austerity

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Ryan, Deficits and Hypocrisy

Paul Ryan is leaving Congress. Before he had finished announcing his upcoming retirement the airwaves were awash with commentary about his legacy.

Count me as one of those who have a particularly strong perspective on this. Paul Ryan was, and presumably still is, a supremely hypocritical human being.

Recall how he sprang into public consciousness. He quickly established himself as a severe right winger, but one with the smarts to back it all up. He promoted himself as a thoughtful conservative. He quoted all the thinkers one has to refer to if one is to be such a person. Ayn Rand was his go-to intellectual foundational source.

He spoke eloquently about the damage that Federal deficits would do. He berated Democrats, and Obama especially, for their wanton reliance on debt to pay for rescuing the economy in the aftermath of the Great Recession. His mantra was that if we would only set taxpayers free, if we would only slash social spending, and if we would only see the sense in balancing our budget then America would enter a new golden age.

Well, a golden age for the wealthy at any rate.

He was, and presumably still is, one of those far right conservatives who honestly believe that cutting away the social safety net from underneath our fellow citizens will somehow lead to their discovery of endless vitality, determination, and virtue sufficient to lift them free of poverty, sickness, or age whichever of which is the cause of their reliance on that safety net.

There is nothing new, of course, in this right wing narrative, it has been the core of conservative opposition to social spending for over a century. In a perverse twist of history the notion that a person ensnared in the net of big government is a soul lost to the march of freedom has moved from being a liberal rallying cry — as it was in the heyday of pure liberalism in the late 1800’s — to that of the far right. Ryan personifies this antediluvian approach today.

I am not going to litigate the pro and cons of safety nets here, besides you can tell what I think in that regard: I want to keep the focus on Ryan.

Nothing more personifies his hypocrisy than his meager legislative record.

His biggest accomplishment, one of which he spoke at length, is the recent tax cut passed late last year. The problem that Ryan has is that this so-called accomplishment will blow a massive hole in the budget. Prima facie it is a negation of his entire political career.

Let’s set aside the discussion over budget deficits and their relevance, let’s just take Ryan at his word.

He believes, so he has said repeatedly, that the federal government needs to avoid deficits. He has spoken about deficits in the darkest and most severe terms. He has lashed out at any politician who he can accuse of “running up the deficit”. His entire career was built around this core message.

And yet here we are with Ryan proclaiming that his personal triumph is the tax cut that will, according to the Congressional Budget Office,  run up that self-same deficit with historic speed and severity.

The starkness of Ryan’s hypocrisy is so sharp and so startling that it almost shocks us into disbelief. Perhaps we misunderstood him all those years. Perhaps all that supposed wonkish posturing was so convoluted that we missed Ryan’s message. Maybe were were wrong. We must have been because no one could possibly be this brazen about their hypocrisy.

Surely not.

No. We undertook him perfectly well. What we misunderstood was his honesty. He simply lied. He lied constantly. His presentations and protestations were a sham. He never once meant what he said.

His goal was, to use a phrase he wore out in his criticism of others, to bankrupt America. He was a true son and heir of the far right’s intention to “starve the beast”.

That refrain, as we all remember, was the battle song of the far right’s rise throughout the 1990’s. It formed the core rationale for Bush’s tax cuts of 2001 and 2003. It formed the basis for the opposition to anything Obama tried to do. It damn near undid the efforts to revitalize the economy in the aftermath of the last recession. Create a budgetary crisis by cutting taxes to the bone and then, in view of that crisis and using it as  justification for action, slash social spending. That was the plan. It was never based on budgetary conservatism. It was based on virulently anti-social opposition to government.

Ryan, and the far right he led to victory, took Lenin’s dictum one step further. It was not a case of “burning the village to save the village”, it was  case of burning the village to justify its destruction. As in: “see we can’t afford villages”.

And, in case you think I am being harsh, let me present exhibit “A”:

Today, in the House of Representatives, a motion to enforce balanced budgets on the Federal government is being brought up for a vote.

Think about that in the context of what I just said.

The Republicans, fresh from undermining the fiscal stability of the budget, are now arguing we need to restore stability through balancing it.

And guess how they propose doing this?

By slashing social spending of course.

Thus is Ryan revealed. And along with him the entire Republican domestic agenda. Anti-social to its core. All in the name of liberty.

Those of us who believe in democracy have a more extensive view of liberty. Freedom from poverty and sickness are within our purview. So is freedom from the consequences of untrammeled capital.

But that’s for another day. Right now let’s be happy Ryan is on his way out.

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Budget Fog and Budget Clarity

On a clear day we can dream of being free from the farce and incompetence that is Trump. Meanhwile back in reality …

The Trump budget released this week is both indescribably foggy and clear as a bright spring day. It is a perfect statement of ‘Trumpism’ from its devastation of the poor, through its privilege for the rich, and its arrogance towards and ignorance of process. Let’s not get carried away though: this budget, like all presidential budgets is symbolic. It has no meaning other than as an indication of Trump’s personal priorities, which, apparently, are entirely plutocratic in tenor. The American budgetary process is convoluted and ultimate authority resides in Congress. So while a future Federal budget might ultimately embody many of Trump’s ideas, the document released this week is simply a starting point.

Further, given the arcane bureaucracy that is Congress, the budget will be subject to obscure procedural rules, particularly in the Senate where the much discussed reconciliation process will come into play. The Republicans are in a rush to slash taxes for the rich, and they want to destroy health care for the poor, both of which efforts are using up slots in the reconciliation calendar. This means that Congress will be very slow to take up a budget debate and will have to wait for the Congressional Budget Office to score those other efforts before it can start in earnest on budget matters.

With that all said, let’s take a look at Trump’s wish list.

First the clarity.

He wants to slash spending on the poor. And I mean slash. His budget aims at eliminating the deficit in ten years. To do that he takes sharp aim at Medicaid, which he wants to halve; he hammers the Supplemental Nutrition Assistance Program (aka Food Stamps); and, contrary to his campaign promises, he reduces parts of Medicare. These programs combine to be the backbone of support for tens of millions of low income Americans. Attacking them in this way will heighten poverty, increase insecurity, and cost the lives of many who no longer will receive health care of any kind. This part of his program is pure right wing callousness unadorned and direct.

He also wants to slash government. He proposes cuts in the departmental budgets of most, if not all, government departments. Some, like the Environmental Protection Agency, will be cut by upwards of 30%. The State Department, too, gets gutted. Neither of these is a surprise. Two of Trump’s major supporters have been lobbying hard for the cuts. The big oil and coal producers want to gut environmental laws, and Russia simply hates the State Department and all that ‘soft power’ money it slops around the world to entice nations into falling for the allure of democracy. At least Trump is being honest about how much in thrall to Putin he is.

Then, this being a pretty straightforward Republican budget, comes the obligatory increase in offense spending and in national security generally. This includes a big dollop of money for Trump’s wall along the Mexican border. There is no indication as yet about how he intends to get Mexico to pay for this. I guess we will have to wait on that.

That’s the clarity: you will notice that the goal for a balanced budget has no reference to the part the rich will play. Presumably they will benefit but not have to sacrifice. As I said: pure plutocracy.

Next comes the fog:

Given that the Republicans want to cut taxes for the rich, even theses draconian cuts in social programs don’t balance the budget in the desired timeframe. So Trump’s budget assumes a 3% annual growth rate in the economy. This is absurd. In an era of slowing population growth, weak productivity growth, and demographic shifts such as the massive wave of baby-boomer retirement, annual growth of 3% is a pipe dream. It is a fantasy. To add to the stupidity of the assumption is the realization that the Trump team began with it as a foundation for their budget process. It wasn’t an outcome of their budget priorities, it was an input from the very beginning. So the minions putting the budget together had to take the fantasy into account no matter how ridiculous it is.

Now for the good bit: the budget includes the impact of the tax reform Trump has already announced. In the budget those tax cuts, which cut a swathe out of Federal revenues, are treated as revenue neutral. In other words whilst they cut revenues because they are tax cuts, they are assumed to ‘pay for themselves’ by stimulating growth sufficiently for the government to earn extra tax revenues. The government, Trump argues, will make the loss up in volume. This is laughable, but is accepted amongst Republican policy makers who all want to deny blowing the deficit wide open.

Wait for it …

Then, when these tax cuts are included in the budget they are assumed to work this miracle all over again. Yes, you read that correctly. The tax cuts not only ‘pay for themselves’ as tax cuts, but they then repeat the process and stimulate growth to allow the budget to arrive at a balance ten years out.

I have never seen anything so brazenly stupid. Nor as plain dumb. This isn’t the sort of double entry bookkeeping I was taught way back in my accounting days. This is way more imaginativetive. It is a triple entry at a minimum, with more entries to come as the Trump administration flounders about in a mess of its own making.

Trump is inventing growth to cover the brutal insanity of his budget. Even the Republicans are repulsed at his plans. Not that they are much better.

Just as a brief indicator of how the Republican’s various policy goals are contradictory, think about the impact of population growth on the budget. Trump is virulently anti-immigrant. By slowing down the influx of immigrants he is, coincidentally, reducing the increase in the working age population. That acts as a significant drag on growth. Yet this is ignored by the Republican hierarchy. Where is the workforce needed to get growth up to 3% to come from? Are they building a time machine to go back to the 1990’s and boost the birthrate?

As I said fog!

One last thing: normal presidents have decent enough relationships with Congress that their budget proposals conform closely with Congressional political possibilities. This is especially true when the president is lucky enough to have a Congress dominated by his (or her?) own party. In Trump’s case he seems not to care. He has simply dumped this budget without any fanfare in the lap of Congress and walked away. Doubtless he will brag about it when he returns from abroad, but his total disregard for the niceties of political relationship building could not be on more public display. He simply doesn’t give a damn about Congress. Like most want-to-be autocrats he has nothing but disdain for the democratic process. But democracy is a pain. It bites back.

Which is why Trump’s budget will go nowhere.

Fortunately. Because it’s horrendous.

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Trump, Denial and The End of Normal

Shocking is an understatement. Donald Trump is unfit for public office, be it town clerk or president of the US. He’s an unbalanced egomaniac. He’s a racist. He’s an immature misogynist. He’s many other awful things. Presidential, he is not.

How did we get here?

Failure. But a particular kind of failure. Failure dressed as success. A success so sweeping and deep that we hardly recognize the extent of the change that it wrought. Naturally I am speaking of the victory of neoliberal thought. Perhaps you were thinking of something else.

For a brief moment after World War II, for a generation and a bit, the western world basked in a quiescence of steady growth, political solidarity, industrial calm, and rising living standards. That much of this was an illusion, or rather a reflection of the prior chaos of the spasmodic ending of the elongated nineteenth century, we ignored. Instead we imagined that a new normal had emerged. Economic depressions had been defeated. Western Europe had settled its ancient scores. And America had emerged as a beacon of democratic freedom, albeit one willing to exert quasi-imperial tendencies in its foreign dealings. Compared with the authoritarian alternative of the Marxist east, America’s heavy hand was tolerable for a generation able to recall the terrors of 1914 through 1945.

This period, though, was bound to end. Within its fabric was an unrest bound to tear at the fragility of the apparent unity.

That unrest was the desire of many to return to the chaos of a more unfettered way of life. They disliked the growing tendency of post-war governments to intrude into spheres of life and activities that previously had been private domains. They especially regarded such intrusions as obstacles to personal enrichment.

They questioned social democracy as if it were Marxist authoritarianism. They asked: Where was the private incentive? Where was the opportunity? What was the intellectual footing upon which those intrusions stood? And: were those footings not insecure against the tide of uncertainty best dealt with by private initiative?

The rebellion, when it finally burst into open life, swept away the temporary stability of that generation and a bit. And like all movements recapturing some imagined version of a glorious past it was even more radical than the original. It preached ideas producing an ever growing insecurity, constantly accelerating change, wrenching social re-aligments, and loss of opportunity for anyone incapable of being the kind of calculating insensitive and morally ambiguous trooper in its corporate divisions.

At its core the rebellion has one theme: liberty. A return to an idealized version of liberty such as that taught by the likes of Hayek and his most potent student Milton Friedman. Others, like von Mises, Peter Drucker, as well as Hayek were members of what the essayist Tony Judt so eloquently called the Austrian cabal. They all grew up within the fetid declining years of the old Hapsburg Empire. They all misunderstood the causes of that decline. They all witnessed the horror of demagoguery of Hitler. They all feared the repression of Marxism, Lenin and Stalin. So they all overcompensated.

Their error, as they built the intellectual features of neoliberalism, was to mistake democracy as a form of socialism. In this they echoed the fears of their intellectual ancestors. The founders of the American republic were just as fearful of the people. The phrase “we the people” refers to a select few: those entitled to participate. It does not refer to the vast mass who were thought unfit to participate.

By making this error Hayek and his ilk debauched liberalism. No: they tore it in two. They ripped away any references to equality or the dignity of community, leaving only the much rawer individuality to stand alone as a beacon of freedom. This primitive liberalism was then packaged as economic and political theory to stand against any attempts to leaven it with those lost, yet appropriate, features of mature liberalism.

So that’s how we arrived here.

The consequences of the neoliberal rebellion are all around us. Trump. Brett. La Pen. Haider. Berlusconi. The people’s reaction to insecurity, austerity, globalization, deregulation, and the decay of social cohesion wrought by the single minded pursuit of the individual ideal.

With respect to Brexit, let me quote at length from Jonathan Freedland’s essay in the New York review of Books:

“There is an overlap here with those white working-class voters in the US who are backing Donald Trump. In both cases, they are often people who once enjoyed secure, relatively well-paid work and who have seen their jobs, and their factories, shipped eastward. Working low-status jobs on zero-hours contracts, they live in places that have been hollowed out and left behind … While London and other major cities gleam and sparkle with investment and regeneration, many of these English towns — post-mining, post-industrial, post-their-best — are still reeling from the Thatcher-era policy of privatization, which saw the state shut down industries it had once propped up. They have grown derelict. In each wave of change — Thatcherism, globalization, automatization [sic] — they have lost out.

It meant that the Remain campaign’s central argument — that Brexit risked Britain’s prosperity — cut no ice with these voters, because they had no prosperity to risk.”

A little later Freedland quotes a Conservative minister, Michael Gove, as saying:

“I think people in this country have had enough of experts.”

And that’s also why we are where we are.

The experts blew it.

The elite. The center. The experts.

They are the people who brought us rising inequality, globalization, shareholder value, austerity, infrastructure neglect, rotting schools, dilapidated cities, insecurity in retirement, health, and personal finances, stagnant wages, and all the other ailments of an economy and society run solely in the name of private profit.

Worse still: those experts are scarcely attached to democracy because they, like Hayek and his confreres, believe that popular will is akin to a chaos imposed by an unwashed undereducated mob. Those experts believe that they alone understand the so-called “national interest”.

But why is it in the national interest for almost half the population to live perilously close to poverty?

As it turns out, that fleeting glimpse of normal back in the immediate post-war years was no illusion. It was simply a threat to the old establishment and to big business. It was a democratic moment that had to be ended not extended. It had to be ended so profits could be made as they had back in the Golden Era. So ended it was.

Which is why we are where we are.

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Too Expensive?

Some things get too expensive. When they do, people tend to buy less. Duh. This quite simple and intuitive observation sits at the heart of all that fancy math we call economics. We don’t need the math to understand the relationship between the cost of, and the demand for, something, but having lots of complicated looking equations gives us comfort: there is a universal law lurking in the intuition. With exceptions of course. This is, after all, economics. There are always exceptions.

One of the things that is getting too expensive, if it hasn’t already arrived there, is higher education. The cost of going to college is becoming prohibitive. Sooner or later the cost of college will cut into the demand for education.

Just as it ought.

In our contemporary economy we are accustomed to being told that ever higher levels of education are not just desirable, but they are essential. One idea endlessly tossed about, especially on the right in politics, is that our workers are insufficiently skilled to compete with their foreign peers, and so the nation is at risk of losing its competitive edge. This is then twisted into the follow-up idea that we need a higher percentage of our population at college.

But what happens when we arrive at saturation? What is saturation? What is the value of a college degree when everyone, or nearly everyone, has one? Do we all then need to go on and get a post-graduate education? And once we all have PhD’s, then what?

Clearly there is something amiss in the thinking.

Getting the general level of education higher has long been a goal of industrial nations. After all, modern industrial economies need armies of numerate and literate workers to provide it with a workforce.

Is this also true in a post-industrial economy?

Is there the same urgency to ensure a steady stream of educated workers for the capitalist mill nowadays when even our largest and most successful technology companies employ mere handfuls of people rather than the ten or even hundreds of thousands of their industrial predecessors?

It seems to me that the answer is no: the urgency is gone. Except, of course, for the need to provide all those techies who clutter up places like Silicon valley.

So what happens to college education?

In a post-industrial world we ought to value education for itself rather than as a gateway to employment. Yet after decades of being told that an education is essential as a way to financial security our students look at education through the prism of cost-benefit analysis. I don’t blame them. With even a mediocre college now feeling free to charge tens of thousands of dollars per semester, it is entirely reasonable for students to calculate the worth of an education in terms of future remuneration and payback. It is also entirely unreasonable for educators to raise a hue and cry when they are subjected to such analysis. They, after all, were only too happy to ride the surge in demand. So if they now appear to be sitting on an insufferably bloated and expensive production process they need to educate themselves on how to deal with it.

It seems more than a little hypocritical for educators to moan about being looked at through that cost-benefit prism now that they are ludicrously over-priced, when a few years back they were only too happy to tout the ‘value’ of education.

Yes, I now that ‘value’ is a slippery word. In a neoliberal world it has one meaning: cash. In a more balanced world it could mean something else: personal enrichment creates value and, dare I say it, ‘utility’, not easily captured within the matrix of economics.

Ah, economics. Look how it has spread its simplistic tentacles everywhere. By colonizing our political and social discourse and corrupting everything around it, economics has debased even education. It has brought its method, and cost-benefit along with it, to enforce its own version of ‘rigor’. And this rigor is now telling us that the ‘value’ of an education is measured in future earnings. The logical extension of this rigor is that an education in subjects of less use to the economy is, obviously, worth less too. Obviously.

It’s intuitive, right?

Which brings me back to the cost of education.

If the suppliers of education want to attract buyers – let’s keep the framing of the discussion within that of economics – then they have to price accordingly. And the buyers, if they want to keep on buying something that has diminished remunerative value in the future, but lots and lots of ‘personal value’, have to undertake the same analysis.

All that is going on is the return of certain forms of education back to their original status: as a luxury item for a those who see ‘value’ in polite discourse, knowledge of the classics, rhetoric, and the other accoutrement of polite society. And, like a lot of luxury items, the perception of value will only rise as the cost increases and makes the purchase more prohibitive and the exclusive domain of the few.

Now, I understand that a lot of educators think the picture I just painted is an abomination.

My response to them is simple: cut costs. Make education affordable. Make it so that is does not become a luxury or exclusive product consumed only by the privileged.

It is one thing to assert that education is not an ‘industry’ or that it ought not be subject to cost-benefit analysis. It is another to look in the mirror and wonder whether you contributed to the change you decry.

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Santa Claus, Taxes and Deficits

“Deficits don’t matter”, to borrow a phrase made famous by Dick Cheney. Hardly a left of center guy, Cheney was defending the sea of red ink Ronald Reagan created in the early 1980’s. Reagan, please recall, was the first president to plunge the US into deficits that were not related to war, economic downturn, or macro-economic management. They were simply an outcome of an ideologically driven set of policies. So Cheney was right: they didn’t matter.

According to the modern Republican party they especially don’t matter when the slashing of Federal revenues is done at the behest of business. That’s because the tax cuts involved are “pro-growth”, and, so we are assured, the increased growth presumed to be stimulated by the cuts will more than offset the red ink.

That’s never happened, but such is the allure of the magic of markets that otherwise sensible people can fall for fairy tales. The University of Chicago is thick with such folk.

Anyway, for those who aren’t obsessing over the rise of Trump and the imminent invasion of America by ISIS – both of which dominate our febrile media – I would like to draw your attention to Washington where a big government funding bill is in the process of wending its hapless way through Congress.

The good part of the bill is that it provides funding to keep government running. So we have no fiscal cliffhanger this year. Sorry, I know they are so much fun, but with the media’s attention elsewhere there’s no point in having a cliffhanger this year.

The bad part of the bill is pretty much everything else.

It includes an astonishing array of tax breaks for business, and its net effect is to add about $680 billion to the national deficit.

Now I think it’s slightly hypocritical for any of us to get too upset over this: we were all berating the Republicans for being stupid about the deficit back in the dark days of 2009/2010. That was when the deficit was rising quickly and looked to be out of control. It wasn’t, it was simply a function of the crisis we created by being so attached to rotten economics for the past few decades.

Still, it is rather quaint to watch was the Republicans, even the most trenchant “austerians” amongst them, rattle off dozens of well worn reasons why adding $680 billion to the deficit is no big deal.

Here’s one such comment, by Ways and Means Chairman Kevin Brady (R-Texas):

“We’re making permanent some very key pro-growth provisions that are going to grow the economy, these are tax provisions we’re extending one year at a time; making the pro-growth provisions permanent doesn’t add any level of funding to our deficit. It’s simply honest budgeting going forward.”

Honest budgeting. I like that.

Brady is a math whizz too, he also said that the cost of these tax cuts over a decade is about the same as one year multiplied by ten. Presumably the cost of interest and so on isn’t a factor in Texas.

Then there’s the old line about making it up in volume, or, in this case, getting the lost revenue back from all that magical growth down the line, Bill Flores, also from Texas tells us not to worry about figuring out the deficit impact – known as “scoring” in Washington speak:

“We don’t score them because economic growth helps them. … We’ll get that back multiple times over in economic growth,”

Just like we always have. Never.

Listen, I am in a radical mood for a change. This entire charade is simply a giveaway to business. Congress is pretty much run by business through its lobbying and election donations. So I have a plan. Call it my “holiday gift plan”.

Get rid of corporate taxes.

Yes. You read that correctly. Just do away with corporate tax.

No, I am not nuts. There are strings attached to this.

Getting rid of corporate taxes will reduce the stranglehold business has on our politics in terms of the stupidity and pretense that surrounds the budget process. But they would still lobby like crazy over social legislation: things like work and labor regulation, family leave, product safety, and so on. All the things businesses have tried to tell us make it hard to do business.

Well: the same bill that eliminates corporate tax will include provisions restoring all the rules and regulations done away with over the last forty years. It will also include rules making it easy for workers to set up unions and a return to collective bargaining for wages and work conditions. Let’s toss in family leave as well. Oh, and obligatory paid annual vacation time. Businesses will be able to afford all sorts of pro-worker goodies now that they can fire their tax departments and not pay all those fees to lawyers looking for loopholes. Not to mention the extra cash from the taxes they no longer pay.

I am sure we can come up with a good long list of things that business has taken away from us in the name of being “pro-growth”. Let’s be imaginative.

And, hey, It’s Christmas isn’t it? Well holidays are upon us. So we, aren’t done yet.

Let’s also throw in the abolition of the capital gains tax.

Gulp.

No: listen to me. We will simply tax capital gains as income. At income tax rates. Income is income, whatever its source. The privilege given to capital owners needs to go. And let’s get the estate tax rate back to a level where it inhibits the growth of a rentier class. That’s why we have an estate tax after all. Well I think so.

And why not reform the income tax for all of us? Get rid of all deductions, lower all the rates at the bottom, add a couple of new higher rates at the top – those top income earners have all the income anyway – and, just for good measure, replace all our hodgepodge of welfare and poverty programs by a simple annual check from the government for anyone earning under some ratio of the median wage.

We can pay for that by adding a little rule that extracts a penalty – not a tax – from any business paying its CEO and top executives a wage/pay package of more than 40 times the lowest wage the business pays. We could be generous to our poor CEO’s and make the ratio set to the average wage, but that’s a detail we can negotiate later.

None of this is controversial at all. Really. At least in a country that thinks Donald Trump is qualified to be president. So we ought to add a lot more.

After all it’s “pro-growth”. And that’s all that counts. At least that’s what everyone seems to think.

 

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