. There’s a qualifying interview that has to be done for Medicaid. Further, the fastest growing part of the Medicaid program is nursing home care, where an asset and asset look-back inquiry has to be done.
I have no idea why this would more efficient administered at the federal level. I’m not even clear how it would be administered at the federal level. Seniors have to report assets and then there is a “look back” to see if they transferred assets to family members to avoid paying for nursing home care. It’s actually done not at the state level, but at the county level.
When you say “would become a more universal program” do you mean make Medicaid a federal entitlement program, with all the rights and responsibilities that go along with that?
Are you sure you wanna do that? How does it cut costs?
Michael
Stimulate, and make sure that every oil baron and paper oil commodity trainer has a pistol to his head for a solid month after the stimulus is issued. Any move to raise oil or refined fuel prices, and the trigger gets pulled.
Of course, I hate America, Sweet Baby Jesus and the Troops, so my solution may be objected to by ED and the robber barons he fluffs for.
sven
EDK,
really excellent post, this is already one of the most interesting threads I’ve seen for a while.
One question I have is whether you believe the right is learning anything during this recession?
I would argue that what we are experiencing is a political crisis even more than an economic crisis.
General Stuck
@sven:
Tee Hee.
suzanne
@Mark:
Abso-friggin’-lutely. I really think it’s because a lot of those so-called conservatives can’t stand, even in their own minds, to admit they have more in common with people they want to dismiss as feminists and hippies than with those that they realize deep down are morally craven, but admire nonetheless, for their BMWs and nice clothes and higher social standing. Just like how everyone wants to be friends with the football players and the student council, not the drama neerds or the computer geeks, even though the head quarterback is really an asshole. Real life is sometimes just high school writ large.
Brachiator
Uh, no.
Not all recessions are created equally (nor Depressions for that matter). This is kind of “one size fits all” thinking that ignores the particulars and the context of the current recession. Manufacturing and service jobs have permanently disappeared (unless we decide to backtrack on our “made in China” habits). State and local governments are beginning to implode, along with the any notion that the public sector can exist independent of a strong private sector. For the first time in decades, we are seeing an absolute decline in the standard of living for many Americans.
And yet paradoxically, the financial services sector is finding that they can still score big profits even as they restrain lending. This may be rational, but what is happening is that government spending, while helpful and necessary is more plugging a gap than stimulating the economy.
This is meaningless, simply an exhortation of a conservative mantra disconnected from economic reality.
The middle class is drowning. One can easily make a case for cutting middle class taxes while cutting back on tax breaks that help wealthy taxpayers more than the bulk of Americans. And yeah, increasing taxes for the wealthy.
And you have to think more outside the box. Credits for families with children are fine, but perhaps should be cut back some because it creates an impediment for single people to work and to save and to get married. Tax breaks such as Roth IRAs permanently rob money from the treasury (Roth distributions are tax free) and disproportionately benefit the wealthy.
The notion that “taxes must be as low as possible” for all income classes and levels is an article of faith for conservatives but is meaningless and often hypocritical since there is much in the tax code that benefits wealthier taxpayers apart from tax rates.
Some of that tax breaks targeted towards small businesses by both Bush and Obama have failed to help as much as predicted and should be revisited (I don’t know if they should be eliminated). For example, it doesn’t help much to give a business a tax break for buying new assets if they can’t afford to make the purchase in the first place. The new rules for Net Operating Losses are insane and since states have not uniformly complied with fed rules, almost impossible to figure out.
It’s easy, simple, and wrong to talk about tax rates if you don’t have a larger grasp of the tax system.
wengler
@ kay
Your post just reminds me how Medicaid was designed by the rich and powerful to fail and demonize the people that need healthcare the most. In the US alone out of OECD countries can you fall into the gap of being too rich to have healthcare but too poor to be able to afford it.
Whenever some Republican says ‘means-testing’ you know that it’s the surest way to destroy a social program and cast the people that use it as your next welfare queen.
I really think we make our politicians out to be idiots sometimes when they are truly evil geniuses. How else can you get someone working at sub-living wage angry at the people poorer than them?
catpal
“promises made to public sector workers that were too generous”
Now can we please Stop the Union-bashing – mostly by greedy Pro-Corporate Conservatives/Republicans.
Wages and benefits for US workers have declined or remained stagnant for years – “In 2009, after the downturn, Hacker estimates that one in five Americans was hit with a 25 percent decline in available household income.”
“In 2007, CEOs in the S&P 500, averaged $10.5 million annually, 344 times the pay of typical American workers.”
Pay people a Decent Living Wage, health care, and future retirement – why not?
les
@sven:
What the General said. But yes, the right is learning something–they can lie, cheat and steal; serial philanderers, pederasts and closeted homosexuals can win the family values vote; they can spout the most fantastic bullshit; they can invent, misrepresent, and forget everything they’ve done for years. And no one in the national media or political structure will call them on it.
Roger Moore
@ksmiami:
The warfare state may be blowing up the Federal budget, but it isn’t why the states are having a hard time. That has a lot more to do with our penchant for locking people up and throwing away the key for small scale drug “crime”. We could afford to spend a lot more on schools and roads if we weren’t wasting that money on the war on drugs.
ksmiami
@Mark: The worst thing about the GOP anti-tax flim flam is that it allows the Republicans to ignore the crumbling infrastructure issues as collective and important aspects of national wealth and allows them to constantly frame the argument as individualistic “you don’t want the government to take your MONEY, do you?” When if the frame was – “bridges are going to collapse and emergency services are going to break down if we can’t fund it, can you do your part?” I bet Americans would respond very differently. I guess ED what I am saying is that since the GOP as a whole (and for 30 friggin years) says “we hate government – elect us and we’ll show you how terrible it is”, even when non-crazy Republicans attempt solutions, I have a hard time getting past the party’s rather unseemly track record and I do not see the GOP members altering their stance.
Take Gov. Christie for example, instead of being reasonable in NJ and stating the case that in a down economy some avenues of cost reduction need to be explored, he has taken a hatchet to core vital civic programs so he can reward his fat benefactors with a minor tax break that won’t really make a difference to them, but it will absolutely devastate middle class and poorer communities. You see, I believe that taxes are patriotic especially when they buy the things we need to remain a competitive first world nation. I am a centrist for the most part, but Republican economic theory has been proven in the real world as just total bunk.
ksmiami
@Roger Moore: Hmm I have always despised the drug war, but I was just saying that I think it is rich that ED whines about teacher and fire-fighter pensions when the totally unnecessary Iraq war has sucked down billions. WTF???
matoko_chan
well this why the teabag movement can’t admit to being 99% christian.
it is all about the religiosity, isnt it Kain?
that is how we wound up on a judeoxian crusade in Afghanistan and Iraq isn’t it?
Can we go home NAOW?
sven
Also, there are lots of good comments but a few folks are still tossing around McArdle and, at least for this post, it’s pretty unfair. I’m much more liberal than EDK but he’s conceding a lot of ground in this column.
EDK:
The ‘balance-sheet’ recession EDK mentions is a pure Keynesian explanation for recessions, the professor he links is a HUGE fan of deficit spending to fight recessions, and oh yeah, EDK himself endorses Krugman’s position. Try any of this with McMegan and tell me how far you get.
Again:
This alone makes him more liberal than 15 Democrats in the Senate. If you still feel the need to shout ‘McMegan’ re-read the passage until the urge passes.
morzer
@horatius:
This depends on how the VAT is actually structured. In the UK, for example, VAT is not applied to food, books and children’s clothing.
Wannabe Speechwriter
@suzanne:
Going to pile on in agreement.
For once, I’d like to get a conservative who will admit the last 30 years have been dominated by conservative thinking. We cut taxes, deregulated markets, and busted unions. In some cases, things worked out-I don’t miss Pan Am. However, in many, many cases, things turned out horribly.
I think this post was better than the previous ones. However, I keep getting the feeling EDK is looking to get a hold of a TARDIS so he can go back to the 1970s and debate people of that era. No one here is calling for massive amounts of cash to be handed out without accountability-that was what the Coalition Provisional Authority was for. During the banking reform debate, I didn’t see any major member of the “professional left” say we needed to prevent banks from opening across state lines like in the olden days. The fights over programs like Aid to Families with Dependent Children (aka “welfare”) are over. Liberals/progressives/”the left”/illegal homosexual Muslim fascists are just trying to clean up the mess left by the last 30 years.
Maybe there’s a type of conservatism that wants to raise taxes on consumption rather than income, fund mass transit over roads, promote governmental efficiency and accountability, and also to let people live their lives how they please. But, those people hold no power, not in the Republican Party, not in the conservative think tanks or elites, not in any major conservative media figure. Therefore, it would be better to try and change these conservative institutions rather than to concern troll liberal ideas.
duck-billed placelot
Oh, this thread has been interesting. Thanks everybody. E.D., you’ve come so far in such a short time! But you’re dead wrong about pensions. People who work full-time in the ‘richest country in the world’ should have health care, a living wage, and a pension. Full-stop. So if we need more money to pay for that for public servants, we should raise more money from the people who can afford it.
I like to blame Reagan for everything as a principle for right living (not Right, mind you), but he really did collapse the tax brackets from 14 (I think) down to 5. So small business owners and your local general practitioner have the same tax rate as the uberrich. Well, Dr. Johnson is a nice man! He shouldn’t have to pay insane taxes! It was a brilliant political move that has really screwed us over.
So yeah, F the VAT – new tax brackets, then raise the rates on people who make more than x million a year.
morzer
@matoko_chan:
Forgive my asking, but what does your comment have to do with this post by EDK? I thought his previous attack on Krugman was demonstrably nonsense, but the post under discussion seems much more even-handed, and solidly grounded in the real world.
sven
I think EDK is too glib about reneging on ‘promises we can no longer afford’. He is concerned, with some justification, that red states (like mine) won’t change their ideology if they are bailed out by the federal government:
But I would argue that in some states the same ideology led to underfund pensions. For those states, reduced benefits are ‘bail-outs’ paid by retirees!
Peter
I think you raise a good point, but I disagree with you to a certain extent: if this were good economic times, I’d be on-board with withholding additional state money until they fix their shit. But with everything spiraling the drain like it is, hitting the taxpayers with a one-two punch of reaping what the state legislature showed and dealing with the full brunt of the recession, would just be too much.
Those systemic issues are best shelved until the economy is more stable, in my opinion, even if one has to hold their nose while doing so.
GR
A much better post than the previous one, but why can’t E.D. Kain just buck up and admit that income and estate taxes on the most wealthy need to go up, too? The only tax increases ever grudgingly supported by supply siders are regressive ones like sales or property taxes or even a brand-new VAT. How generous of them. Meanwhile, the wealthy who made out like bandits over the past 30 years of supply side boondogglery are left mostly unscathed.
I guess the next round in this discussion will be E.D. Kain trotting out his supply side talking points about why raising income and estate taxes on the rich stifles the economy, lowers government revenue (Laffer Curve, anyone?), and makes the baby Jesus cry.
Gaardian
This is a very good and thoughtful post, I guess my only question would be: Does the moral hazard of letting a state which may actually derserve to go bankrupt actually go bankrupt greater than the moral hazard of simply letting the state misspend perhaps 30% of its stimulus money?
If this was a private corporation, I would let it go down in a second, but the chaos that would accompany a collapse of any state government would I think require a more extensive Federal intervention anyways. In the end it would cost more to not give them the money than it would to give it to them.
It sucks, but as is frequently the case, being a lunatic conservative will actually pay off for these people who have been supporting ideology over governance for decades. Furthermore, any conditions that are placed on them would be loudly decried as Federal intervention in the rights of the states. Not only would we bail them out, but they would likely be fucking assholes about it, if we tried to make them NOT waste it. Perhaps people at that point will have had enough of them, but if after eight years of George W. Bush they haven’t, how or why would the conservative movement stop them now?
Roger Moore
@ksmiami:
Simple: the military is funded federally, but teachers and firefighters are funded by state and local governments. Since it’s the states that are having the really bad problems right now, it makes sense to focus on what’s blowing up the state budgets, not what’s blowing up the federal budget.
That’s not to say that they aren’t related. If we weren’t wasting hundreds of billions of dollars a year on unnecessary wars and preparing for hypothetical future wars against improbable adversaries, the economy might not have gotten into such a mess in the first place. Even if it had, the federal government would have an easier time bailing out the states, and it would be easier to propose a large fiscal stimulus without fighting the anti-deficit crazies.
AZERTY
tr;dr (too retarded; didn’t read)
Fucking riddle me this, Batman:
Why the fuck are taxes bad?
I don’t mind paying taxes–I just wish I had more control over where they went. We all do. I don’t wanna support the circle-jerk, cock-gobbling, fag fest that is the military industrial–and now you can add security–complex. Perhaps you don’t wanna support non-whites who, unlike you, didn’t CHOOSE to be born a white males on third base.
As I said, I don’t mind paying taxes. I like water, police, fire protection, regulatory agencies, if/when they operate as intended and chartered, like the FDA, USDA, EPA, etc. You ‘taint licking conservatives have NEVER offered up any alternatives, short of “privatize, privatize, privatize”, to replace these public services. Well, as we’ve seen over and over and over again, any sort of profit driven enterprise cannot be trusted to provide the same level of services as the government; yet your ilk seem to think that this is a viable solution. It’s not and we won’t buy it anymore.
Sweet Jesus man, look at the crumbling infrastructure all around you–there are bridges & water lines & god knows what else that date from Roosevelt & the New Deal. If you don’t have the capabilities to fix this stuff now, tell me, when will you and who (not you!) is going to pay for it?
Sadly, you’ll probably get most of what you want and you’ll succeed in destroying the country, if you already haven’t.
A Guy Named Erik
You are so damned reasonable…and you spell your name correctly. Are you sure you are a conservative? :-) If you (and myself to a degree) were what represented conservative in this country, things might actually get done.
I’m writing from Colorado Springs. You don’t really notice the street lights being out that much. Though apparently there have been a couple murders in areas that are dark because of the choice to cut back on street lights. May be coincidence though.
Grover Gardner
This makes a heck of a lot more sense than the last one. I read it with interest.
ThresherK
Perhaps stimulus shouldn’t be tied to any sort of accountability.
All the accountability I want is for Bobby Jindal and Haley Barbour to come crawling on his hands and knees, begging, up the steps of the Capitol building to get Federal Funds.
If I start from that, I’ll settle for “Republican governors who want stimulus money have to take a big cardboard check
from a Treasury Department employee in front of 60 TV cameras and promise to clap their yaps about stimulus
‘waste’.”
Once again, the grown ups are doing a favor for the Birthrighteously Fiscally Responsible. The latter should effing
act like it.
patroclus
First, it is a pleasure to read a post from a self-described conservative that does not include lies or smears. Yesterday’s lie/smear fest (Krugman’s “only” solution is tax hikes and he’s so unprofessional that he “won’t show his work”) was nauseating.
Second, a federal VAT is too regressive and I would never vote for it. Collectively-bargained-for firefighter pensions aren’t the problem and should not be scapegoated before, say, far-flung military commitments, AIG bonuses and tax cuts for Mr. Kain and his wealthy friends.
Third, raising taxes of any kind while we are in a non-robust recovery is a bad idea because they would be contractionary; not stimulative. The goal is to stimulate the growth of effective demand so as to provide more jobs, goods and services to more people. The best method of finance, at this point, is borrowing. And the best method of stimulus is increased direct investment.
If taxes are to be raised for long term deficit hawk purposes, they should be timed to coincide with a robust recovery, which, hopefully, will begin in 6-9 months. The expiration of the Bush tax cuts this December might coincide with this timeframe.
I therefore favor a 2nd Recovery Act ASAP and the planned expiration of at least most of the tax cuts effective next January. If the lying smearing Republicans take power, however, what I expect is haphazard disparate government shutdowns, chaos, anarchy, a lot of shouting and loads and loads of unhinged anti-government rhetoric.
MNPundit
Ah finally I am here in time to read an ED Kain post.
Wrong. This is a big mistake. Right now we are in a demand recession because Republicans eviscerated the middle-class for 25 years to enrich the rich, and covered it up by enabling people to go into mass debt. Everyone will climbing out for some time. So businesses are sitting on money because no one is buying. The rich too are sitting on money because… that’s why they are rich. I will make my examples huge to make the point. If you make 1,000,000,000 a year you can only spend so much, say 100,000,000 even. The rest sits there doing nothing. Thus it would make sense to take say 800,000,000 in taxes so the government can spend it to stimulate the economy. Otherwise it would simply sit idly.
Now on some people it would not be a good idea to raise taxes, but we need to raise taxes on money that is just sitting there until businesses and others start spending again so that the government can spend it. You said as much later, so you pretty much obviated your original idea. So which is it?
Further to your point about accountability, this is what separated Liberals and Conservatives. You place weight on accountability and avoiding waste and if people starve or lose their jobs because we are busy setting that up, then it’s okay for the greater good. While for lefties, preventing suffering counts for more in the immediate term.
Irony Abounds
Ahh, Arizona, the land I’ve come to hate. The East Valley legislators, with their rural county allies, have finally gotten full control of the state government and we are now seeing the results. Huge budget problems, with the schools and public services bearing the brunt of the problems. The true irony is that while the ultra-conservatives here love to bash Obama and the Democratic Congress, the stimulus money that they provided helped the state legislature from making cuts that would have resulted in an uprising of the under-represented sane community. Class sizes have increased considerably this school year without stimulus money and disaster was only avoided by a sales tax increase that the ‘nuts opposed.
The whole immigration scare is also symptomatic of the dire straits these wacko legislators find themselves in. Screaming about non-existent increases in crime by illegals diverts the attention of the populace from the man behind the curtain. Jan Brewer completely lost any shred of integrity she had by jumping on the SB1070 bandwagon in order to win reelection. May she rot in Hell along with that bastard McCain (and Pearce for that matter).
Arclite
E.D.,
Thanks for engaging. I’m learning a lot from these back-and-forths.
Lee
good post
Batocchio
Thanks, this is a much better effort, more accurate and a fuller picture.
It’s not the only force, but yes, 30 years of Reaganomics, Gingrich, Norquist and the rest have taken their toll. Had Reagan and Bush II not been horribly fiscally irresponsible, our problems would be far smaller. Movement conservatism is selfish, reckless and destructive, and its leaders have shown no interest whatsoever in responsible governance. It’s not the only factor, but movement conservatives are the biggest cause of the problem and the biggest impediment to fixing it.
TEL
Thanks, E.D., interesting post and thread.
While education funding has been brought up several times in the thread, one contributing factor that hasn’t been brought up is what role property taxes play in it. In several states, one disparity in education funding comes from well-off localities having more money for education. Whether this is because the money is unequally distributed to begin with (does this actually happen?), or because these well-off areas are willing to pay additional taxes for education (which definitely happens here in California), this doesn’t seem like a good idea. But what should be done to fix it?
And union-bashing aside, one point that I don’t see brought up when it comes to education problems is the role that school administrators play in it. Where I live, we have school districts that consistently do well and have good reputations, surrounded by districts that are problematic. When I’ve asked two of my neighbors who are teachers what the differences are, they both told me it isn’t the teachers per se, but the way the districts are run that make the difference (though they both say that all teachers they know want to work for the well-run districts, if they aren’t already).
Honestly, while its easy to blame incompetent teachers, I’m much more worried about incompetent administrations.
fasteddie9318
@morzer:
I’d eat my hat if those exemptions were included in a VAT implemented here. Too many Knights of the Plutocracy would have to bear slightly higher percentages of the tax burden so that dirtbag serfs could do pointless shit like eating and clothing their dirtbag serf kids. Our political system would never permit that.
MikeBoyScout
E.D.,
Probably I missed something somewhere, but after reading today’s piece and yesterday’s I’m completely unclear why I should read you concerning economics and fiscal policy again.
There are already too many comments for you to wade through, so I’ll keep this short.
You’re all over the map here. You conflate quite a lot.
Cheer up! There shall (unfortunately) be way too much time in this Bush Recession back-wash for you to keep it focused, relevant and short.
birthmarker
@IrishGirl: Though I hate DWB laws, I don’t hate AZ or you. I know you fight the good fight.
I also hate DWY (young) laws, which seem prevalent where I live. (I have young adult male children. One was frisked on the side of the road and the car searched b/c his passenger didn’t have his seat belt buckled.)
morzer
@fasteddie9318:
You may well be right. I am just reminding people that VAT doesn’t have to be the Full Brutalist Monty, so to speak. It can be engineered in sensible and humane ways. Yes, I know, the GOP can’t even spell sensible or humane.. but it can’t hurt for us to make the case.
Bijan Parsia
Yay to federalizing Medicaid.
I still think contrasting with Krugman isn’t helping, but it’s not distracting here, so also yay.
I also agree that, as with the bankers, bailing out people who behave badly to the detriment of all and then 1) continue to behave badly immediately and 2) act like a bunch of sanctimonious righteous assholes while preventing people from fixing the problems they created really sucks at several levels. It may perpetuate the problem.
But apocalypse is apocalypse. I don’t think you can do anything but fight the current battles especially when widespread destruction is the alternative. To put it another way, we had to help BP kill the well even if they won’t be held as accountable as they should be.
Finally, a crashing economy weakens the party in power and strengthens the one out of it. So, paradoxically, not bailing out the bad actors empowers similar bad actors. Which sucks. One could wish for more hardball, but, in the end, it’s not clear that that would have been more effective in the short or long term. I think Obama has made some key missteps (too small stimulus, not filling fed seats, reappointing Big Ben) which may have screwed the pooch for the next 2 years at a least.
matoko_chan
@morzer:
this is a lie. this is “compassionate conservatism”, a head fake towards social justice while eviscerating the middle class.
glorifying the invisble hand of the free market that just punched america in the face.
making society more equitable means market regulation, or capitialism just becomes survival of the greediest.
how much did GINI go up during Bush?
fuckin’ cudlip. you swallow just like a teabagger.
Hey, Kain, i have great idea.
lets save billions right now by GTFO of MENA, kk?
lets be honest….we are only there because Bush was too stupid to get that muslims will vote for shariah when they get the chance to vote. We are losing. 30k taliban are kicking our ass, 430,000 coalition forces. we can’t win.
wikileaks showed we are paying the ISI to help the Talis kill american soldiers…. the preds and reapers create more “insurgents” than they kill with collateral damage. we have been pouring blood and treasure down a bottomless pit for almost a decade because we elected a WEC retard too dimwitted to understand that muslims will vote for shariah when they can vote.
wat a maroon.
Can we go home NAOW?
morzer
@matoko_chan:
Still not seeing the relevance of your scattershot rant. If you want to rant about religion, fair enough, but it would be nice if you connected it to the actual post in some way. And the quote you selected isn’t a lie. One can be pro-market in certain areas, while thinking that the market isn’t the solution for everything.
matoko_chan
@morzer: oh yes that is a lie.
you see….we can’t do much about how conservatism has destroyed our social fabric and our economy with the rapacious, soulless unregulated greed of the untrammelled free market, but we could leave Afghanistan and Iraq right NAOW and use that money to pay unemployment benefits.
being pro-market in any “areas” just leads to an apocalypse of greed.
markets need regulation to deliver social justice.
but be my guest….give data then.
give an example.
i love empiricals.
and im not ranting about religion…..im ranting about intelligence.
morzer
@matoko_chan:
Let’s see you connect your previous post to the actual topic in hand first. I am not particularly interested in helping you to discuss some fictional posting by EDK that you appear to have created from your personal obsessions.
matoko_chan
@morzer: i did. my assertion is that it is not possible to be both free market and social justice, either in theory or in practice. Kain is lying, and you, morzer, having declined to produce a counterexample, are just another cudlip at the trough.
E.D. Kain
@Spaghetti Lee: I don’t want Arizona to topple or crash. I just want the bums thrown out of office, rather than resting on their laurels – or rather the laurels of a federal bailout.
E.D. Kain
@DougJ: Agreed. That’s why I especially like the federalizing of Medicaid. But obviously we need to think about not just the politicians in these states, but the people who may or may not have had anything to do with the silliness wreaked upon their cities and states.
matoko_chan
@E.D. Kain: the system is WAI.
“those people” elected the buffoons that are heartlessly farming their votes and scamming them, they should suffer.
“a learning experience”.
its like Douthat wanting to derive some alternative meritocracy that conservatives can compete at.
you don’t get to change the rules just because you are losing, and going to lose forevah.
E.D. Kain
@Jim Pharo: I’m all for giving stimulus money directly to ordinary people instead of funneling it through corrupt politicians or in an attempt to bolster failing corporations. That would be stimulative for sure but wouldn’t address infrastructure problems which I think may not be as stimulative in the short term but certainly address longer term issues.
E.D. Kain
@blahblahgurgleblegblah: I agree. Let’s build things. Of course, we’re bound to give some money to corporations and banks in the process, but let’s build stuff anyways.
E.D. Kain
A few points because I just don’t have time to respond to everyone (sorry). A VAT needs to be addressed in another post. Suffice to say, a VAT is a much more reliable, recession-proof revenue source. It is more regressive than an income tax, but nobody is suggesting we have the one and ditch the other. This would be on top of the income tax, and would help create a more constant revenue stream without too greatly effecting productivity (we could further bolster productivity by replacing at least part of the payroll tax with a carbon tax, but that’s another tune for another time). Many European nations use a VAT because it’s the only way to reliably fund their welfare systems.
Yes, I’m from Arizona and no I don’t want the state to fail. I want the hooligans in office to fail. I’ve had enough of their ideology, their anti-immigrant nonsense, etc. But I love my state which is full of wonderful interesting people who also want to throw the bums out.
I’ve written extensively on why supply-side economics (as currently interpreted) are bunk and how we should scale way, way back on the military and defense spending. Anyone who accuses me of promoting either supply-side economics or defense hawkishness is simply full of it.
And no, for goodness sakes, I’m not wealthy or anything like wealthy. I don’t even have wealthy friends.
E.D. Kain
@Mark: Oh, and I’m not a Republican either. I’m an ‘independent’ for lack of a better party.
E.D. Kain
@sven: Thanks. And I think there are a number of people on the right who are learning a great deal, and quite a few more who are learning nothing at all. Perhaps even doing the opposite.
E.D. Kain
@Wannabe Speechwriter: I’m not trying to concern troll.
Darnell
Uh, here’s an idea; how about we increase taxes on the rich to a point where the top tax rates are more in line with the top tax rates of the early to mid 20th century?
I know, sounds simple. And that’s the point. Why is the idea of ending this 30 year tax holiday for the ultra-wealthy in this country out of the question?
mclaren
Shorter E.D. Kain:
No, Kain, you still don’t get it. Krugman’s point wasn’t that we need a bigger stimulus. When you say that, you show that you didn’t bother to read Krugman at all.
Krugman said years ago that we’ll only get one chance at the stimulus. (See Krugman’s 10 November 2008 in which he predicts we’ll only get one shot at passing a stimulus package.) So that’s done. There won’t be anything more. Whatever happens to the economy now, happens.
…And as the giant ship called U.S. America titls over the edge of Niagara Falls and heads down vertically in a waterfall drop, the only thing we can now is watch. The time for action on the economy is past — both political parties had their chance in late 2008/early 2009, and they blew it. Now it’s like the end of the 1997 movie Titanic, where the ship breaks in half and the bow heaves up vertically and people fall off screaming into the water as the ship slides into the deep.
No, what Krugman is really concerned about is that America is on the wrong track at a basic level. We’ve got systemic collapse written into our DNA now as a country. America can no longer make anything good start or force anything bad to stop. Our wars keep going no matter how badly we lose and no matter how pointless they are. We keep spending more and more and more on medical care and the medical-industrial complex and tax cuts for the rich and the limitless growth of a DHS surveillance state American Stasi no matter how destructive and counterproductive these policies are. And these crazy self-destructive policies continue under both Democrats and Republicans. The self-destructive lunacy is bipartisan.
In the middle of a deflationary recession, did you know that America is building a new government office building bigger than the Pentagon? It’s the largest GSA construction project in U.S. history — the new headquarters of the Department of Homeland Security, and it dwarfs the Pentagon…which used to be the biggest office building in the world.
And if you think the DHS, which is on track to grow bigger than the Department of Defense, won’t be used against the American people and won’t suffer from mission creep, you’re dreaming. The DHS has already mission-crept into shutting down movie pirates — the DHS has become the private security goons for the MPAA and the RIAA. Soon the DHS will smash in college kids’ doors and windows and blast them with shotguns for downloading movies over the internet. What’s next? How long before armored DHS thugs break in the doors of elementary school classrooms and bash in young girls’ faces with rifle butts and haul ’em out in chains for jailbreaking their iPods, leaving a blood trail on the school linoleum 500 yards long?
At the same time the second wave of offshoring is destroying high-wage high-skilled white collar middle class jobs in addition to the old blue-collar jobs wrecked by offshoring America’s manufacturing base, the United States is starting to ramp up its military-industrial-surveillance expenditures with a vengeance. (Google the Washington Post series “Top Secret America” for details.) Meanwhile, U.S. medical costs continue to skyrocket without limit.
Krugman’s point is that there comes a time when these three curves cross. The plummeting income of the middle class crosses below the ever-increasing military-industrial-surveillance outlays and the ever-increasing U.S. medical costs.
At that point, something has to give. It’s unsustainable.
People like you, Kain, who pen trivial nitpicks haggling and quibbling over minutia like whether the asphalt in roads that get torn up by impoverished towns is made from petroleum, miss the point. This is only the start. Soon we’ll begin shutting down our police forces and fire departments and outsourcing ’em to private for-pay companies because we can no longer afford to run them on our diminished tax base. At that point, we back to the 1830s, where rival fire companies fought over which one got the fee for saving your house while your house burned, and if you didn’t pay the fee, your house burned and so did everyone else’s on the entire block because the fire spread.
Soon we’ll be shutting down our schools because we can no longer pay for them. Then we’re back to the 1820s where only the rich get educated and the American economy contracts sharply because you need educated workers in today’s knowledge economy and without ’em, you’re a third-world economy weaving baskets and selling drugs and whoring out your daughters to create jobs.
DBrown
While I’ll agree that most of what Mr. Ed the talking horse said makes perfect sense (like the sky is blue on a sunny, clear day – brilliant!), except for a pointless exchange of money with little savings (let the Fed handle all of Medicare), what real solution did the talking horse offer – besides the boiler plate and empty general statement “I admit that some taxes must be raised” – like on who and how much – that would at least let Mr. Ed move his talking from the rear horse section to the front but instead, we get a long winded set of mostly empty, points warm fuzzes … great job there Mr. Ed. next time, if you want to be taken seriously, try writing something that requires a brain and not just rearward moving hot air … this is the best he can do in BJ? Still a joke.