The Last Honest Republican

Now that George Herbert Walker Bush is in the ground, I think we can lay off the eulogies and take a realistic look at what he actually did.

Well, he certainly picked a good time to die.  Although nobody actually put it into words, it was inevitable that he would be compared to the current occupant of the White House — and by that standard, even William Howard Taft would have come off well.  We also shouldn't forget that he had the advantage of leading in far less threatening times, when the Soviet Union was collapsing and Islamic holy warriors were our allies in Afghanistan.

I give him full credit for not invading Iraq after pushing Saddam Hussein out of Kuwait, and I wish he hadn't subscribed to the parenting style of letting one's children make their own mistakes.  Did he resent Dick Cheney?  If not, he must have been very nearly as saintly as his eulogizers claimed.  I like to remember him, though, as the last honest Republican: the man who coined the phrase, "voodoo economics."

Ever since Arthur Laffer first drew his magical curve, Republicans have espoused the fiction that tax cuts "pay for themselves" by spurring economic growth that increases government revenues.  Variously called "Reaganomics," "supply-side," and "trickle-down," this big lie has justified every transfer of wealth from ordinary Americans to the ultra-rich for forty years, culminating in the recent tax travesty that will send our budget deficit over one trillion dollars next year.  George H. W. Bush knew it was a lie — and when push came to shove, he violated his "Read my lips: no new taxes" pledge, and became a one-term president.

I can admire that.

The Bull Market

The American economy really doesn't need the stimulus of a tax cut right now – but it does need a redistribution of wealth that is the exact opposite of what the Republicans are doing with their tax bill.  Don't worry though!  Stock values will continue to rise because inequality is really good for the market.

Corporate America has been quite profitable for years now, but new investments to expand production remain rare.  That's because corporate America has found "better" uses for its money.  With added wealth from tax savings, we can expect even more stock buybacks, more monopolistic mergers and acquisitions, and higher dividends paid.  All of those make stocks more valuable — but even so, most 401Ks still won't add up to enough to finance a worker's retirement.

Since the tax bill increases the deficit and the debt, the next "obvious" step is to reduce them with cuts to Social Security, Medicare, Medicaid, and other safety net programs that might come in handy even before your 401K is used up — and cuts to entitlements just might push the markets even higher.

 The temporary cuts to taxes on some less lofty incomes might create some temporary consumer demand; but short-term demand won't justify new investment and expanded production, and producers won't bet on the cuts being extended.  When demand falls again with the consumer's disposable income, corporate managers will respond with more stock buybacks.  The markets won't suffer — because the transfer of wealth will be complete.

The Tax Plan

It was never a convincing argument, but now we're hearing it again: reduce their tax load, and businesses will create more jobs and pay more in salaries.  It's never happened, and it never will.

Businesses expand based on increased demand for their products; demand increases when consumers (read workers) have more money to spend.  In the absence of increased demand, businesses sink extra cash into stock buybacks, shareholder dividends, and executive bonuses.

Right now, American corporations have a lot of extra cash just sloshing around, providing no economic stimulus at all.  They don't need more cash; they need more affluent customers.  The Republican tax plan may provide a fleeting infusion of cash into some middle-class wallets, but most of the $1.5 trillion addition to the national debt will wind up in the pockets of the very rich — as usual.

Still, there are some features of the plan that make good economic sense: most notably, the cap on mortgage interest deductions.  It is hard to justify subsidizing the McMansions of the "comfortably well-off," their claims to middle-class status notwithstanding.  Builders will complain – McMansions are much more profitable than the kinds of homes families earning less than six figures might afford – but an impetus for builders to provide more affordable starter homes and fewer rococo monstrosities is long overdue.

Money Matters

“I’m doing the right thing, and it’s not good for me. Believe me.”

Rule of thumb: every time Tr*mp says, "Believe me," he's lying.  The Republican tax plan, whatever it turns out to be, will be great for him.

At the moment, the tax and budget proposals are too vague for fiscal analysis — a big plus from the Republican perspective because that makes it impossible for the CBO or anybody else to estimate their real impact.  What is clear is that they depend on the same supply-side fairy tale that has failed to produce a happy ending since Arthur Laffer first drew his magical Laffer Curve back in 1974.

Despite the threat of immense budget deficits, the "deficit hawks" are silent — predictable, since they never really cared about deficits.  What really bothers them is the thought of government spending on anybody not already a multimillionaire.

Some proposals, like ending the inheritance tax, probably are included as "giveaways" to be "sacrificed" in order to get the big-ticket items, like the hyper-expensive tax cut for "pass-through" income.  Hopefully, though, there will be ample fractiousness among mega-rich factions to ensure that nothing at all gets done.  Fingers crossed.

Obama on Deficit Reduction

Okay, he threw a hefty wad against the wall. Now we have to wait and see how much of it sticks.

To me, the best part of yesterday's speech was the commitment to let the Bush tax cuts expire — presumably including the possibility that middle class taxes also will increase. Personally, I don't think a middle class tax increase would be all that awful. Granted, there is not quite so much middle class as there once was, but what the hell... most of the people who think of themselves as "middle" wouldn't be out more than a couple of hundred a year. Too bad for McDonalds, WalMart, etc.

The worst part of yesterday's speech was the continued assumption that Obamacare would reduce health care costs. The only sensible way to reduce health care costs is to remove the profits enjoyed by private insurance companies. Given that Obama is an unrepentant Clintonista, we won't be hearing anything from him about Medicare for All.

While Obama's speech was more aggressive than I expected, we won't know what any of the rhetoric — generally seen by the news media as "the first speech of the campaign season" — genuinely means in terms of action for a while.

I would love to be surprised.

New Rules

The House of Representatives has adopted a new set of rules that require any spending increases to be offset by spending cuts elsewhere. Tax cuts, on the other hand, need not be offset by tax increases elsewhere.

After thirty years of trying, one would think even the dullest witted Republican would have figured out that tax cuts do not increase government revenues. Even Arthur Laffer, creator of the famed Laffer curve that was used to justify Reaganomics, has come to that conclusion. Frankly, I don't believe even Reagan believed in the magical efficacy of tax cuts for raising revenues — he and his crew were more interested in the "starve the beast" school of reducing the size of government, especially those programs introduced as part of Roosevelt's New Deal.

That leaves Democrats, both in the Senate and the White House, in an uncomfortable position. If they are in any way serious about deficit reduction, they will have to reject every tax cut the House sends their way — and since the Republican answer to every problem is a tax cut, you can be sure the House will be sending them. Naturally, that would allow the Republicans to accuse Democrats of sabotaging economic recovery by stifling economic growth.

Actually, given the small Democratic majority in the Senate, including the remnants of the Blue Dog caucus and some who will do just about anything to keep their seats in the 2012 election, it may actually be necessary for other Democrats to filibuster tax cut bills to keep them from being enacted — or just pass them along to the President for a veto.

Does Obama have the balls to do that? Not from any of the evidence we've seen to date.

"Half-assed" defined: "compromising" with assholes

So much for the definition -- on to the case in point: Obama's economic recovery plan.

Let's say you're a hospital administrator. A majority of the doctors at your hospital think patients with infections should be treated with antibiotics. A minority -- a loud minority -- believe those patients should be leached or, better yet, bled. Only in that way, they maintain, will the foul humours be released. (Note: they recommend bleeding no matter what the patient's condition, from robust health to death rattle.)

"I know," you proclaim, "let's compromise! We'll cut the dose of antibiotics in half, and we'll placate the minority with some bleeding! That way everybody will like me, and the bleeders won't shout quite so loud when they go on Fox News."

Listen, Barack, stop being such a goddamned pansy. A half dose of antibiotics (spending) and a half dose of bleeding (tax cuts) ensures that the patient dies. If you're re-elected in four years, it won't be because you knuckled under to a pack of loud-mouthed Republican troglodytes. You don't have to compromise, because if they won't go along with a real stimulus package, it simply means that they hate America. You are the goddamned popular president (albeit not yet especially popular with me), so use the goddamned popularity you worked so hard to win and get us out of this mess.

Tax cuts -- $500 for individuals and $1000 for couples -- will not stimulate anything. The money will go straight to the banks to pay down debt, which was exactly what was done with the last stimulus package. There is NO economic reason to promulgate stupid little tax cuts, except to push more public money at the very same people who created the current crisis. Did a Republican ever espouse bipartisanism? Even when goddamned Bush lost the popular vote, did it ever occur to him to compromise with Democrats?

I'm not saying helping people get out of debt is a bad idea, but a tax cut is the wrong way to do it. The average household owes over $9000 in credit card debt, with interest rates from the mid to high teens. Those who have missed a payment or two may find themselves paying interest rates in the upper twenties.

Once upon a time -- that is, before 1978 -- rates that high were illegal in every state but Delaware and Nevada. All the other states protected their residents with anti-usury laws. Then came the Marquette decision, in which the Supreme Court ruled that banks could charge borrowers in any state whatever interest was legal in the state where the bank was based.

As you might expect, banks from all over the country started relocating their corporate offices to Delaware and Nevada; then, so as not to lose their banking industries, all the other states overturned their anti-usury laws. If the new administration wants to help people get out of debt, trying to get a federal anti-usury law through Congress would be a great way to do it. At the very least, there should be a limit on interest charged by banks taking federal bailout money.

The money that Obama wants to blow in tax cuts would be much better spent in direct aid to the states. State tax revenues are crashing, and state governments are responding with budget cuts. That means job losses for workers in state and local government -- clerks, secretaries, teachers, fire fighters, librarians, social workers, trash collectors and, if things get bad enough, police. Thirty-seven states are required by their constitutions to balance their budgets, so governors will have no choice if they don't get help right away.

Yes, money for infrastructure projects is a fine thing, and should help put many of those in the construction trades back to work, but helping to support state payrolls should not be ignored -- and the twenty-two Republican governors will appreciate it every bit as much as the twenty-eight Democrats.

Totally irate, again

If I seem to spend a lot of time attacking the presidential candidate I intend to vote for in November, it's because he keeps pissing me off. The latest, of course, is his support for the alleged "compromise" (read capitulation) on FISA.

Last Monday, Paul Krugman was wondering whether Obama was really a liberal or just another poll-driven, Clintonesque asshole. Okay, Krugman didn't say asshole -- that was me. (As Krugman noted, there are fates worse than Bill Clinton -- but that's not much to celebrate.)

The alternative, of course, is McCain -- and more supply side economics. If the media were a bit less corporate and if liberals invested anywhere near as much in think tanks as conservatives do, supply side would have been the victim of mercy killing years ago. America being Amerika, however, supply side economics marches on like a zombie in a B movie.

What would make any rational person think, at this particular historical moment, that tax cuts for the rich or the corporations lead to economic expansion? Give the rich more money and all they do is bid up the prices of the investments they and their friends already own. Give the corporations more money and all they do is distribute it, in the form of dividends, to the rich. Nothing new gets started that wouldn't have been started regardless. Entrepreneurs start new businesses because they think those businesses can turn a profit -- with or without tax cuts.

Granted, tax advantages always can make a business more profitable, but how often are those additional profits translated into jobs and benefits for workers in the affected industries? The answer: rarely, if ever.

So, yes, I'll vote for Obama -- how could I do otherwise? I just wish I had a better choice.