And from the right…..

Jeff – My response is so long I made it a post.  Firstly, I’m going to dispute the interpretation of some of what you imply in the previous post. In particular – “Bush takes office and conditions start to deteriorate”. Second, I think we are probably not that far off in our world-view or opinions on what should be done next.

I hate revisionist history.  The “Bush” recession was caused not by W, but by the Internet bubble bursting, starting an economic decline in the last quarter of the Clinton administration.  Bush took office in Jan, during the quarter when the recession began.  Hard to make the case that he caused a recession in the first 60 days.  Arguably, his immediate tax cuts assured that recession was one of the shallowest in history, until of course September!  Was the guy really so bad that the idea of him started a recession?   (wait – don’t answer that)

I say this not to blame Clinton for the bad economy that Bush was saddled with as he came into office, but just to clarify fact.  The recession was no more Clinton’s fault than the economic turbulence that followed 9/11 was Bush’s fault. The economy is cyclical; the individual occupying the oval office cannot prevent recession, but can impact how quickly we come out of them.

You’ve hit the nail on the head though in terms of the tax code.  Tax code is the problem as pointed out by the deficit and debt commission.  A more fair and simple tax code, with a lower rate than today, would actually collect MORE revenue, and is fundamentally fairer than the current system.  Wealthy Americans would pay more.  But those who pay nothing would pay some.

I am doubly impressed at you advocating this in spite of the fact that this tax code would raise taxes on the middle class and poor, most importantly, the 47% of Americans who through credits and subsidies pay zero taxes yet receive plenty of benefits.

I am fully for the debt commission’s recommendations, as a conservative, and fully understand that they represent an increase in taxes across the board, and disproportionately put the burden on wealthy Americans (as is currently and will always be the case).

Look at the social security “bailout” for example.  The retirement age is increased slowly over a period of 65 years and COLA’s are reduced. The system is then saved by removing the cap on social security income taxes.

This is sacrifice?  This means that the program will be funded by wealthy Americans, who through means testing, will pay more taxes and receive lower benefits.  Only because I like the cuts in other areas, will I say this trade-off is worth making.  Interesting enough, conservatives hate the social security recommendations because they don’t really cut anything; progressives hate them because they think they cut too much.

Back to Bush.  Bush’s mistakes were not that he cut taxes.  It was that he kept cutting taxes in the face of two wars.  Then created a huge government entitlement called Medicare Part D.  His were not flaws of policy, they were flaws of timing and failing to react to what was happening in front of him, while blindly following the domestic plan he had in his head before 9/11.  Obama is doing the same, blindly following the plan he had in his head as a community organizer in Chicago, and failing to react to conditions on the ground.

That could be the big tragedy of being President. You have grandiose plans, and in the campaign the people demand you tell them exactly what you are going to do.  The fact is until you become President, you have no concept of what you should/can do.

Bush did not cause this problem, nor did tax cuts, nor did Obama or Clinton. We (the royal and collective we) caused it by being apathetic and complacent about our government for the past 40+ years, and by believing that Europe has some monopoly on civilized society.  Spending more than we have caused the collapse in the private sector, and spending more than we have will cause the collapse of the pubic sector. Period.

I reject the premise that our ills are caused by the W. tax cuts, or tax cutting policy in general, or even the notion that wealthy Americans are not already disproportionately burdened with the costs of social justice.  But agree with you on what needs to be done.

I think the President needs to address those well-off directly, look them in the eye and say “I’m sorry, we’ve messed up for the last 40 years, and we need more of your help to get out of this mess.  You’re not bad because you make lots of money, we just need more of it, and we promise not to be irresponsible this time”

Isn’t that better than telling them that their kids are going to private school with blood money stolen from the poor?

For the record, I am for letting all the tax cuts expire for everyone, or for overhauling the tax code as Simpson and Bowles recommend.  There are only two levers; revenue and expenditures, both must be pulled.

Guest Blogger Jeff


3 responses to “And from the right…..

  1. How can you say a president can’t prevent a recession and then say that we are where we are due to an apathetic society? If government can’t prevent a recession, then voting doesn’t matter. You say it is not Bush’s policy, but the timing of it. Isn’t a part of policy knowing when to impliment it? How much better off would we be now if we took longer to evaluate the wars before we got into them or payed for part D? I know you agree with me on that, yet you refuse to reject his policy. A policy can be wrong at a certain times and still be viable in another. We should be willing to reprimand our politicians when they fail to realize this.

    “Bush did not cause this problem, nor did tax cuts, nor did Obama or Clinton.”

    ” We (the royal and collective we) caused it by being apathetic and complacent about our government for the past 40+ years, and by believing that Europe has some monopoly on civilized society. Spending more than we have caused the collapse in the private sector, and spending more than we have will cause the collapse of the pubic sector. Period.”

    What? Really? So the securitization of mortgages creating no risk to the banks wasn’t the problem? I understand that there were government programs to get people housing that probably couldn’t afford it, but isn’t that why we have banks? Banks are there to determine who can pay off loans, otherwise we would just be able to get money straight from the fed. If thousands of mortgages fail, it is the fault of the bank and the bank alone. Public sector spending did not cause this recession, it made it more painful to try to fix it.
    This recession was caused by the banks and a failure of government oversight. Not by voter apathy or the “lazy” poor. If everyone participated in elections would things be different or would we just have more people voting for the same candidates who would do the same things? I agree with you that politicians should be more direct, but I will be damned if I ever go to a rich person and say sorry I screwed up. Normal people did not make those loans banks did.

  2. Dan – I think you missed the point on a bunch of what I said, and we actually agree on much. But there are some things we still will flat out disagree on.

    First, on the timing of tax cut policy. Yeah you are right, timing is as much of a failure. I was simply making the distinction that cutting taxes is not a failed policy. Cutting taxes while at the same time spending like a drunken sailor and waging 2 costly wars is failed policy. Timing not substance.

    Having a business education, it always amazes me how much people think the government has to do with the business cycle. The government has very little to do with the business cycle. Sure, government research spurs great developments that the private sector then brings to market, but government intervention from subsidies to Freddie Mac/Fannie Mae, generally causes harm to the normal business cycle. No amount of government intervention can stop a recession when the business cycle reaches its peak. Recession is actually a natural way to cool down and not continue to over invest. Look at economies like China, they are so worried about the pace of economic growth, they are raising interest rates in an effort to cool things down before a bubble bursts. Please don’t interpret this as me saying recessions are good, I’m just saying they are a natural occurring part of a free market economy.

    There’s more blame to go around than any of us can keep track of. What always bugs me though is our own lack of ability to take responsibility for our actions. If we signed a mortgage document that we can no longer afford, that is no-one’s fault but our own. I find it incomprehensible to think otherwise. Just as we elect officials to Washington, we get the results we deserve in direct proportion to how much we pay attention, and hold ourselves/others accountable.

    Also I don’t recall mentioning the “lazy poor” not sure why you threw that out there? I was suggesting a collective laziness, rich, poor, or otherwise. And further, it was not laziness in terms of work ethic. It was laziness in terms of paying attention to the affairs of our government and demanding that our politicians start telling us the truth about the financial state of the US budget. We’ve become so disconnected that we don’t realize that our teenage child has stolen the American Express Card (no limit), and is on a spending spree that we are going to have to pay for one way or another out of our own pockets.

    I go to work each day, and trade my labor and expertise for a paycheck. Generally coming from someone more well off than me. They took an economic risk, and created a job that requires my talent. Thank goodness there was someone who took that risk, and used his or her own capital to give me that job.

    One last point. If you are willing to concede that part of the problem was a “failure of government oversight” which we both agree with, understand, that failure unveiled itself over a 20 year period of structural flaws in how government works and regulates. It cannot be laid at the feet of any President, but all Presidents. More appropriately it could be laid at the feet of Congress, and the general federal bureaucracy. Congress and the bureacracy it creates, is driven by whom WE vote into office. That’s kind of my point.

    Easy to blame others, but not very productive. Its OK to be pissed off, I’m very pissed off. Not OK to keep electing the same type of politician. Both parties are filled with Men and Women that we just cant afford to have go to Washington.

  3. I agree with point about 2000/2001 not being Bush’s recession. Disagree on the .com characterization since the communications industry as a whole destroyed something like 2X shareholder value, and corruption was possibly rampant in the accounting departments/governance structures of many bellweather firms (see Enron, Tyco, possibly GE capital, although that is admitted hearsay).

    I think Bush’s policy of cutting taxes in the face of a military conflict was wrong, representing bad policy as well as appearing quite partisan (the cuts seemed to favor the extreme rich, I certainly didn’t notice much, at least not in comparison to my deduction for my apartment at the time).

    Otherwise, Bush has the mismanagement of two wars and associated costs to answer for – We may be lucky in that his surge may work out however imperfectly, but that places the final outcome in the hands of the Iraqis. Neglect or incompetence around Afghanistan was just incredible.

    The two big secular trends since the 1980s though has been:

    1) Fiscal indiscipline (Clinton’s surpluses were surprises in many ways as fruits of bubles) , with Republicans interestingly enough quite adverse to balancing budgets (not sure if Cheney really said deficits dont’ matter, but many Republicans seem to share that sentiment, or fear implications of corrective measures, like raising taxes which has been interpreted to have hurt George Bush Sr.). Everything that Paul Kennedy wrote about in the US’ situation in the 1980s in the Rise and Fall of Great Power seems to hold true
    2) the rise and/or enlargement of Big Finance, which may be
    a) depriving capital and resources from other sectors (a la the Economist’s Dutchman’s disease)
    b) distorting or even underminig the political processes (lobbying to get rid of Glass Steagal, to make things illegal legal, etc.),
    c) and very likely driving very unproductive if not counterproductive allocation of resources (speculation, outright corruption in compromising transparency around risk, see S&L crises, accounting scandals of the 1990s, the housing bubble, etc.).

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