"Shoeless Joe" Stiglitz vs. the Alan Simpson & Erskine Bowles Deficit Reduction Proposal

“Macroeconomic policy can never be devoid of politics..."

Joe Stiglitz is a Nobel-Prize winning economist, currently professor at Columbia University, who chaired Bill Clinton's Council of Economic Advisors from 1995-97 and was Chief Economist at the World Bank.  He won the Nobel Prize in economics in 2001 for his work on "market imperfections." He's long been a critic of free market theorists - who he regards as market "fundamentalists" - and has written extensively on the destabilizing effects of economic globalization.

Stiglitz plays in powerful circles, but he's not a "team player."  He left the Clinton administration after losing an ongoing duel with Larry Summers. In an American Prospect profile ten years or so ago, entitled "Shoeless Joe" and highlighting the often-disheveled professor's unorthodoxy, Jonathan Chait quoted Stiglitz' take on his stint as CEA chief:   

"When I was in the lawyer- and politician-dominated White House environment, I often felt that I had arrived in another world," he recounted. "I had expected lower standards of evidence for assertions than would be expected in a professional article, but I had not expected that the evidence offered would be, in so many instances, so irrelevant, and that so many vacuous sentences, sentences whose meaning and import simply baffled me, would be uttered."

Stiglitz' intellectual credibility and experience combined with his tendency to tell unwelcome truths in high places is why he's such a valuable voice. What this little panegyric is getting to is a broadside that Stiglitz has just fired contrary to other former presidential CEA chairs who had banded together in a joint "letter" to promote the much-touted opinions of Deficit Commission co-chairs Erskine Bowles and Alan Simpson - pushing an agenda of "compromise" cutbacks to reduce budget deficits long-term. 

"Social Security is a milk cow with 310 million tits!"

Commission co-chair Alan Simpson, you might recall, is the terminally grouchy public scold who makes cracks like, "Social Security was never a retirement" and "it was a good idea when it started, but may no longer be so" - that is when he's not babbling about "the green weenie","sparrow belch" or how "a lot of blood, hair, and eyeballs have to lay on the floor before we (the Simpson-Bowles commission) finish." (Simpson's lips are so loose and he's so dyspeptic there's a StuffAlanSimpsonSays.com website.) Why President Obama chose  - along with "corporate Democrat," former Clinton staffer and investment banker Bowles - this disgruntled old coot to head a key commission looking at the future of Social Security, among other major long-term budget issues, is one I'll never understand.

But back to Joe Stiglitz.  Arguably he's no more the diplomat than Simpson, but his tongue is connected to his brain, not his spleen.  Stiglitz calls the Simpson-Bowles proposals a "near suicide pact" and "a set of unprincipled political compromises that would lead to a weaker America — with slower growth and a more divided society."

Strong stuff. And the substance of Joe Stiglitz' "counter-letter" to his fellow former CEA chairs regarding the deficit commission is compelling:

Terrible Democratic strategy on the budget...

Think Progress reports - a "Tea Partyized" GOP win is likely in current budget "negotiations":

Unfortunately the administration backed away from its budget even before the negotiations started, and the Tea Party is calling the shots in the House. So instead of negotiation between the president’s original level and House leadership’s original level, we’re stuck negotiating between the Tea Party’s $100 billion, and the new status quo’s $50 billion. That means the likely compromise is right where the House Republican leadership always wanted it: around $74 billion.

That’s not much of a compromise if we end up with what the House Republican leadership wanted in the first place.

The full "Think Progress" analysis is HERE.  "The Tea Party is calling the shots in the House" - OMFG! But bending to the crazies seems to be working for the GOP, which is getting it's original offer as the "compromise" with weakened Democrats. This apparent failure is the fruit of the mid-term debacle, of Democratic timidity and - among the base that worked hard for Obama - of our having let the Tea Party activists take center stage at the grass-roots and in the media circus after our guy won the Presidency.      (via Ezra Klein, Wonkbook)

Update: Steve Benen has more on this at Political Animal, HERE.  Up-update: Can GOP over-reach give the Dems leverage?  Brian Beutler, HERE at TPM, has the latest on the potential for a government shutdown.

The unbearable hypocrisy of being a GOP "deficit hawk"

Exhibit A:
Sen. Richard Shelby, Republican, Alabama

At left we have Sen. Shelby expressing his concern over mounting deficits, by pointing his finger at the year before they began growing out of control - 1980. 1980 was, of course, the year the great anti-government fiscal conservative Ronald Reagan was elected President - and proceeded to initiate the Gospel of Tax Cuts, a scheme hatched by the economic elites and which got the federal  deficit ball rolling big-time. 

Thank you Senator Shelby, for reminding us of "the good old days" before the GOP's "Starve the Beast!" strategy to break government took hold.

Currently Shelby - when he's not attacking consumer advocate Elizabeth Warren or fighting regulation of the banking industry - is railing against the dangers of the deficit with public statements such as this:

“Washington must put its fiscal house in order. American taxpayers are rightly infuriated by the federal government’s disregard for the same economic principles that govern every household and business budget.”  

Aside from the nonsensical simplification that the federal government should adhere to identical budgeting principles as "every household," at least let's acknowledge that's a clearly expressed point of view.

But behind the hot air, we find "fiscal conservative" Shelby inserting the pork-barrel “Shelby provision” into the 2010 budget extension.  The "Shelby provision" forces NASA to spend $1.4 million daily on the Constellation moon program, which it already canceled and doesn’t even want:

3rd part of "Common Sense" Guide to the Great Deficit Debate at "Winning Progressive"

 Winning Progressive has the third segment of our "Common Sense" deficit primer up today.  This segment focuses on the drastic growth in income inequality over the last 30 years.  Thanks to WP for spreading the word!

How did GE pull it off ? - "Some people rob you with a six-gun..."

"...some people rob you with a fountain pen"

And some people rob you with lobbyists re-writing the tax laws.

It's been reported widely - including here - that General Electric paid zero taxes on over $14 billion in profits for 2010. What's gotten a bit less attention is the part of the story where GE not only doesn't pay any taxes, but got a "tax benefit" of $3.2 billion - which presumably means that Uncle Sam owes GE a multi-billion dollar credit against future taxes (assuming the sharks at GE ever are liable for any.)

As the New York Times story explains in painful and anger-inducing detail, GE is typical of large corporations - although obviously more skilled than many - in employing a small army of well-funded lobbyists to work Washington for tax breaks, loopholes, "incentives", "credits", etc. - ad nauseum.

This is the background to what are called "tax expenditures" - i.e. money that the US Treasury forgoes on taxable income and corporate profits because of various "work-arounds" as fine print  written into the tax code.  It is a huge issue for corporations like GE, but it's an imbalance in our tax system that comes into play with taxation on wealthy individuals as well.

More fiscal conservatives like these, pleeeze...

In economic jargon this is called, "DUH!!!"

If there's one fact folks need to understand in the current "deficit debate," it's that the GOP doesn't care about the deficits. They care about cutting taxes...primarily for the very wealthy - no matter what the cost or the impact on the country or on responsible government.

That's the bottom line of these alleged "conservatives" of the GOP. Their obsessive clinging to a "policy" of tax-cuts-over-everything became obvious during the GOP temper tantrum over letting the Bush tax cuts expire for the top 1% - the super-wealthy folks whose incomes have grown exponentially over the past thirty years, at a rate about 15 times more than the majority in the lower & middle income groups have seen.

Congs. Heckle & Jekyll

So, if the allegedly "conservative" GOP has devolved into a bunch of shills for cutting taxes on the economic elite and on corporations (or in many cases, simply giving a platform to nut-jobs and demagogues who can't even do the math but are feeding on cultural & racial resentments), what does real "fiscal conservatism" look like?  

Well, one might begin with a report just out from the Center on Budget and Policy Priorities. They've got some rational approaches to keeping deficits under control over the long term. They've also got some good charts!  Nothing like a chart to make this stuff (stuff that, frankly - were it not so critical to decent public policy - bores me to tears) comprehensible and easy to grasp without wading through a sea of numbers. 

Let's start with the chart above at the top right (Fig2.)  It's pretty obvious.  Bottom line, according to the CBPP report, "letting all the Bush tax cuts expire...is likely to be the only way to stabilize the debt as a share of the economy over the coming decade without draconian cuts that would cause serious damage..."

Senator Sanders, Proudly Inependent-VT

Uh...yeah. But try telling that to these "conservative" clowns in Congress. Apparently the only "fiscal conservatives" to be found in the Beltway these days are among the liberals and moderates of the Democratic Party.  For that matter the "real-live-socialist" in the Senate, Bernie Sanders from Vermont, is a more authentic fiscal conservative than that Ayn Rand acolyte, Cong. Paul Ryan of Wisconsin, or the Minnesota Tea Partier Michelle Bachmann (who apparently gives voice in Congress to the unfortunate folks who forgot to take their medication) because he's not selling the fiscal patent medicine of tax-cuts while yammering incoherently about  "budget balancing."

The CBPP has more, which I'll excerpt - along with their great charts:

McCarthy's Ghost

The Madison Wisconsin Capital Times reports that the state GOP is going after U of Wisc. history professor William Cronon - who has been critical of Republican Gov. Walker's attacks on public employees and unions - requesting that his emails be made public in an attempt to pin some sort of violation of university policy on him.  Prof. Cronon was featured on "The Titanic" on Tuesday, for his New York times op-ed on GOP radicalism.

He details the GOP's attack on him for his public statements  at his aptly named Scholar as Citizen blog:  A Tactic I Hope Republicans Will Rethink: Using the Open Records Law to Intimidate Critics.

UPDATE: Krugman has a good piece on this in today's Times (3/28.)

It's tax time - and the government owes General Electric $3.2 billion!

How's does this bit of news make you feel while you're poring over tax returns in preparation for April 15?  General Electric took home profits of $14.2 billion last year - $5.1 billion of the total came from its operations in the United States.  So how much are they paying in taxes?  Nothing!

On top of that, GE is getting a tax credit of $3.2 billion from Uncle Sam.

But it's not just GE that has become expert in tax avoidance -  the corporate share of the nation’s federal tax revenues has declined from 30 percent in the mid-1950s to 6.6 percent in 2009.

The New York Times notes that "low taxes are nothing new for G.E. The company has been cutting the percentage of its American profits paid to the Internal Revenue Service for years...

How's that austerity strategy working out ? (Reprise)

Paul Krugman on "The Austerity Delusion" today at the NYT;

Just ask the Irish, whose government — having taken on an unsustainable debt burden by trying to bail out runaway banks — tried to reassure markets by imposing savage austerity measures on ordinary citizens. The same people urging spending cuts on America cheered. “Ireland offers an admirable lesson in fiscal responsibility,” declared Alan Reynolds of the Cato Institute, who said that the spending cuts had removed fears over Irish solvency and predicted rapid economic recovery. 

That was in June 2009. Since then, the interest rate on Irish debt has doubled; Ireland’s unemployment rate now stands at 13.5 percent. 

And then there’s the British experience. Like America, Britain is still perceived as solvent by financial markets, giving it room to pursue a strategy of jobs first, deficits later. But the government of Prime Minister David Cameron chose instead to move to immediate, unforced austerity, in the belief that private spending would more than make up for the government’s pullback... British growth has stalled, and the government has marked up its deficit projections as a result. 

Austerity trickles down...

State budget cuts are being passed off to local governments, which must further cut services or raise taxes.  According to the New York Times, "The state budget squeeze is fast becoming a city budget squeeze, as struggling states around the nation plan deep cuts in aid to cities and local governments that will almost certainly result in more service cuts, layoffs and local tax increases...Moody’s Investors Service, the ratings agency, said in a report last week that many states '' 'are increasingly pushing down their problems to their local governments.' The Moody’s report warned that this would be 'the toughest year for local governments since the economic downturn began.'”

One year after ACA's health insurance reform...

It's good for the country - CBPP reports HERE.

Republicans are still lying about it - CBPP reports HERE.  "Angry Black Lady" at Balloon Juice has more on GOP BS - HERE.

(Thanks to the Center on Budget & Policy Priorities for keeping us informed of the Affordable Care Act's benefits.)

Conservative government's austerity strategy in the UK: Surprise! It's not working...so "Let's try it here!"

The GOP's agenda of spending cuts as the path to economic growth isn't just a dubious idea. It's a very bad reality that's not working and dragging the economy down in England, where the Conservative Party Cameron government enacted  a strategy of "austerity as the path to prosperity" last year.

As expected by most observers other than "true believers," British economic growth is in decline and tax revenues are less than anticipated, while inflation is up and their treasury has had to actually borrow more than Prime Minister Cameron's Conservatives projected.  So we can already see in the real world the "benefits" of slashing government spending - spending which in a deep recession is helping bolster an already weak economy. Not only are these "benefits" non-existent, an austerity agenda puts a drag on the economy and can actually increase budget deficits due to declining tax revenues as overall growth slows. Totally counterproductive!

"Common Sense" Guide to Deficit Debate...

Winning Progressive is running the second "chapter" of our "Common Sense" Guide to the Great Deficit Debate & the Future of Our Economy today.  Thanks to the great folks over there & continue to check out their site - they are "sending the message of strong and sensible progressive values to the American public."

Former Council of Economic Advisors Chair Romer sounds the jobs alarm

 From Politico via Brad DeLong:

"Official" unemployment still at nearly 9%

President Obama’s former top economic advisor sharply criticized the federal government for failing to take more aggressive action against unemployment.

“I frankly don’t understand why policy makers aren’t more worried about the suffering of real families,” former Council of Economic Advisors Chair Christina Romer, who left the Administration last fall, said during a discussion at Vanderbilt University in Nashville Tuesday. “I think there are tools we have that we can use, and I think it’s shameful that we’re not using them.”

The cowardice and phony "conservatism" of the GOP

(Via "Economist's View")

Bruce Bartlett, a conservative economist who has had it with the phony "deficit hawks" of the GOP who believe that cutting taxes in the face of budget shortfalls is "fiscal conservatism" rather than fiscal (and ideological) profligacy,  reports that Republican leaders have predictably caved to the "Tax Cuts Uber Alles" extremists in positioning themselves for the budget fight:

Americans for Tax Reform president Grover Norquist has received assurances from Republican leaders in Congress that under no circumstances will they vote for any tax increase, either as part of deficit reduction or tax reform. Apparently, the only permissable deficit reduction is spending cuts and the only permissable tax reform is tax cuts.

Elizabeth Warren, our "cop on the beat" - and the power of simple, clear rhetoric

Our new consumer regulatory chief Elizabeth Warren - actually she's setting up the agency and moving on because she'd likely have trouble getting confirmation as the new agency chief through GOP obstructionists - is one of the most effective and broadly popular people in the administration.  So she's being attacked relentlessly by the Wall Street Journal and Beltway neanderthals like Sen. Richard Shelby (R-Bankistan).  

As we quoted Paul Krugman the other day the "purpose of the attack on Ms. Warren was to ensure that neither she nor anyone with similar views ends up actually protecting consumers...For people like Ms. Warren — people who warned that we were heading for a debt crisis before it happened — threaten, by their very existence, attempts by conservatives to sustain their antiregulation dogma. Such people must therefore be demonized, using whatever tools are at hand…"

But Elizabeth Warren is no patsy for the people trying to take her down.  Dana Milbank made this clear in a Washington Post article on Professor Warren's grilling by Republicans in Congress:

What's the deal with GOP "deficit hawk" Paul Ryan?

Wisconsin Republican Cong. Paul Ryan makes a lot of noise about deficits.  Of course, his actual record is of voting to increase deficits with tax cuts and big ticket unfunded schemes like...uh...the war in Iraq and Bush 2's prescription drug bill that was deliberately unhinged from any additional revenue source.

Ryan is known for having his staff read Ayn Rand's Atlas Shrugged, a sort of Bible for those obsessed with the notion that taxation - and especially progressive taxation - is inherently evil (literally "morally evil" & I'm not kidding) and that we should essentially eliminate the government.  The GOP congress has chosen Ryan as their Big Gun on the budget, so it's useful to remind folks of just what a fraud this fellow happens to be.  Steve Benen recently had a good background piece on Ryan as the face of the GOP cutback agenda, with lots of additional links if you want to dig deeper into the Ryan deep hole - HERE. 
Also, if you missed it, check out our previous posting of Jon Chait's piece on Ryan, HERE.

"Common Sense" Deficit Guide - Series at "Winning Progressive"

Winning Progressive - a site dedicated to "sending the message of strong and sensible progressive values to the American public" has launched a serialized version of our "Common Sense" Guide to the Great Deficit Debate & Future of Our Economy.  That's a great idea - giving readers an opportunity to absorb it in "chapters" rather than downloading the whole thing for one sitting.  Thanks to the Winning Progressives for their interest and making the message more accessible and available.  And check out their blog on a regular basis (it's linked at our "Double Espresso" blog-roll) for ongoing coverage of key progressive initiatives. They're doing a great job!

Commie attacks on GOP's cutbacks agenda

From a recent column by David Leonhardt, business & economics point-man for the NYT:

(T)he people who get paid to make economic predictions say that federal cutbacks would harm the economy this year and next. The research firm Macroeconomic Advisers estimates that the House Republicans' budget would raise the unemployment rate by 0.3 percentage points -- which means about 500,000 lost jobs -- by the end of next year.

Economists on Wall Street, which isn't exactly thrilled with the Obama administration, have made similar forecasts. Nigel Gault, chief United States economist at IHS Global Insight (formerly Wharton Econometric Forecasting), puts it this way: ''I wouldn't be cutting spending over the rest of the fiscal year, because the economy still needs support.'' 

Boehner's boys in Congress are unhinged from reality. They're pushing a cult of anti-government ideology over cautious, informed policy focused on "growing" jobs and getting the economy back on track.

The Radicalism of Today's Republicans

In today's NYT, William Cronon, a professor of history at University of Wisconsin-Madison, provides some historical perspective on the ideological extremism of today's "conservatives" and the destruction of the Republican Party as a responsible partner in our democracy, a moderating influence or even an authentic bastion of conservative principles:

Wisconsin’s Radical Break

NOW that a Wisconsin judge has temporarily blocked a state law that would strip public employee unions of most collective bargaining rights, it’s worth stepping back to place these events in larger historical context.

Republicans in Wisconsin are seeking to reverse civic traditions that for more than a century have been among the most celebrated achievements not just of their state, but of their own party as well.