Monday in the middle of August and a hot and hazy day in Hollywood – that light brown photochemical smog that was supposed to be a thing of the past returned. It happens. You try not to breathe that much. And the day opened with the usual thump outside the front door – the morning Los Angeles Times. So, hazy and groggy, it was black coffee and a morning pipe, and, with the business news burbling along in the background, a glance at the local summary of the state of the world. And there on the op-ed page was James Galbraith telling anyone who still reads the newspaper about our badly misguided approach to reviving the economy:
Federal budget deficits in this situation are like IV-bags in an emergency room: they stabilize things. IV’s are definitely linked to sickness, and no one would use them if they weren’t necessary. But very few doctors propose to cut back on saline while the patient is still sick. Today, however, the official economists and their followers in Congress, the White House and the media are divided between those who would remove the IV’s slowly, whether the patient recovers or not, and those who’d like to charge through the wards, yanking needles from arms. The debt deal enacted earlier this month put the first group in charge, but that’s pretty cold comfort.
Having watched the live broadcast of that royal wedding a few months ago, in the middle of the night local time, flat on my back with an IV morphine drip – which improved the odd women’s hats immensely – it was easy to see what Galbraith was saying. Federal budget deficits stabilize things – yeah, you go into debt and basically print money to pay your creditors until things get better. When things are better, and lots of folks are working and paying taxes again, you use the jump in tax revenues to pay down that debt. And it is like an IV drip. You stabilize the patient. You don’t pull the IV and launch into a lecture on diet and exercise and the importance of fiber from here on out, or, in this case, on reducing federal deficits in the future. That can wait. It has to wait.
This is pretty obvious. Or, if you’re a bit to the right and do the Tea Party thing, it isn’t. And the folks on the pull-the-IV side seem to be winning that argument. We may need to kill the patient to save the patient, or something. On his Mother Jones blog Kevin Drum summed up what this means – “We are doomed.”
But this is the first full week where it has become clear there are only three Republicans of all those who had wanted their party to tap them to run against Obama – Mitt Romney, Michele Bachmann and the cowboy-governor from Texas, Rick Perry. And it seems Perry was in fine form as he stirred an Iowa crowd into frenzy about the perfidy of Fed chairman Ben Bernanke:
If this guy prints more money between now and the election, I dunno what y’all would do to him in Iowa but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in history is almost treasonous in my opinion.
But that is what the Fed does. That’s its job, to control the money supply. The Fed prints money. That is where it comes from. No, it doesn’t grow on trees. And the Fed doesn’t print money to make Obama look good because printing more of it right now stabilizes things, which makes Obama look good when he shouldn’t look good. The Fed prints money to stabilize things because crisis and instability are not good for anyone. Is that treason?
And Kevin Drum offers this comment:
I guess this kind of pseudo-populist buffoonery goes down well with the tea partiers. But I really have a hard time believing that it impresses much of anyone else, no matter which party they belong to.
No wonder the nation is sick. And Bachmann is at it too. In fact Tim Murphy offers this in his Mother Jones profile:
Since her election to Congress in 2006, Bachmann has earned a reputation as one of the lower chamber’s biggest bomb throwers. She has accused the president of harboring “anti-American” views, warned that census data could be used to round up dissenters into internment camps, and declared that the Treasury Department is quietly planning on replacing the dollar with a global currency. To her critics, Bachmann is flat-out crazy, a purveyor of, as Rep. Keith Ellison (D-Minn.) put it, “psycho talk.” …
In Washington, Bachmann has shown no signs of letting up; if anything, the stakes have gotten even higher and the nation, under the stewardship of President Obama, has careened that much further along the road to ruin. She’s made her mark by framing her opponents’ views in the most dire terms – charging that the Obama administration would deny conservatives health care, and that AmeriCorps, the Peace Corps’ domestic equivalent, is a forerunner for “reeducation camps for young people.” To Bachmann, the Obama administration is a “gangster government,” unmoored entirely from the biblically supported constitutionalism she’s espoused since her Oral Roberts days. Her rigid conservative dogma, an outlier at the outset of her first congressional campaign, has set the tone for the 112th Congress.
Ah, you know the Bible has to come in somewhere here, and Michelle Goldberg carefully explains doctrine of Dominionism that animates both Bachmann and Rick Perry:
Put simply, Dominionism means that Christians have a God-given right to rule all earthly institutions. Originating among some of America’s most radical theocrats, it’s long had an influence on religious-right education and political organizing. But because it seems so outré, getting ordinary people to take it seriously can be difficult. Most writers, myself included, who explore it, have been called paranoid. …
We have not seen this sort of thing at the highest levels of the Republican Party before. Those of us who wrote about the Christian fundamentalist influence on the Bush administration were alarmed that one of his advisers, Marvin Olasky, was associated with Christian Reconstructionism. It seemed unthinkable, at the time, that an American president was taking advice from even a single person whose ideas were so inimical to democracy. Few of us imagined that someone who actually championed such ideas would have a shot at the White House. It turns out we weren’t paranoid enough. If Bush eroded the separation of church and state, the GOP is now poised to nominate someone who will mount an all-out assault on it. We need to take their beliefs seriously, because they certainly do.
Imagine you’re flat on your back in the hospital, groggy and on an IV drip, and your new doctor rushes in and rips out your IV in the name of Sweet Jesus. You might not thank him or her.
Are these two that strange? Well, Matthew Yglesias read Perry’s 2010 big idea book – Fed Up! Our Fight to Save America from Washington – and has this to say about it – that it is not a typical “campaign book” from a political candidate:
For starters, its forward is written by former House Speaker Newt Gingrich, nominally one of Perry’s rivals for the nomination. For another thing, its overall tone much more closely resembles that of a B-list conservative radio host looking to stir up controversy and sell books than of a cautious politician trying out poll-tested lines. Consequently, while the book is by no means a good one, it’s certainly a lot more interesting than most comparable works.
And now Yglesias is proud to produce a list of the Top Ten Weirdest Ideas in Rick Perry’s Fed Up, which include these three:
All Bank Regulation Is Unconstitutional: Criticizing the Security and Exchange Commission’s rulemaking process under the Dodd-Frank financial regulation bill, Perry asserts that “if the Constitution were shown the appropriate respect, Washington regulation writers wouldn’t have to worry about underrepresented views, because they wouldn’t have control over them in the first place” (page 94).
Consumer Financial Protection Is Unconstitutional: Further reiterates his view that all federal financial regulation is illegitimate, listing the SEC on page 44 as part of a “federal alphabet soup” in which “undemocratic unelected Washington bureaucrats” are “now (dubiously) empowered to dictate their own preferences to the American people.”
Almost Everything Is Unconstitutional: Regrets the existence of jurisprudence construing the Commerce Clause to permit “federal laws regulating the environment, regulating guns, protecting civil rights, establishing the massive programs and Medicare and Medicaid, creating national minimum wage laws, [and] establishing national labor laws.” Perry makes a partial exception for laws barring racial discrimination which he says fulfill “the intent behind the passage of the Reconstruction Era amendments” (page 51).
Oh yeah, there is also this:
Social Security Is Evil: According to Perry Social Security is “by far the best example” of a program “violently tossing aside any respect for our founding principles” (page 48).
These stances are well to the right of where Republican candidates have traditionally positioned themselves. Indeed, even Michele Bachmann has not, to my knowledge, deemed Social Security unconstitutional. The propriety of a federal role in regulating the banking industry has been the subject of bipartisan agreement since the Madison administration.
All in all, the book should give political reporters plenty of questions to ask Governor Perry as he introduces himself to a non-Texas constituency.
And Kevin Drum chimes in:
I continue to contend that the rank-and-file of the party still contains a lot of non-crazy non-tea-partiers who just aren’t going to be willing to pull the lever for someone like Perry (or Michele Bachmann).
In the end, this may or may not end up being too much for Republican voters this year, but it’s sure as hell too much for a general election. Unless the economy falls completely off a cliff, or Barack Obama is caught on videotape sneaking out of the White House to engage in serial killings, I flatly don’t see how a guy like Perry can win in November. Once Republicans figure this out, Mitt Romney is going to start looking a whole lot better to them.
Well, maybe. But one should not underestimate the pull-the-IV-now crowd.
But of course the Big Dog is just amused:
Bill Clinton said newly announced presidential candidate, Republican Governor Rick of Texas was a “good-looking rascal” whose railings against the federal government were nonsense.
Speaking at a fire fighter’s conference in midtown Manhattan this morning, Clinton said, “I got tickled by watching Governor Perry announce for governor, for president. He’s a good looking rascal.”
The audience – members of the International Association of Fire Fighters from across the United States and Canada – laughed.
Clinton, dressed in a dark suit and gray tie, continued his riff on Perry – who officially announced his presidential campaign on Saturday.
“And he’s saying ‘Oh, I’m going to Washington to make sure that the federal government stays as far away from you as possible – while I ride on Air Force One and that Marine One helicopter and go to Camp David and travel around the world and have a good time.”
But who was making sense on such an odd and hazy Monday? Well, there was Warren Buffett in the New York Times with his op-ed, Stop Coddling the Super-Rich:
While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.
These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.
It’s nice, but absurd:
Last year my federal tax bill – the income tax I paid, as well as payroll taxes paid by me and on my behalf – was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income – and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.
If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine – most likely by a lot.
But his point here is that all this talk about taxing folks like him damages the economy is nonsense:
I have worked with investors for 60 years and I have yet to see anyone – not even when capital gains rates were 39.9 percent in 1976-77 – shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.
So he says cut taxes for the poor and the middle class, who need every break they can get:
But for those making more than $1 million – there were 236,883 such households in 2009 – I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more – there were 8,274 in 2009 – I would suggest an additional increase in rate.
My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.
How are the Tea Party folks supposed to respond to that? Well, a typical response might be this – Punishing the Rich Means You Just Don’t Believe You Will Ever Get There. Buffet is shattering the dream of those who know one day they’ll be rich and beyond all taxes.
But Steve M at No More Mister Nice Blog puts this Buffet item in perspective:
It doesn’t matter that what he writes is directly relevant to Topic One in our current domestic debate. It doesn’t matter that he knows more about how to getting rich in this country than the entire Ayn Rand Fan Club that is the modern GOP.
You know how your e-mail program has a spam filter? Our political discourse has a similar filter – it’s a liberalism filter. And that’s “liberalism” broadly defined. Buffett’s op-ed will go straight into that filter because (a) he’s said this kind of thing before on many occasions and (b) he was an Obama supporter in 2008, so even though he embodies capitalist success, he’s not deemed a “real” capitalist.
Oh, I forgot (c): the right has a simple, knee-jerk response to any call by the wealthy to raise taxes on their own class: Well, if you feel that way, rich guy, nobody’s stopping you from writing a big check to the Treasury voluntarily.
And that did happen all day on the cable news shows, led by Pat Buchanan. The right decided to laugh at Buffet, as they do:
Buffett will get a little attention for this, and then what he’s saying will disappear into the memory hole, as it’s disappeared every other time he’s said it. If he wants to have some impact, he needs to bring together (or someone needs to bring together) a much larger group of rich people – including people who aren’t associated with what are regarded as hippy-dippy notions of business virtue (so no Ben & Jerry, and no Howard Schultz of Starbucks, who’s getting a similar fleeting bit of attention with a campaign to stop donations to politicians by his fellow rich people). The group needs to include some right-wing hard-asses. Ideally, it would be the whole freaking Chamber of Commerce, or a majority of the Fortune 500 CEOs.
I’m naturally pessimistic, and I hope I’m wrong about this. But I’ve heard Buffett say this too many times in the past, to no effect. I’ve heard it from Bill Gates Sr. as well. If it somehow hits a nerve this time, then I guess doing the same thing repeatedly and expecting a different result isn’t always insanity.
But it usually is. The patient is unstable and could die. Pull the IV and lecture them on avoiding fatty foods in the future.
And then there is Doctor Doom, the man who predicted the mortgage crisis and ensuing worldwide apocalyptic crash, in precise detail, a year or more before it happened, Nouriel Roubini. And he knows a sick patient when he sees one. And the sick patient this time is capitalism itself:
So Karl Marx, it seems, was partly right in arguing that globalization, financial intermediation run amok, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct (though his view that socialism would be better has proven wrong). Firms are cutting jobs because there is not enough final demand. But cutting jobs reduces labor income, increases inequality and reduces final demand.
Recent popular demonstrations, from the Middle East to Israel to the UK, and rising popular anger in China – and soon enough in other advanced economies and emerging markets – are all driven by the same issues and tensions: growing inequality, poverty, unemployment, and hopelessness. Even the world’s middle classes are feeling the squeeze of falling incomes and opportunities.
To enable market-oriented economies to operate as they should and can, we need to return to the right balance between markets and provision of public goods. That means moving away from both the Anglo-Saxon model of laissez-faire and voodoo economics and the continental European model of deficit-driven welfare states. Both are broken.
So now what? He has that covered, because it’s common sense:
The right balance today requires creating jobs partly through additional fiscal stimulus aimed at productive infrastructure investment. It also requires more progressive taxation; more short-term fiscal stimulus with medium- and long-term fiscal discipline; lender-of-last-resort support by monetary authorities to prevent ruinous runs on banks; reduction of the debt burden for insolvent households and other distressed economic agents; and stricter supervision and regulation of a financial system run amok; breaking up too-big-to-fail banks and oligopolistic trusts.
He’s more Warren Buffet than Rick Perry. And he has no problem with a bit of deficit spending:
Over time, advanced economies will need to invest in human capital, skills and social safety nets to increase productivity and enable workers to compete, be flexible and thrive in a globalized economy. The alternative is – like in the 1930s – unending stagnation, depression, currency and trade wars, capital controls, financial crisis, sovereign insolvencies, and massive social and political instability.
But what does he know? He’s only Chairman of Roubini Global Economics and a full professor of Economics at the Stern School of Business at NYU with that book Crisis Economics – and he doesn’t mention Jesus.
Maybe Drum is right – we’re doomed. Or we’re sick and on IV drip, so we don’t die just yet. Or maybe it’s just the smog.