Economy

A new Quinnipiac poll finds voters blame Bush over Obama 54 - 27% for the poor economy. The poll finds that by a margin of 67 - 25% voters believe that solutions to the deficit should include tax hikes for the wealthy and corporations, and not just spending cuts. And 62 - 32% voters believe that it's more important to reduce unemployment than to reduce the federal deficit.

Says Peter A. Brown, assistant director of the Quinnipiac University Polling Institute:

The graphic below is from the July 24 New York Times based on figures from Center on Budget and Policy Priorities. Read Jonathan Cohn's New Republic article.

"... [I]it's as if you put charges on your credit card, then decide later whether you're going to pay for them," The Atlantic's James Fallows told NPR's Guy Raz yesterday.

This is money past Congresses and this Congress, too, have already voted to spend....

... [R]atings agencies have already said that even though, of course, people know that the U.S. government is not going to finally renege on its obligations, the interest rate that the U.S. has to pay for its Treasury notes and other debt will probably go up if there is this default because it's always been defined as the most riskless investment in the world.

And if and when that happens, essentially interest rates for everything else - for mortgages, for city governments, for state governments - they will all go up, too, because almost all of them are benchmarked to the supposedly riskless Treasury rate.

Readers old enough to remember will recall that 'voodoo economics' was the label applied to Ronald Reagan's economic policies by George H.W. Bush in 1980. The policies were based on the aptly named "Laffer curve," which purported to show that high tax rates reduce tax revenue by lowering the incentive to produce. (The model also predicts that tax rates below an optimal level for a given economy will reduce tax revenue; today's Republicans conveniently ignore this provision.)

Despite being embraced by mainstream commentators like David Brooks, who called it a "moment of truth," Rep. Paul Ryan's (R-WI) budget proposal is a return to 'voodoo economics.'

"Ludicrous and Cruel" says Paul Krugman in his recent NY Times column.

In a follow-up to his piece on the importance of economic growth to deficit reduction, the NY Times' David Leonhardt looks at the effect of the Bush tax cuts, and concludes "Every available piece of evidence seems to suggest that the Bush tax cuts did little to lift growth."

Commenting on Robert Reich's September 2 NY Times op-ed piece How to End the Great Recession SEC policy adviser Rick Bookstaber calls it "a reasoned argument for income redistribution based not on some notion of fairness, but on economic results."

Rather than the government priming the pump through fiscal measures, which is obviously a short-term solution, he argues that we need to change the structure of the system to shift income toward those who will consume.

In the November 1 NY Times Paul Krugman critiques the moralistic anti-debt sentiment that has provided one of the dominant themes of this election season. The cartoonish "debt is evil" sentiment that has made its way into political rhetoric around the world, "is the reason we’re mired in a seemingly endless slump," Krugman writes.

Reagan Budget Director David Stockman, in an interview with NPR's Guy Raz, labels much of the so-called Pledge to America "a lie." Listen to the whole interview here.

The New Yorker's James Surowiecki has an interesting analysis of how many of the qualities that made the Obama administration's economic stimulus package effective also made it less popular.

.. [B]y any reasonable measure, the $800-billion stimulus package that Congress passed in the winter of 2009 was a clear, if limited, success. The Congressional Budget Office estimates that it reduced unemployment by somewhere between 0.8 and 1.7 per cent in recent months. Economists at various Wall Street houses suggest that it boosted G.D.P. by more than two per cent. And a recent study by Mark Zandi and Alan Blinder, economists from, respectively, Moody’s and Princeton, argues that, in the absence of the stimulus, unemployment would have risen above eleven per cent and that G.D.P. would have been almost half a trillion dollars lower. The weight of the evidence suggests that fiscal policy softened the impact of the recession, boosting demand, creating jobs, and helping the economy start growing again. What’s more, it did so without any of the negative effects that deficit spending can entail: interest rates remain at remarkably low levels, and government borrowing didn’t crowd out private investment.

Surprise! (Not really.) The conservative movement doesn't oppose deficit spending, they oppose deficit spending by Democrats.

Think Progress's Matt Yglesias has a succinct summary. Some key points:

1. There have been two presidents who were members of the modern conservative movement, Ronald Reagan and George W Bush, and they both presided over massive increases in both present and projected deficits.
2. The major deficit reduction packages of the modern era, in 1990 and 1993, were both uniformly opposed by the conservative movement.
3. When the deficit was temporarily eliminated in the late-1990s, the mainstream conservative view was that this showed that the deficit was too low and needed to be increased via large tax cuts.
4. Senator Mitch McConnell says it’s a uniform view in his caucus that tax cuts needn’t be offset by other changes in spending.
5. The deficit reduction commission is having trouble because they think conservative politicians won’t vote for any form of tax increase.