The Republicans are always to blame

If there were ever any doubt that the media leans to the left (I know, I know, there’s not) it shows in its treatment of disagreements between Republicans and Democrats.  When Democrats want to change something and Republicans disagree, the Republicans are the bad guys, standing in the way of progress and “Hope and Change.”  But when Republicans want to change something and the Democrats disagree, it is still the Republicans fault for daring to pass legislation in the House that they know will fail in the Senate.  Why aren’t the Democrats at fault for standing in the way of the “Change” that a Republican House was elected to begin?

Sadie sends along an example of the latest round of Republican bashing:

 

Is the U.S. Credit Rating a
Victim of GOP Sabotage?

But Congressional Republicans deserve much more of the blame. For this calamity was entirely man-made — even intentional. The contemporary Republican Party is fixated on taxes. It possesses an iron-clad belief that the existing tax rates should never go up, that loopholes shouldn’t be closed unless they’re offset by other tax reductions, that the fact that hedge fund managers pay lower tax rates than school teachers makes complete sense, that a reversion to the tax rates of the prosperous 1990’s or 1980’s would be unacceptable.

Email him at grossdaniel11@yahoo.com

And who is Daniel Gross, you ask ….

  1. Daniel Gross is one of the most widely read financial and economic writers working today. He is a senior editor at Newsweek, where he writes the “Contrary …

    www.thedailybeast.com/contributors/daniel-gross.html
    Cached

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Comments

  1. Danny Lemieux says

    I understand that my own economics training may get in the way and what seems obvious to me is not so to others – but I really have trouble understanding how people can believe that by taking more disposable income away from individuals and giving such to government can in any way help stimulate job growth…unless they mean “government jobs”.

  2. says

    Don Quixotewhen Republicans want to change something and the Democrats disagree, it is still the Republicans fault for daring to pass legislation in the House that they know will fail in the Senate. 

    The debt ceiling debate is a very bad example if you are intending to show equivalence. Looking from the outside, the U.S. just spent the last few months seriously considering whether or not they were going to pay their bills, or voluntarily default. They kept this up until the last possible moment. It’s not something that reassures creditors. As the problem can recur the next time the debt ceiling needs to be raised, a peculiarly American process, creditors have a right to be worried. This relates back to Geithner’s statement in the other thread. 

    Danny LemieuxI really have trouble understanding how people can believe that by taking more disposable income away from individuals and giving such to government can in any way help stimulate job growth…unless they mean “government jobs”.

    If you have economics training, it shouldn’t be that difficult. If there is excess capacity in the labor market, putting those people to work will put more money into circulation. The cost is increased debt or reduced savings. If the workers produce something of value, such as improving the roads, then it can provide a long term economic advantage along with the short term stimulus. 

    The trade off is an increase in debt or a decrease in savings. We can discuss when this makes sense, but the short term stimulus is straightforward. 

  3. Danny Lemieux says

    Wrong, wrong, wrong, Zach! For example, improving a road is only of value if it increases productivity. Improving a road to nowhere or building high-speed trains to nowhere do not.

    As far a “putting excess capacity to work”, it doesn’t put more money into circulation – it takes $100 from a productive taxpayer who would otherwise use it to create added-value, circulates it through a parasitic government class (i.e., bureaucracy) and puts in the $10.00 or so that is left into the excess labor force to generate work that is usually non-productive.

  4. says

    Well, Zach, looking from the inside, the House Republicans wanted the change they were elected to provide and the Democrats blocked them.  The Republicans got blamed.  Yet when the Democrats propose any changes and the Republicans block them, the Republicans get blamed.  My point is there is no equivalence.  No matter what happens, the Republicans always get blamed by the media.

  5. says

    Danny, Zach’s assumption is that it won’t take $100 from a productive taxpayer.  The $100 will come from printing money and going further into debt.  Well, okay, that debt, plus interest, must be paid back someday by the work of a productive worker, which is why the model never actually works in practice, but the short term effect does put more money into circulation and should stimulate.

  6. suek says

    DQ…

    I think it’s based on printing the money but _not_ going further into debt. How does printing money create debt?

    I mean…we _do_ own the printing presses, don’t we? And since there’s nothing backing the dollar – it’s worth what we say it is, so…why not just print more of it???

  7. says

     

    Don QuixoteWell, Zach{riel}, looking from the inside, the House Republicans wanted the change they were elected to provide and the Democrats blocked them.  
     
    Doesn’t matter. Threatening default means threatening to break your commitments. 
      
    Don Quixote… the short term effect does put more money into circulation and should stimulate.
     
    Good.  This is fundamental to economic theory. There are other limitations, but we need to understand the simple cases first. 
     
    Danny Lemieux: Wrong, wrong, wrong, Zach{riel}! For example, improving a road is only of value if it increases productivity. Improving a road to nowhere or building high-speed trains to nowhere do not.
     
    Consider a simple situation, a population of 10, with four out of work. The six buy food at the market, but the four forage for tubers in the forest. The king dips into his treasury (or borrows from the neighboring kingdom) and hires the four to work on improvements to the palace that have no intrinsic market value. The money that was sitting in the treasury is now in circulation. Merchants reap immediate benefits as there are now ten people buying food at the market. 

     

  8. Mike Devx says

    suek,
    If I have it right, the Federal Reserve is a private institution, not a government agency, that prints the money and loans it to us at an interest rate so that we have to pay that interest back.  Departing the gold standard in favor of being a fiat currency allows us to “manage the money supply” and, via Zach’s beloved counter-cyclical programming, attempt to achieve a measured, steady rate of economic activity that doesn’t include sudden spikes, dislocations or plummeting recessions, etc.

    We lack tax revenue to pay back what we borrow from the Fed, so we pretend we have the money by calling it debt, and pay that money – which we don’t really have – back to the Fed with interest.  The Rubio speech highlighted the problem: Government spends 300 billion per month, but collects revenue for only 180 billion of it.  The other 120 billion is money that doesn’t exist, which we refer to as debt.  Your children and your grandchildren will pay that missing money back.  Unless we – the collective American People “We” – default on paying back this missing money with interest, and refuse to pay when it comes due.

    How much the Fed, despite being a private institution, and not a government agency, is under the control of the current Administration (whichever party is in power) is an interesting question I don’t have the answer for.   But the current Secretary of the Treasury – Geithner – can’t just print money.  It has to be borrowed from the Fed before it can be printed.  Please correct me if I’m wrong about this!
     

  9. Mike Devx says

    Z #8:
    The king dips into his treasury (or borrows from the neighboring kingdom) and hires the four to work on improvements to the palace that have no intrinsic market value. The money that was sitting in the treasury is now in circulation. Merchants reap immediate benefits as there are now ten people buying food at the market. 

     Oh God, here we go, off and running to hundreds of comments on the classic economic debate surrounding “fixing the broken window” fallacy of this kind of economic thinking.  To wit: We should deliberately break more windows so that the government can hire more people to fix them.  Put people to work doing something that is not in demand, so that we can give them cash to stimulate the economy.  Common sense alone dictates that there’s something severely wrong with that picture.  I will grant that this can create a short term benefit to the economy perhaps… just as with cash for clunkers… but following such policies long term, economic disaster must ensue.

    Such thinking can work only as emergency interventions to try to avoid a looming immediate catastrophe.  The price is dislocation and economic disruption, but that’s better than the catastrophe.  Long-term responsible fiscal policy, it certainly ain’t.  Interesting though, that the Obama Admin, and Zach, consider it to be responsible policy.

  10. says

    Governments are not special, no unique rules of physics (or math) apply.  Economics as we know it today is closer to astrology than astronomy – especially in the domain of circular arguments that have the veneer of science but still are an appeal to authority.
    .
    A family and a business can have a credit rating established by an independent third party.  It makes little difference if there are arguments within the family which purchases should be made or not, or who should work and not, or what loans should be paid first or not.  The risk for lending money to this entity comes with some risk that can be determined by looking at history, current behavior and current debt.  No magic involved – save if some third party is putting their thumb on the scales – and even here, as long as the rules are based on well understood policy – v. human discretion (see John Taylor), risk can still be calculated. 
    .
    The U.S. is broke, there is no more money, we’ve committed not only the discretionary funds that we have, what our children have, but their children as well.  We can afford a Federal Government of about 15% of GDP and that’s it.  And it would be better if we recast the 10th amendment as a budget law, where the only taxing authority lay with the local unit of government (something the size of Swiss Canton) – say 1/3rd of today’s congressional district or 250,000 people (larger than all but two of the founding states, and a larger economic unit than almost all companies), and every unit of government above that was allocated per capita funding against a set of priorities appropriate to their reach.  With any unmet need (even in an emergency) left to the entity below it.
    .
    Granted, when the majority of the citizens aren’t numerate there’s little hope for anything but radical decentralization – like the Swiss Cantons where most governance (tax and services, including health and elder-care) are local, and the feedback on a decision is immediate – so even a random walk results in positive outcomes (at least as seen by the majority of the local electorate, since they can and will fix it if otherwise).   Having 50M+1 decide issues for 50M-1 is idiocy and guarantees the current situation, stasis, and “compromise” to even worse results.

  11. says

    re: Keynes.  Would disown the current use of his name.   He didn’t propose using monetary policy to subvert free market capitalism (markets responding to price signals) and its necessary ability to creatively destroy those entities that did not or could not respond (even in a time of crisis).  
    .
    His theory (and he’d argue that it is just a theory, not a law) argued for short term easing of market shocks when it was clear there still was value in the assets, and the assets could not be quickly redeployed (nor was he in favor of unemployment insurance in non-cyclical industries – since he wanted to maximize incentives for recycling resources quickly).  And he wouldn’t countenance our manner of borrowing against future generations – nor our claim that money loaned from the future and spent today be counted in GDP.
    .
    Long term he argued for a safety net (welfare) to support those who couldn’t be retrained or redeployed (even at much lower wages).  But he would not have argued for continuing support of a proven to be non-economic, unable to compete activity – e.g. uncompetitive auto companies, so called green energy, or the family farm – better to recycle those assets (worst case pay them not to continue doing what they were doing – and insure that the uneconomic behavior would end with this generation) than create communitarian-like systems where it’s considered ok for the outputs to be worth less than the inputs (for cosmic justice or better rational).

  12. SADIE says

    We lack tax revenue to pay back what we borrow from the Fed, so we pretend we have the money by calling it debt, and pay that money – which we don’t really have – back to the Fed with interest.
     
    We used to play that game  “Pretend” as children. We grew up.

  13. suek says

    Cleaning out bookmarks and ran across this one:

    http://www.bobsloansampler.com/ess05.htm

    It belongs on an earlier thread, but that one has disappeared from the list on the side. Anyway, if you want a moment of serenity and quiet thought, it’s a good link.

    Back on topic:

    >>If I have it right, the Federal Reserve is a private institution, not a government agency, that prints the money and loans it to us at an interest rate so that we have to pay that interest back.>>

    Interesting. Now…if it’s a private institution, who are the owners? To whom is interest paid? You can say “The Fed”…but if it isn’t owned by the government, it must be owned by _somebody_. Does that somebody pay taxes? Seems to me I’ve heard some conspiracy theories connected … Bilderberg Group??
    I think I agree with Ron Paul on this one – the Fed should be audited. At least, it should not be totally secretive.

    But wait. You say the Fed prints the money – yet the Mint is a government enterprise, is it not? Belonging to and funded by the Federal Government? Am I mistaken? Does the Federal Reserve own and pay for the Mint?? I thought only the government could issue legal tender… I must be confused.

    Help me out here!

  14. says

    Mike Devxthe Federal Reserve is a private institution, not a government agency
     
    The Federal Reserve is a government agency, but one that is somewhat insulated from the political system. 

    Zachriel: The king dips into his treasury (or borrows from the neighboring kingdom) …

    Mike DevxOh God, here we go, 

    It makes sense to understand basic economic theory if you want to make comments about economic policy.

    Mike DevxTo wit: We should deliberately break more windows so that the government can hire more people to fix them.  
     
    Yes, stimulus spending negatively affects the balance sheet. That’s not the question. 

    Mike DevxI will grant that this can create a short term benefit to the economy perhaps…

    Baby steps. Thank you. 

    Mike DevxLong-term responsible fiscal policy, it certainly ain’t.

    That’s right! So, with countercyclical policy, what should the government do during an economic expansion? 

    Ari TaiThe U.S. is broke, there is no more money, we’ve committed not only the discretionary funds that we have, what our children have, but their children as well.  

    That’s not correct. The U.S. is a $15 trillion economy, and can be expected to grow somewhat in the future, probably 2% is reasonable. There is no reason why they can’t pay their bills. 

    Ari Tai{Keynes} didn’t propose using monetary policy to subvert free market capitalism (markets responding to price signals) and its necessary ability to creatively destroy those entities that did not or could not respond (even in a time of crisis).  
     
    That’s right! Countercyclical policy merely mitigates the market cycle, but allows the market to otherwise work unencumbered. 
     
    Ari TaiAnd he wouldn’t countenance our manner of borrowing against future generations – nor our claim that money loaned from the future and spent today be counted in GDP.

    Aggregate Demand = Consumption + Investment + Government +( Xports – Mports )

    Zachriel
    : The king dips into his treasury (or borrows from the neighboring kingdom) …

    So when would it not stimulate the economy? Let’s say all ten workers are already busy making widgets. When the king begins hiring to make improvements to his palace, he is now competing in a labor market that is working at full capacity. He has to bid up the price of the workers. Now there are fewer widget producers, and this drives up the cost of widgets. So instead of stimulating the economy, the king’s spending is bring about inflation. 

  15. says

    Don QuixoteWell, Zach{riel}, looking from the inside, the House Republicans wanted the change they were elected to provide and the Democrats blocked them.  

    According to S&P (give their credit rating whatever credibility you want):
     
    The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy.

    Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.
     
    http://thinkprogress.org/economy/2011/08/05/289861/breaking-s-p-downgrades-u-s-credit-for-the-first-time-in-history-repeatedly-cites-gop-intrasigence-on-taxes/

  16. Danny Lemieux says

    Zach: “Consider a simple situation, a population of 10, with four out of work. The six buy food at the market, but the four forage for tubers in the forest. The king dips into his treasury (or borrows from the neighboring kingdom) and hires the four to work on improvements to the palace that have no intrinsic market value. The money that was sitting in the treasury is now in circulation. Merchants reap immediate benefits as there are now ten people buying food at the market.
    Zach, I must agree with you. Your medieval analogy was absolutely appropriate. 

    FYI – money today doesn’t “just sit in a treasury”. 
     

  17. says

    Danny Lemieuxmoney today doesn’t “just sit in a treasury”. 

    That’s a policy choice. The Chinese had a larger stimulus, as percentage of GDP, than the U.S. Though their stimulus was financed by the banking system, they had more than sufficient reserves to pay cash. The U.S. was running substantial surpluses, but decided to take a different fiscal path.

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