Post from July, 2011

Dueling Graphs & Debt Ceiling Politics

Wednesday, 27. July 2011 14:12

When did the debt expanson occur and which party is most to blame? The NY Times puts the blame squarely on the Bush administration:

NY Times 1

The problem with this graph is it assumes the Bush tax cuts were a static cost — that they generated zero in new revenues by stimulating the economy. We can certainly debate how effective specific tax cuts or tax cuts in general are at stimulating economic growth, but assuming it is zero is rather extreme. Beyond that, should we be treating tax cuts as if they’re the same as government spending? Certainly Republicans and Democrats see that differently. The NY Times has come down on the side of tax cuts = spending increases, but that’s an ideological position and not an objective one. Lastly, their projections for Obama spending (1.4 trillion over 8 years) seem…optimistic.

Let’s look at the growth in federal spending (via Heritage and Hot Air):

As Captain Ed notes, the notion of treating the Bush Tax Cuts as a static cut is belied by the fact that revenues grew steadily in the wake of the passage of the Bush Tax Cuts. Again, while we can debate about how much of a stimulating effect the Bush Tax Cuts had, it certainly is inappropriate to treat them as if they produced none. It’s apparent that unified government (Reps 01-06 and Dems 08-10) produces significantly higher increases in federal spending over divided government. And it is also apparent that while both parties spend when they’re in control, the Dems have spent more over a shorter period of time than did the Republicans.

And as we can see in this final graph, most of the added federal debt (requiring the raising of the debt ceiling) has happened recently. Our federal deficit is increasing expontentially and at an unprecedented rate.

Heritage 1

This helps explain why rating agencies are threatening the U.S. government’s AAA rating — not because the US may or may not raise the debt ceiling — but because the exponentially increasing deficit and debt has put the country’s long-term fiscal outlook in jeapordy. D.GOOCH

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Obamacare’s Effect on the Private Sector

Wednesday, 20. July 2011 13:29

Wow. This is stark. H/T Ed. D.GOOCH

stark before and after Obamacare on private sector job growth

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A Game of Chicken: The Debt Ceiling Politics

Tuesday, 19. July 2011 16:02

Chicken!

There is alot going on in Washington, D.C. at the moment…and no, I’m not talking about the Nationals (for whom nothing much is ever going on except in the Hot Stove). The debate (discussion? urban warfare?) over whether to raise the debt ceiling would, at first blush, seem like a strange convergence point for a partisan battle. The current law establishing a “debt ceiling” (meaning that the U.S. can’t borrow money above that line) was put in place in 1917 and the modern debt limit was defined in 1939. Since then the debt ceiling has been raised regularly and without much controversy, most recently in Feburary of last year.

To understand why this has come to a loggerhead and both parties are currently in a particular nasty game of chicken you have to take into account the 2010 elections and the burgenoning Tea Party movment. The Tea Party has taken a particularly hard line on government spending and was intergal in electing a number of Republicans to Congress in the 2010 elections, flipping the House to the Republicans. This moved the Republicans considerably to the Right on government spending, particularly in reaction to government spending programs like TARP, the Stimulus, and Obamacare. So an ideological battle over government spending, taxes, and a balanced budget was probably invetiable. The polarization on this issue demanded it.

But we don’t want to merely look backwards, because a key aspect of this current battle is about looking forwards: specifically to the 2012 elections. Here you have a battle over historical narratives. The Republicans want Obama to be Jimmy Carter — a one term liberal president drummed out of office on a combination of incompetence abroad and a stagnating economy here at home. Hence doing a grand deal (tax increases combined with spending cuts) is bad politics for the Republicans — it would give them ownership of both the current state of government spending and a share of the responsibility for the economy that they would rather see fully on the shoulders of Obama come the 2012 elections. Furthermore they are mindful of the political effect Bush Senior’s decision to make a grand deal that raised taxes to win ephemeral deficit reduction in the early 1990′s had on his political fortunes. His breaking of the “read my lips, no new taxes” pledge is seen as key to his downfall in 1992 to Clinton. On the other hand you have the Democrats and Obama seeking to emulate different presidential models. Obama had hoped to be Reagan — following up a mid-term defeat with strong presidential leadership and an improving economy to win re-election. He has also, undoubtedly, been mindful of the Clinton-Gingrich example – where a government shutdown (following Republican takeover of Congress in 1994) is percieved to have been a political loser for Republicans (Clinton won re-election).

Which is the truth? Any? All? I would argue that historical analogies are often more wrong than right — the exigent circumstances, players, and electorate are so significantly different as to render most of them useless. For example, the Bush Senior analogy ignores the difference in party-control (R pres / D cong), the fact Bush’s popularity after that deal was never higher, and the three-way race (Perot) and economic recession best explain his loss to Clinton in 92 (“It’s the Economy, Stupid“). On the flip-side, the Clinton-Gingrich battle was held in the context of full Republican control of Congress and a booming economy. Furthermore, polling in the aftermath of the shutdown showed little evidence the public had faulted the Republicans in a meaningful way. The description of ‘what happened’ then in terms of public opinion is more apocryphal yarn than historical description. A post-hoc, and often self-serving, story explaining the 1996 election that simply doesn’t hold up in the light of day. Does anyone really think the government shutdown had much to do with Clinton’s re-election in 1996? I don’t. And, again, even if we take the story as given true, the differences outweigh the simillarities by far.

However, one shouldn’t ignore the power of media memes — and certainly the media has beaten the drum of “this is 1995 all over again” in its coverage of the debt ceiling battle. Perception, in Washington, is often more important than reality. Particularly if the opposition buys into it.

So where are we going from here? While it is currently the ‘consensus’ that the Republicans are divided and Obama has won the public debate, I think the polling on this is much more mixed than it would be if that were the case. While polls suggest that the Republicans would get a plurality of the blame if the debt ceiling isn’t raised, the difference in “blame-awarding” is a few percentage points and heavily determined by partisan identifiers. Furthermore, a strong majority of the public says it doesn’t want the debt ceiling raised. The public demands spending cuts and opposes tax increases, but is strongly aligned against significant changes to entitlements (the most significant driver of federal debt). This muddled wash of countervaling and mutually exclusive views suggests there is little settled in the public’s collective mind on the question at hand. Furthermore, President Obama has backed himself into a corner by portraying the debt limit raise as a ‘crisis’ and drawn a hard line in the sand with the August 2nd deadline. He has issued a veto threat against the Tea Party backed “Cut, Cap and Balance” plan, but can he afford to veto a bill when he has suggested default would have such dire economic consequences?

Still, the CC&B bill is almost certainly dead on arrivial in the Senate. My guess is that we end up with some package of spending cuts attached to a debt ceiling increase that will move this past the 2012 elections (the singular reason Obama has been adamantly opposed to a short-term fix). No tax increases (at least on net), but no balanced budget amendement or hard caps on spending. Leaving that as an issue to be defined in the 2012 presidential election. But I’ve been wrong before. D.GOOCH (as hard as that is to believe…)

UPDATE: I was right.

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Space Invaders: The Movie

Tuesday, 12. July 2011 23:38

No, not some soulless Hollywood remake intent on wrecking every single thing that used to be cool and fun in the 80′s. Oh, well, yes, they are doing that. But that’s not what I’m talking about. I’m talking about this:

Oh, yes! D.GOOCH

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Up to 90% off Used Textbooks at Amazon

Tuesday, 12. July 2011 18:36

An FYI for the frugal student. D.GOOCH

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200 Countries, 200 Years, 4 Minutes

Tuesday, 12. July 2011 17:55

Awesome graphical depiction of the relationship between wealth (income per person) and health (life expectancy) at the country level over the last 200 years. The academic studies health, but this could easily be a comparative politics project. It really is an astounding visual and something to think about when we debate the importance of wealth in a society.

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How the Rich make stuff Cheaper

Thursday, 7. July 2011 20:25

An excellent video illustrating how rich first-adopters acting in their own self-interest produce a social good that redounds (dare I say, trickles down) to the mass public in the form of cheaper yet infintely superior technological products. In short, Gordon Gekko was right: Greed is Good. H/T Cafe Hayek

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I’m Baaaaaaack!

Wednesday, 6. July 2011 0:23

I’m back and rarin to go, folks. A few weeks here was not only fun, but has me refreshed and ready to get back into the fray. Alot is going on in the world of politics, but as a lead in to the “silly season” of a presidential campaign we are but a few short months away from, observe the below. Ever heard about how a politician is supposed to “stay on message” in an interview and look to provide a soundbite that communicates the “talking point” of his or her party? Well witness it in all its glory:



I can’t recall ever feeling sorry for a reporter…maybe once when one was in the middle of a hurricane (no, wait…I was laughing hysterically…nevermind). But this guy has my sympathy. D.GOOCH

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