The budget battles

[awm]

As far as Ron Paul goes, his views (and his son Rand's) are at least consistent. They have shown a willingness to shrink government enough to balance the budget, and I applaud them for that.

 

With this said, their Ayn Randian view of how the country should be run is one I very much disagree with. Certainly it would save money if we didn't provide any health care to seniors or disabled people and left them to fend for themselves. It would save money if we drastically shrank our military and pulled out of world affairs. It would save money if we eliminated all government enforcement of equal rights laws, eliminated all government food and health inspections, and so forth. Ron Paul and son have endorsed all these ideas. Personally I wouldn't want to live in a country where the old and disabled are dying on the streets, where private companies are free to pursue racist and sexist policies, and where companies are free to make the calculation that a few people dying from lax safety practices is better for their bottom line than being responsible.

[hrothgar]

Did I say that I think you're against pulling back the military? No, I said that you ridicule someone because you disagree with him. And asserting that things with which you disagree are "fairy tales" or "dogma" is just more of the same bullshit.

 

And asserting that things with which you disagree are "fairy tales" or "dogma" is just more of the same bullshit.

 

Winston never stated that everything that he disagrees with is a "fairy tale" or "dogma".

Rather, he suggested that some of Paul's beliefs are so silly that they not only deserve to be critiqued but mocked as well and cited two specific examples:

 

1. Returning to the gold standard

2. Abolishing the Fed

 

I think that Winston's behavior is appropriate.

 

"Mocking" outlandish positions is a perfectly acceptable form of social sanction. There are other options like shunning or violence. However, people often say that laughter is the best medicine.

[Winstonm]

This little diversion about Ron Paul is a good example IMO of how partisanship affects real solutions being found - reducing the military and pulling back is reasonable, while returning to a gold standard is laughably naive; however, when dogma reigns - whether right wing or left - there is no distinction between good and bad ideas. There are only ideas which fit the right or left dogma.

 

Whichever sides does it, strict reliance upon ideology and dogma to provide solutions is stupid.

 

I submit three radical ideas that each side should adopt as starting points for discussions:

 

1) Steve Jobs is not John Galt.

2) Hillary Clinton is not the madonna.

3) It is the 21st century.

[PassedOut]

Second, it's quite possible to argue what "fair share" means. With a few exceptions, most of the people not paying federal income taxes are also not making much of an income. Many of them are families with kids subsisting on one or two minimum wage jobs, who can barely make ends meet.

It is perfectly fair for my taxes to be proportionately higher than those of folks who've had a harder time of it. I think I've worked hard, but so have those people. Many of my advantages arose from blind chance, such as growing up in a family that valued both education and enterprise tremendously. And I've been lucky to avoid random catastrophies, as well as the potential consequences of foolish things I did as a young man. Others have not.

[PassedOut]

when dogma reigns - whether right wing or left - there is no distinction between good and bad ideas. There are only ideas which fit the right or left dogma.

 

Whichever sides does it, strict reliance upon ideology and dogma to provide solutions is stupid.

I couldn't agree more.

 

Fareed Zakaria discussed this very point in Time magazine: How Today's Conservatism Lost Touch with Reality

 

When considering health care, for example, Republicans confidently assert that their ideas will lower costs, when we simply do not have much evidence for this. What we do know is that of the world's richest countries, the U.S. has by far the greatest involvement of free markets and the private sector in health care. It also consumes the largest share of GDP, with no significant gains in health on any measurable outcome. We need more market mechanisms to cut medical costs, but Republicans don't bother to study existing health care systems anywhere else in the world. They resemble the old Marxists, who refused to look around at actual experience. "I know it works in practice," the old saw goes, "but does it work in theory?"

Those on both the right and left who insist on foisting their cockamamie schemes on the rest of us, based on their unproven theories, represent two sides of the very same coin. In fact the claimed benefits of the tax policies that today's congress imposes on the US are not only unproven: they've been disproven by the reality of the past decade.

Edited June 23, 2011 by PassedOut

[Winstonm]

With the U.S. borrowing $0.40 of every $1 spent, it seems necessary to address the deficit, the debt, and spending/revenues - but now is not the time.

 

The error being made IMO is the idea that what we have experienced is a run-of-the-mill recession based on the business cycle rather than a credit/debt event that has more in common with the Great Depression than any minor business fluctuation.

 

The primary concern right now must be jobs. There can be no prolonged or sustained recovery with 16% underemployed or unemployed. The wealthiest have been able to take advantage of the worldwide wage arbitrage. It surely must be time to take back part of the windfall and create jobs here at home. The crumbling airports, bridges, highways, and dams call out for federal intervention.

 

Boeing will just have to make do with less gravy - and build fewer wasteful drones.

[hotShot]

Just to get it right:

 

A party lead by president A (called party a) started wars, ruined the state finances and left country in a messy state with an economic crisis going on.

So a new president let 's call him B is elected, and his party has a small majority , but they can hardly act freely because of wars that are going on and because the government is short of money.

President A had 8 years to mess things up and since president B did not clean that mess up within 2 years, at the "intermediate" elections some followers of president B lose their parliament seats. Now president B is blocked by party A, because he does not have a majority any more.

 

Is the next step the election of a president c supported by party A, to mess up things even more?

[PassedOut]

It surely must be time to take back part of the windfall and create jobs here at home. The crumbling airports, bridges, highways, and dams call out for federal intervention.

Yes, take that money and build up the infrastructure. It's way past time for some nation building at home.

[luke warm]

First, it's not true that 50% of people don't pay taxes. What's true is that roughly this percentage don't pay federal income taxes.

i should have been more specific... that is, of course, what i meant

 

Yes, take that money and build up the infrastructure. It's way past time for some nation building at home.

if i were dictator, this would be one of my plans...

 

Personally I wouldn't want to live in a country where the old and disabled are dying on the streets, where private companies are free to pursue racist and sexist policies, and where companies are free to make the calculation that a few people dying from lax safety practices is better for their bottom line than being responsible.

demagogue much?

[hrothgar]

 

AWM wrote

 

> Personally I wouldn't want to live in a country where the old and disabled are dying on the streets,

> where private companies are free to pursue racist and sexist policies, and where companies are free

> to make the calculation that a few people dying from lax safety practices is better for their

> bottom line than being responsible.

 

demagogue much?

 

As I recall, Ron Paul has specifically stated that the federal government doesn't have the authority to stop private companies from discriminating on the basis of race or sex.

 

If you'd like, I can dredge up some of his comments on OSHA, Medicaid, and social security...

[Winstonm]

As an aside, I went to me doctor yesterday for a routine physical and the talk got around to fixing healthcare - my doctor volunteered that he wasn't so sure that using a profit-driven business model was the best approach.

 

I had to agree. Seems simple when even the ones profiting from the system (and in a red state and ever redder city) find this system a poor choice for healthcare delivery.

[Winstonm]

I also sometimes wonder what would happen if those who support the current capitalist-business model of healthcare felt that same impact in all public systems.

 

What would be the charge for electricity delivered from the Boeing Hoover Dam or the cost of traveling coast-to-coast on the Goldman Sachs Interstate Highay system, and what shape would the owners have those dams and roads?

 

Of course, the answer would be that if you didn't like it you could always use whale oil lamps and drive the back roads.

 

But to my way of thinking, progress is not made by walking backwards.

[luke warm]

As an aside, I went to me doctor yesterday for a routine physical and the talk got around to fixing healthcare - my doctor volunteered that he wasn't so sure that using a profit-driven business model was the best approach.

did he happen to mention how he wanted to be paid, or upon what basis? of course it's possible you have a doctor who has already paid off his student loans

[Winstonm]

did he happen to mention how he wanted to be paid, or upon what basis? of course it's possible you have a doctor who has already paid off his student loans

 

As a matter of fact we did talk about his student loans and the fee for service model. We also talked about liability insurance costs to physicians and the cost of administrating the current model.

 

There are better models available - not perfect but better. But we have to be willing to do something other than cloak ourselves in dogmatic rhetoric to get anything accomplished.

[luke warm]

one thing that drives up the costs of even "routine" medical procedures is the independence of certain ancillary providers (anesthesiologists, radiologists, emergency room doctors, lab facilities)... these disciplines, at least in louisiana, seldom contract with insurance companies because they feel they don't have to... they take the (out of network) payment from the company, of course, then bust the patient with the bill's balance... so i can see a system in which certain ancillary charges are figured into the cost of a procedure, as a flat rate

 

i still think your doctor is in the minority, though

[Winstonm]

i still think your doctor is in the minority, though

 

That may be, but retaining a capitalistic-business model because some students chose medicine thinking they may acquire wealth is an unsatisfactory answer as well. Do we really want our healthcare to be run on the same business fundamentals as our automotive industry?

 

The wealthier should be able to opt out and drive their Lexus healthcare models, but for the bottom 95% of Americans, a genuinely usable public transportation system healthcare model would be nice.

[y66]

The Immutable Laws

 

by Maxine Kumin

 

Never buy land on a slope, my father declared

the week before his heart gave out.

We bit down hard on a derelict dairy farm

of tilting fields, hills, humps and granite outcrops.

 

Never bet what you can't afford to lose,

he lectured. I bet my soul on a tortured horse

who never learned to love, but came to trust me.

 

Spend your money close to where you earn it,

he dictated. Nothing made him crosser

than wives who drove to New York to go shopping

when Philly stores had everything they needed.

 

This, the grab bag of immutable laws

circa 1940 when I was the last

child left at home to be admonished:

 

Only borrow what you know you can repay.

Your mother used to run up dress-shop bills

the size of the fifth Liberty Loan,

his private hyperbole. It took me years

 

to understand there'd been five loans

launched to finance the First World War,

the one he fought in, the war to end all wars.

 

What would this man who owed no man, who kept

his dollars folded in a rubber band,

have thought of credit cards, banking online?

Wars later, clear as water, I hear him say

 

reconcile your checkbook monthly, and oh!

always carry a clean handkerchief.

 

from Where I Live: New and Selected Poems 1990-2010. © W.W. Norton & Company, 2010. Reprinted with permission at The Writer's Almanac.

[kenberg]

Growing up in the middle of the last century, I can say that people had mixed opinions as to, say, whether Moses really was found in a stream. There were no mixed opinions about debt. It was to be avoided.

[Bbradley62]

Growing up in the middle of the last century... There were no mixed opinions about debt. It was to be avoided.

Except, of course, to get a 30-year mortgage with 10% down, because a house is always a good investment.

[kenberg]

I figured someone would mention mortgages. And if course it is so, there were banks back then and they lent money to home buyers.

 

I don't live in the past, but it is perhaps useful to acknowledge that the attitude toward debt really was different. A mortgage was often the only debt a family had. In my family it had been paid off, at least by the time I was 13 or so and came to know of these things, and to the best of my knowledge my father never bought anything else on credit. I am not counting the small tabs at the grocery where I would be sent to get things without having to carry money. These tabs were paid in full by the end of the week.

 

Constant, and large, debt is now a way of life for many. It's a whole different way of looking at things, or at least it seems so to me.

 

Anyway, the remembered attitudes of Maxine Kumin's piece seemed familiar to me. I don't want to dwell on it.

[PassedOut]

In somewhat unrelated news, Britians Austerity package seems to be working ok

I get the idea that not everyone in the UK agrees with your "working ok" assessment: Public sector strike hits services and schools

 

Hundreds of thousands of public sector workers have gone on strike across the UK over planned pension changes.

 

Teachers from three unions have walked out and about 40% of state schools in England and Wales have been closed or partially shut.

 

The Public and Commercial Services union, which includes police support and border staff, are also on strike.

What happened to the stiff upper lip?

[helene_t]

The stiff upper lip doesn't apply to politics. British politics is surprisingly dirty, considering the otherwise polite attitude of the average Brit.

[phil_20686]

I get the idea that not everyone in the UK agrees with your "working ok" assessment: Public sector strike hits services and schools

 

 

What happened to the stiff upper lip?

 

One thing that has gone unnoticed is that the UK actually has a large number of teaching unions and university lecturer unions. The NUT is well known to be rabidly left wing and to give vast amounts of money to the labour party. If also often campaigns on behalf of the labour party, hence Ed milibands silence in the face of strikes which he opposes. In total I think only about 25% of teachers are actually on strike, although it seems hard to get accurate numbers. In the uk the ALT is the other bid union for teachers and it did not strike. Despite claims to teh contrary the BBC news thinks 75% of civil servants turned up to work today. Besides, its after exam season. When the teachers unions are really serious the strike in exam season.

 

I have to admit, I have much more sympathy for the pensions issue than for any of the other cuts. I would personally shelve many of the pension cuts, although it is certainly right to get rid of final salary pensions which seems to have resulted almost entirely in people gaming the system by always promoting old people near retirement so they can retire on much bigger pensions. Also, I think cutting pensions is only storing up trouble for later. I am especially opposed to the brown changes in the tax regime which have removed almost all the incentives for having a private pension.

 

 

The stiff upper lip doesn't apply to politics. British politics is surprisingly dirty, considering the otherwise polite attitude of the average Brit.

 

DIrty, but fortunately not corrupt. The "expenses scandal" in the uk was charmingly quaint. The public getting out raged over bogus expenses claims totaling a few thousand pounds over years. In france it seems like their politicians spend that much on their mistresses before breakfast!

[y66]

Local budget battle story by Kevin Sack in today's paper.

 

Wilmington, N.C., is not Camden, N.J., which laid off half its police force this year. It is not Detroit, which is closing half of its public schools.

 

But like local governments across the country, the City of Wilmington has been demonstrably diminished by five years of unyielding economic despair. That a place like Wilmington, until recently a real estate boom town, would defer a purchase as essential as a fire truck for even one year, much less five, speaks to the withering toll.

 

In repeated visits over six months, Wilmington revealed itself to be typical of hundreds of American cities where the relentless drip-drip-drip of yearly contractions has gradually arrested civic momentum. As they wrangled over the 2012 budget, the city’s recession-weary mayor, Bill Saffo, and his fellow Council members faced a menu of increasingly distasteful options.

“We’re getting to a point,” the mayor said, “where I hear it on the street: ‘I’m stressed out because I don’t want to pay more taxes.’ We still don’t know what the state is going to do to us, and we’re in a hurricane zone here. If Mother Nature hits us and the state hits us, we’ll really have a double whammy.”

 

Later that day, the National Oceanic and Atmospheric Administration forecast a worse-than-normal hurricane season.

 

The mayor and the Council, who serve part-time, were still smarting from last year’s decision to raise property taxes to make debt payments on projects they had approved when coffers were flush. If a tax increase was out of the question, would they need to raid the city’s reserves? That, Mr. Saffo knew, could threaten Wilmington’s capacity to rebuild if a hurricane smacked the Carolina coast this summer.

 

“We’ve had to make some pretty tough choices,” Mr. Saffo said one afternoon in his City Hall office. “We actually do make decisions where people can feel it and see it and touch it, and if they don’t like it they let you know about it.”

 

He pinched his brow with his thumb and forefinger.

 

“How you play this tough hand will determine how your community is going to come out of this,” he said. “You can hunker down and not invest in anything and then have to play catch-up, or you can continue to invest and find ways to improve so we can catch that economic wave up.”

 

What makes Wilmington’s reversal so striking is that the city had so much going its way.

 

Until 2007, the general fund budget for this endearing port of cobblestone streets and moss-draped oaks had been expanding by about 7 percent a year. Fueled by in-migration and a series of annexations, the population surged 40 percent for the decade, to 106,000.

 

The growth helped pay for glittering capital projects all over town — a convention center on the Cape Fear River, a police headquarters with its own crime lab, a 20-mile bike and jogging trail, tennis courts and softball fields, a host of road and streetscape improvements. The mayor’s calendar was crowded with ribbon-cuttings.

 

But by the time Mr. Saffo and the Council took on this year’s $85 million budget, the collapse of the real estate market had so choked revenues that the finance department could no longer afford free coffee for its staff. Despite last year’s increase in property taxes, which account for nearly two-thirds of the general fund, the city’s revenues were still projected to be lower in 2012 than in 2008.

 

Wilmington’s experience is not uncommon. Nationwide, the decline in municipal revenues has accelerated in each of the last four years, draining billions from direct services like police protection and garbage pickup. Local governments have shed nearly half a million jobs, and are expected to lag well behind any recovery in other sectors.

[y66]

Via Krugman

 

Laura Tyson — who headed the National Economic Council under Clinton — has an excellent, clear, sober discussion of the economic problem at the FT. She calls for long-run fiscal restraint, but more, not less, spending right now, with the economy deeply depressed. Laura is anything but a radical; what she’s saying is basically macroeconomics 101.

Excerpt:

 

The US economy has just marked two years of recovery from its worst recession since the Great Depression. But few Americans are celebrating; indeed, most believe that the economy is still in recession. No wonder. Although gross domestic product has recovered to its pre-recession peak, employment has not.

 

The employment decline during the 2008 recession was more than twice as large as those of previous postwar recessions, according to the McKinsey Global Institute. Even if June’s employment report is much better than expected, 14m Americans will remain unemployed and more than 8m will be working part-time because they cannot find full-time jobs.

 

More than 2m discouraged workers will have stopped looking for work. The fraction of the population working is near a 25-year low. According to calculations by the Hamilton Project, the US will face a “jobs gap” of about 21m jobs – the number of jobs needed to return the economy to its pre-recession employment level and absorb the 125,000 people who enter the labour force each month. At the current growth rate, that gap will not be filled for another decade.

 

The jobless recovery is also a wageless recovery for most Americans. Corporate profits have soared, claiming an unprecedented share – more than 80 per cent – of the growth in national income since the recovery began. But real average weekly earnings for production and non-supervisory workers have increased by less than 1 per cent since the recovery started. Real median weekly earnings have fallen. Real median household income in 2009 was 4 per cent lower than its pre-recession high and about the same as it was in 1997.

 

...

 

It is not surprising that many Americans are pessimistic about their economic future. Nor is it surprising that they think jobs should be the top priority for policymakers. They are right. Unfortunately, many members of Congress are not listening. Urged on by Tea Party Republicans interested more in the size of government than the size of the government’s debt, the debate in Washington is focused on deficit reduction rather than on job creation.

 

It is true that the US faces a major fiscal challenge that must be addressed. But this is a long-run challenge that is primarily the result of rising healthcare costs, the ageing of the population and unwise fiscal choices made before the recession. The short-run challenge is inadequate demand – a gap between the amount of goods and services the economy can produce and the demand for them, caused mainly by the private-sector deleveraging. The long-run challenge calls for fiscal contraction. The short-run challenge calls for fiscal support.

 

There is a logical way out of this policy conundrum: pair temporary fiscal measures targeted at job creation during the next few years with a multiyear, multitrillion-dollar deficit reduction plan that would begin to take effect once the economy is closer to full employment. Pass both now as a package.

 

Current signals from Washington indicate that this way out will be not taken: instead, partisanship and politics will trump logic and premature fiscal contraction will undermine the already anaemic recovery. Even worse, a political stalemate over the debt limit could precipitate a financial crisis and necessitate immediate large cuts in government spending that would tip the economy back into recession, driving the unemployment rate into double digits.

 

But imagine for a moment that logic prevails. What should the federal government do to promote job creation? At the very least, it should introduce additional stimulus measures to offset the substantial fiscal drag – in excess of 2 per cent of GDP – that is slated to occur in this year and next when current stimulus measures introduced at the end of last year expire. On the spending side, it should invest more in infrastructure maintenance and replacement. Such investment raises demand, creates jobs and increases the growth potential of the economy.

 

Each $1bn of infrastructure investment creates between 11,000 and 30,000 jobs. On the revenue side, the government should extend some of the targeted tax measures enacted at the end of last year including the payroll tax cut for employees and the capital investment expense deduction. But it should also go further and cut payroll taxes for employers on all new hires, including hires by new businessses. This cut should be linked to the unemployment rate and should be maintained until it falls to the 5-6 per cent range.

 

History suggests that recovery from a debt-fueled asset bubble and the ensuing balance-sheet recession can be long and painful, with significantly lower GDP growth and significantly higher unemployment for at least a decade. Right now, it looks like the US is on such a course. For many Americans, the first decade of the 21st century was a lost decade for the economy. A second lost decade has already begun. No wonder they think the economy is still in recession – for them, it is.

The weird thing about current financial policy is how rare it is to see examples of leaders even acknowledging this logic, much less making a serious effort to strike a balance between the immediate, real problem of recovery and the long term, real problems of debt and inflation.