Almost everyone finds politicians useless, but if pressed, would find it hard to say why. We elect these guys to keep things running reasonably smoothly, or at least to keep collapse and catastrophe at bay – and with the vague hope beyond hope that they actually might come up with some policy or program that is stunningly useful. Well, that seldom happens – there was establishing the Securities and Exchange Commission after the Crash of 1929, and Social Security about the same time, to smooth out the rough edges of capitalism, so to speak. That was good. And there were some useful public works programs – the Tennessee Valley Authority bringing electricity to a big chunk of the country for the first time, and Eisenhower’s Interstate Highway System, and that cool Golden Gate Bridge. Some think the FDA was a good idea – keep the nation’s food supply safe – as was Nixon’s EPA – keep the air and water safe – and not many think the Centers for Disease Control and the air traffic control system, to keep airliners from slamming into each other, were useless ideas. But those are the exceptions. Most of the time it’s bickering over what may or may not be the nation’s business – that Terry Schiavo business comes to mind. And congressional hearings on the use of steroids in baseball seemed kind of odd.
But most of the time it’s the posturing that’s wearying. It seems everyone we elected to take care of the government and what it does, as we all have other things to do with our lives, is in a constant process saying yep, we’re in trouble, and they have a solution that is quite simple really – and only idiots wouldn’t see that if we do this one thing, well then everything would be just wonderful. Except people do look into what they’re saying – their political opponents, the media, economists and scientists and so on – and show that doing that one simple thing would cause no end of trouble.
And that is as it should be in an open democracy. But the cumulative net effect of proposals from the left and right being rigorously examined – this would crash the economy or that would make Jesus weep bitter tears – is that it becomes all too easy to conclude that these guys we elected are just winging it. They just don’t know much about anything, or they’re saying what they think sounds likely – so they just haven’t thought things through, or worse yet, they may have thought things through and certainly do know what they’re proposing is nonsense – but they hope it will get them reelected, without doing too much damage, or not doing much real damage until long after they’ve retired to Arizona. So either they’re careless and dumb – or they’re cynical and playing us all for rubes.
And thus those who find politicians useless but can’t put their finger on why, caught up in the daily rather absurd back-and-forth, don’t step back and see the big picture. There’s a grand unified theory here. These guys are faking it, on our dime, representing us. That’s the problem. The folks we sent to the state capital or Washington, to take care of the big serious stuff, aren’t the best and the brightest. They’re amateurs telling us, over and over, that they really know how to play the game. And we’re all like the old and frustrated Casey Stengel when he came out of retirement to manage the hapless brand-new Mets in the early sixties – “Can’t anybody here play this game?”
The answer was no. The 1962 Mets posted a 40–120 record. And politics is like that.
And an example of that is the current position of the Republican Party and its Tea Party wing – that total commitment to austerity economics. That offers a solution that is quite simple really – shut down as much of the government as possible, and spend next to nothing on anything – cut up to four trillion dollars in spending – and watch the economy take off. They call it Cut-and-Grow.
And in early June, Rick, the News Guy in Atlanta, left a comment in these pages that looked at that:
Specifically, cutting government spending means cutting jobs – some of which are held by government employees, but others are private sector employees whose jobs depend on government spending – and all that job cutting hurts the economy, which means even more cutting of jobs. It’s a multiple, like dominoes.
Well, Rick and his wife were part of the team that founded CNN and all their years there causes a bias for the basic facts. News guys are like that. And this was the week that the awful job numbers came out:
It’s a bit odd to see Obama getting blamed for this week’s weak job numbers, everyone conveniently overlooking the loss of 29,000 public sector jobs that offset the 83,000 gained in the private sector. Nobody even suggests that we obviously didn’t do enough to save those public sector jobs. If Obama can be blamed for something, maybe he should be blamed for that, but you won’t hear that coming from anyone who is advocating cuts in government spending – which right now, unfortunately, seems to be everybody, Republicans and Democrats alike.
Jobs are jobs. You want people to have them, even government jobs. That means they buy things, and pay taxes. That keeps the economy going. Can’t anybody here play this game?
And then Rick brings in that dreaded deficit:
Cutting government spending in hard times just amounts to kicking the economy when it’s down. If you really want to reduce the deficit – and I’m not convinced that’s what Republicans are really trying to do, or else they would have tried to do that during the Bush years – but if you really want to reduce the deficit, you should wait to do that when the economy is in better shape. If there ever was a time for deficit spending, it’s for times like these.
What we really need to be doing right now is increase spending, rather than cutting it. I find it astounding that Obama and the Democrats are not arguing for more stimulus. Too politically dangerous? …
The reason nobody is talking about more stimulus for the economy right now – when it’s needed most – is that nobody has the guts to argue for it, which leads to everyone, to various degrees, being on the Republican side of the argument.
Yes, I know, you may be wondering where I’d expect us to get the money for all this spending I’m calling for; it obviously has to come from higher taxes, or else more borrowing. Absolutely. That’s exactly where it needs to come from.
So Rick argues that at the very least let the tax cuts on the wealthy expire. And there’s this:
And yes, in spite of what we’ve been told about our “debt crisis,” we can still borrow, and at pretty low rates. Our triple-A rating will always be there as long as we prove we’re serious about investing in our future (although it certainly won’t be helped if the Republicans keep flirting with the idea of defaulting on our loans, just on a lark.)
And so it goes. But maybe things are shifting. Brian Beutler offers an unexpected example of that:
One of the most influential investors in the world of finance has a message for lawmakers – particularly conservative lawmakers – on Capitol Hill: rejoin the real world.
In a prospectus for clients, Bill Gross, a co-founder of investment management giant PIMCO, says members’ of Congress incessant focus on deficit – and in particular, the manner in which they obsess about deficits – is foolhardy, and a recipe for disaster. What the country needs, Gross said, is real stimulus now, and a measured return toward fiscal balance in the years ahead.
That was odd. It was Bill Gross’ Casey Stengel moment.
But there’s always the damned tinkering around the edges, as the New York Times reports that corporate lobbyists are renewing a push for a “one time” deal that allows them to bring foreign profits back into the United States at a special low tax rate:
Under the proposal, known as a repatriation holiday, the federal income tax owed on such profits returned to the United States would fall to 5.25 percent for one year, from 35 percent. In the short term, the measure could generate tens of billions in tax revenues as companies transfer money that would otherwise remain abroad, and it could help ease the huge budget deficit.
Corporations and their lobbyists say the tax break could resuscitate the gasping recovery by inducing multinational corporations to inject $1 trillion or more into the economy, and they promoted the proposal as “the next stimulus” at a conference last Wednesday in Washington.
But Kevin Drum is not buying what these guys are selling:
This is ridiculous: I know that “stimulus” is the excuse du jour for everything, but companies don’t expand and hire more people because their corporate treasuries are flush. They expand and hire more people when they think demand for their goods and services is strong. Besides, corporate treasuries are already flush with cash that isn’t being used to expand operations. So why would this make any difference?
But he is pleased that the Times reporter, David Kocieniewski, does point this out:
But that’s not how it worked last time. Congress and the Bush administration offered companies a similar tax incentive, in 2005, in hopes of spurring domestic hiring and investment, and 800 took advantage. Though the tax break lured them into bringing $312 billion back to the United States, 92 percent of that money was returned to shareholders in the form of dividends and stock buybacks, according to a study by the nonpartisan National Bureau of Economic Research.
Indeed, 60 percent of the benefits went to just 15 of the largest United States multinational companies – many of which laid off domestic workers, closed plants and shifted even more of their profits and resources abroad in hopes of cashing in on the next repatriation holiday.
Ah, those news guys have a bias for the basic facts. News guys are like that, and Drum adds this:
That money didn’t go toward corporate expansion last time and it won’t go toward corporate expansion this time. It will just fill up corporate treasuries and get distributed to shareholders, who are disproportionately well off and unlikely to use the money for increased consumption. The whole thing is just a scam.
America’s corporate tax code needs an overhaul. The way we treat overseas income might need an overhaul too – though doing it properly would require some new regulations that corporations might not like so much. But without that overhaul, yet another tax holiday does nothing except to make the rich richer. It won’t do a thing to get the economy moving again.
And Drum is not alone. Andy Kroll offers The Tax Holiday Road to Ruin – reviewing a new Center for Budget and Policy Priorities report that does a kind of Casey Stengel thing on the whole idea.
It seems that proponents of this – Kroll cites the WIN America campaign – a group bankrolled by major pharmaceutical, energy, and technology corporations of course – claim a new tax holiday will “strengthen our economy, pay down our debt, put people back to work, and invest up to $1 trillion in America.”
Yeah, right, but the Center for Budget and Policy Priorities report notes that the last tax holiday, in 2004, did nothing at all like that – “The evidence shows that firms mostly used the repatriated earnings not to invest in US jobs or growth but for purposes that Congress sought to prohibit, such as repurchasing their own stock and paying bigger dividends to their shareholders.” Well… duh, and the report adds this – “Moreover, many firms actually laid off large numbers of US workers even as they reaped multi-billion-dollar benefits from the tax holiday and passed them on to shareholders.”
And the report is pretty specific:
Repeating the tax holiday would increase incentives to shift income overseas. If Congress enacts a second tax holiday, rational corporate executives will conclude that more tax holidays are likely in the future. That will make corporations more inclined to shift income into tax havens and less likely to make investments in the United States.
The claim that a tax holiday would increase domestic investment by freeing multinationals from cash restraints is extremely dubious. U.S. non-financial corporations currently have $1.9 trillion in cash and other liquid assets, the highest level as a share of total corporate assets since 1959. The ten companies lobbying hardest for a new tax holiday alone have at least $47 billion in cash and other liquid assets that could be used for domestic investments – without triggering additional tax liability.
Some of the biggest beneficiaries of a tax holiday would be firms that have aggressively shifted income overseas. Companies in the technology and pharmaceutical industries have been particularly aggressive in shifting income abroad because they rely on intellectual property, which is relatively easy to shift to other countries as a tax avoidance strategy. Half of all repatriations from the 2004 tax holiday came from companies in these two sectors alone. The same corporations and sectors would stand to benefit disproportionately – and enormously – from a second tax holiday.
And people find politicians useless? Kroll adds this:
It seems that a tax holiday would have, in the long term, the opposite of its intended effect: it would encourage companies to shift cash out of the US. It’s hard to see any upside whatsoever for American workers – or the American economy at all, really – from another tax holiday. That is, unless you’re a member of Congress who depends on hefty campaign donations to stay in Washington. In that case, a tax holiday is exactly what the doctor ordered. I’ve even drafted a working title for such a piece of legislation: “The Keeping-Corporations-Happy-and-the-Contributions-Rolling-In Act of 2011.”
That’ll do. But they do have a solution that is quite simple really – and only idiots wouldn’t see that if we do this one thing, well then everything would be just wonderful.
Nope – these guys are faking it, on our dime, representing us. That’s the problem.