Republican Marxists

Sooner or later one of your conservative friends, probably the Glenn Beck or the Ron Paul fan, is going to tell you about the wonders of Creative Destruction – usually in the context of arguing for stopping all stimulus spending right now, and cutting off unemployment benefits to everyone, and ending any federal aid to the states to keep teachers and cops and firefighters on the job. And of course they favor not raising the debt ceiling, so America will no longer be able pay even the interest now due on all the treasury bonds that have been floated over all the years to keep this place running, and to keep our two major wars humming along. Let America default on its loans. Sure, the world’s complex interlocking economy will collapse when the richest and largest economy in the world, the one sure bet to make good on those loans, says we’d rather not continue to make any payments from here on out – consider us bankrupt. This is supposed to be a good thing. It would shock people into a new order, one of strict fiscal responsibility – one where we only do what we have the money, the cold hard cash in actual revenues, on hand to do. In that case we’d have hardly any government – just a stub of what was – but everyone knows that government is evil – a necessary evil but nevertheless inherently evil. And Janet Brewer says so – so it must be so. Yes, all these plans mean chaos and pain, and massive destruction of life as we know it – but, on the other side of that destruction, things will be wonderful. No pain, no gain, as they say.

At least that’s the theory. And the odd thing is that Creative Destruction derives from Marxist economic theory about how capitalism works. This schöpferische Zerstörung is something Marx and Engels didn’t much like – the processes of the accumulation and annihilation of wealth under capitalism cause chaos and pain for most everyone. Who needs it? They said so in the Communist Manifesto and Marx went into more detail about this in Das Kapital. Too many people get hurt so a few folks can get rich, as capitalism itself, by its very nature, destroys and reconfigures previous economic orders, always and forever devaluing existing wealth through war or regular and periodic economic crises – one bubble after another – to clear the ground for the creation of new wealth. And this chews up the ordinary folks, the honest workers, and discards them like so much trash.

But in the middle of the last century the Austrian school of economics – Joseph Schumpeter and that Hayek fellow and the others – decided this was a feature, not a bug. How else do you get economic innovation and progress? It’s a matter of free-market economics – you know, like downsizing in order to increase the efficiency and dynamism of a company. Sure people get hurt, many of them, and really badly, but the new lean and mean company corners the market for whatever amazing new widget or gizmo they now make. Maybe they don’t even need workers at all. That’s progress. You can’t stop it. And it’s a good thing. Marx was sort of right about what Creative Destruction does, but he was wrong to think all that was a bad thing. Yes, capitalism destroys people – but not all of them. The clever make a bundle.

Of course it’s probably not wise to raise the issue of the Schumpeter reassessment of what Marx was bitching about. Don’t mention Karl Marx. It stops the conversation. But the issue won’t go away – in fact, recently House Speaker John Boehner conceded that thousands of Americans would lose their jobs as a result of Republican spending cuts, and he gave his now-famous reply to whether that mattered – “So be it.” They did ask him exactly how many American workers would be left unemployed as a result of the Republican plan to cut sixty-one billion from the budget. Boehner said he didn’t know. But he was just doing that Austrian thing. The odor of wonderful Creative Destruction hung heavy in the air.

And now NPR’s Steve Inskeep had asked Indiana Republican Governor Mitch Daniels a similar question:

INSKEEP: I want to ask something that a lot of people are confronting right now, as they deal with the federal deficit as well as state and local deficits that need to be closed. Are budget cuts – government budget cuts – worth it, even if they end up seriously costing a lot of jobs right now?

DANIELS: The answer is yes.

And there you have it – a clear endorsement of the wonders of Creative Destruction, and Steve Benen is stunned:

I’m having a hard time wrapping my head around the state of the debate on this. We now have three separate independent analyses of the Republican proposal, all of which say the same thing – if approved, the GOP plan would hurt the economy and make unemployment worse. We now have two prominent Republican – one is currently the nation’s most powerful GOP official, the other hopes to be – conceding publicly that the party’s spending-cut priorities would force more Americans out of work.

How are we even having this conversation? I’d genuinely love to know exactly how many American voters are thinking, “You know, maybe what we need is higher unemployment, lower wages, and slower growth – it’s a good thing Republicans are working on this.”

More than you think – the Republicans are counting on it. And Benen adds this:

For his part, the perpetually-confused House Majority Leader, Eric Cantor (R-Va.), said the latest analysis from Moody’s Analytics economist Mark Zandi doesn’t count. Zandi found that the GOP proposal would likely force 700,000 American workers into unemployment, but Cantor said we shouldn’t believe him – because Zandi backed the 2009 Recovery Act, which necessarily forfeits his credibility.

Dave Weigel covers the details of that odd story here and Benen adds this:

First, Cantor may not be able to understand this, but the stimulus was a success, and did exactly what it set out to do. Republican repetition about “failure” demonstrates tremendous message discipline, but also demonstrates striking ignorance about current events.

Second, before Cantor blows off Zandi, let’s note that Zandi was an advisor to the McCain/Palin campaign in 2008. Besides, even if Republicans don’t like the Zandi analysis, what’s the response to the Goldman Sachs report from last week?

And third, if Cantor & Co. doesn’t care for any of the independent analyses showing the GOP plan making unemployment worse, why don’t they offer a competing analysis? They think 700,000 job losses is too high a number fine. Where does Cantor put the number? Can Republicans offer anything in the way of economic projections? Anything at all?

The stimulus was a success? According to this report from Thanksgiving 2010, it seems it was:

The massive U.S. stimulus package, widely viewed by voters to be ineffective, put 1.4 million to 3.6 million people to work between July and September, the nonpartisan Congressional Budget Office said Wednesday.

The American Recovery and Reinvestment Act also boosted national output by between 1.4 percent and 4.1 percent during that period, CBO said in its latest estimate.

CBO’s estimates have consistently shown that the $814 billion package of tax cuts, state aid, construction spending and enhanced safety-net provisions has blunted the impact of the worst U.S. recession since the 1930s.

But it seems it wasn’t really a success, because it didn’t destroy anything. And Benen just smacks his forehead:

I can’t remember the last time the political discourse made this little sense. We have Americans demanding action on job creation; we have congressional Republicans deliberately trying to make unemployment worse; and we have a media that prefers to pretend that the deficit matters more than the economy.

Ain’t it grand?

And Andrew Leonard asks the question that has been floating around – “Are House Republicans attempting to wound the US economy on purpose?”

The evidence – on Monday economic forecaster Mark Zandi released a report for Moody’s Analytics – on the likely negative economic consequences of proposed Republican budget cuts:

The House Republicans’ proposal would reduce 2011 real GDP growth by 0.5% and 2012 growth by 0.2%. This would mean some 400,000 fewer jobs created by the end of 2011 and 700,000 fewer jobs by the end of 2012.

Yes, Mark Zandi was an economic adviser for John McCain’s 2008 presidential campaign, and Leonard adds this – “He’s not the kind of guy normally accused of being a Democratic pawn; he makes his living providing economic analysis to the private sector, which places a premium on being, you know, right, rather than politically correct.”

And there was the warning released by Goldman Sachs earlier last week – and Leonard says that was not particularly controversial – “When governments cut spending in economies ravaged by high unemployment and characterized by a clear shortfall in aggregate demand, some amount of economic contraction is perfectly normal.” As they say – well, duh!

And there is what Dave Weigel reported was Majority Leader Eric Cantor’s response to Zandi:

When considering the latest study from Mark Zandi on the GOP’s efforts to rein in government spending, let’s not forget that he was the chief architect of the Democrats’ failed stimulus plan. Even as unemployment climbed into the double digits, Mr. Zandi continued to defend this failed policy. It shouldn’t come as a surprise that he would come out against the GOP’s common-sense efforts to put an end to more stimulus-style spending.

Leonard:

I think it’s overstating the case to call Zandi “the chief architect” of the stimulus, but there’s no question that he supported it, or that he, like other private forecasters, believes that the stimulus contributed to economic growth in 2009-2010, and kept unemployment from rising even higher than it ended up reaching. We don’t have an alternate reality timeline to provide what economists like to call the “counterfactual” so Keynesian stimulus-backers will never be able to prove beyond the shadow of a spurious politically motivated partisan doubt that the U.S. economy would have been even worse off had Obama not marshaled a rescue plan as his first order of business. But notice the lack of anything resembling an argument based on economics or data? Cantor offers no prediction of what will happen to the economy, or what might happen to the unemployment rate, if the Republican plan is implemented.

No, we got this:

House Republicans argue that their bill should become law as part of a “cut and grow” strategy that they say, by removing uncertainty about higher taxes to pay for government spending, would spur spending by businesses.

Leonard:

Let’s be clear here. To reach a balanced budget that would permanently remove such “uncertainty” – without ever raising anyone’s taxes ever again – would require budget cuts so deep that the U.S. economy would immediately flat-line. In fact, the only sensible response to the Republican spending plan from the private sector is to be even more cautious. Standard economic theory suggests that sharp budget cuts will slow the economy – why would any company react to that by expanding hiring?

So it comes down to Creative Destruction:

The only honest case Republicans can make about their current agenda would be that some short-term pain now might pave the way for later sustainable growth. If Boehner or Cantor came out and said, yes, we understand and appreciate the analysis put forth by Zandi and Goldman Sachs and we realize that subtracting demand in the short term will deliver a hit to the economy, but we are nonetheless convinced that it is the right long-term strategy, that would be a defensible, perhaps even honorable, position.

But then they’d have to admit that Marx was right, and they cannot do that. Of course that would be the honest thing to do:

But the Republican leadership can’t do that, because they are constitutionally unwilling to admit that their policies will cause any short term pain at all. Because if you open up that can of worms, you risk changing the debate topic to the question what the appropriate economic policy for this particular juncture in time should be. Even worse, would mean taking responsibility for what happens to the economy between now and Election Day 2012.

So they’re stuck. Destruction and chaos and pain for most everyone are awful things, and just what we need, because chaos and pain for most everyone creates a wonderful world, next time around, for the clever. That’s a hard message to manage, and so you get the conspiracy theories – that “the Republicans know exactly what the likely impact of their cuts will be, and they’re fine with it, because the worse the economy does, the better their chances are of taking the White House in 2012.”

Is that it? Leonard wonders about that:

I don’t know. It’s not that I wouldn’t suspect politicians of such foul Machiavellianism, but I find it hard to buy the thesis that this bunch of Republicans are consciously attempting to damage the economy for political reasons. I think that they just really don’t understand or care about economics. The crew that is in power now has distinguished itself by its ability to reject any kind of objective scientific or economic analysis that doesn’t fit into their political schema. Whether it’s the link between greenhouse gas emissions and global warming or the negative impact of subtracting demand from a weak economy is irrelevant. From the contemporary Republican point of view Obama’s policies must be “job-killing” because, well, he’s Obama!

And the converse simply can’t be true. So no matter how impossible it is to make Republican numbers add up, that’s not a problem for the Republican leadership, because reality just isn’t something they are willing to accept.

It is an odd situation. Somewhere Marx is giggling. And Goldman Sachs thinks the Republican budget cutting plan would reduce economic growth by two percentage points while Mark Zandi of Moody’s Analytics estimated the loss at 0.5 percentage points this year and another 0.2 next year and Economists at the Center for American Progress estimate the cuts would lead to nearly a million jobs lost, and Steve Benen is still asking questions:

How is it this isn’t at the heart of the debate over the budget? How far off track is the public discourse when an entire chamber of Congress, in the midst of a jobs crisis, approves a plan to make the crisis much worse, and this is considered only tangentially relevant?

See Kevin Drum:

I just spent the past hour on a call-in show out of New Orleans, and it was pretty clear that the callers didn’t think too highly of my claim that income distribution depends not just on the economy, but also on deliberate political decisions. And I admit that it’s a hard point to get across in a concrete way. But how much more concrete could our current situation be? Republicans – and, unfortunately, some Democrats too – are pushing for an economic austerity plan that will keep unemployment high and the job market loose. The result is downward pressure on wages, which keeps middle-class incomes stagnant and corporate profits high. This benefits the executive and investor class, and while it’s a shortsighted benefit, it’s a benefit nonetheless. And it’s not thanks to globalization or returns to education or anything like that. It’s due to a deliberate political decision that favors the rich at the expense of everyone else. That’s as concrete as Hoover Dam.

And Benen:

We can have a debate about why the GOP is doing this – irrational fear of inflation, politically-motivated economic sabotage, etc. – but after multiple reports, the effects of the Republican plan themselves are no longer a mystery.

This deserves to be the lead story for every major news outlet covering the debate. There’s no more important angle to the electorate that still says economic growth and job creation trump everything else.

I would, by the way, gladly note the Republicans’ response to this, but as far as I can tell, the GOP doesn’t have one. The House majority has seen these multiple projections, showing steep job losses – that Republicans have responded with nothing – no projections, no competing sets of numbers, no hearings on the effects of their cuts, nothing.

If midterm voters aren’t feeling some buyer’s remorse right about now, they’re just not paying attention.

And he adds this:

Also, don’t forget that as far as Republicans are concerned, the ultimate attack on any policy is to call it “job-killing.” If Dems don’t start using this in the budget fight, they’re missing an important opportunity.

But you can imagine the arguments that would follow. Those budget cuts you Republicans are proposing will kill jobs – a million of them – and cripple the economy! Yes, they would, and they should, as you Democrats don’t understand that the way to create jobs and have an economy that grows by leaps and bounds is to fire everyone in sight – eliminate every job you can – and make sure that the economy grinds to a halt! Hey, who the hell was the total idiot who told you that! Karl Marx did!

Now THAT would be interesting. But until these guys embrace their Marxist economic theory about how capitalism works we’ll get what seems to be economic theory from that other Marx fellow, Groucho. Who are you going to believe, me or your own eyes? It’s come down to that.

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About Alan

The editor is a former systems manager for a large California-based HMO, and a former senior systems manager for Northrop, Hughes-Raytheon, Computer Sciences Corporation, Perot Systems and other such organizations. One position was managing the financial and payroll systems for a large hospital chain. And somewhere in there was a two-year stint in Canada running the systems shop at a General Motors locomotive factory - in London, Ontario. That explains Canadian matters scattered through these pages. Otherwise, think large-scale HR, payroll, financial and manufacturing systems. A résumé is available if you wish. The editor has a graduate degree in Eighteenth-Century British Literature from Duke University where he was a National Woodrow Wilson Fellow, and taught English and music in upstate New York in the seventies, and then in the early eighties moved to California and left teaching. The editor currently resides in Hollywood California, a block north of the Sunset Strip.
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