Category Archives: Federal Spending

Missing Media–Deficit Ignorance

Deficit is shrinking, but after listening to political commentary, Americans think otherwise. A few days ago Paul Krugman mentioned he’d like to see a survey on what Americans knew about the deficit. And now we have just that after Google willingly volunteered.

Lets take a look at the deficit over the recent past. As we covered yesterday, the deficit is and has been going down, nearly to the point it was before the recession and still falling :

Deficit Aug 13

Meanwhile we have politicians on the far right and especially the Tea Party saying we have a Trillion dollar deficit per year, some like Virginia’s Cantor have said it is growing this comment on 5 Aug 13 just a few day ago. Hello? So the question, what does the public believe. Here are the survey results so far when asked: How do you think the US Federal Government’s yearly budget deficit has changed since January 2010?

viewsurvey=qyz5ytgc2grp4&question=1&filter=&rw=1

Results as of 1700 EST 13 Aug 13. (Click on the graph for a link to the most current survey results)

Oh how wrong we can be. I’m not surprised however as I continue to witness the discussion. We are being bombarded with misinformation as so called congressional “leadership” attempts to build support for their party positions before the next debt ceiling  battle–sure to be this fall sometime. The questions I have: Where is the national media? The Cantor interview for example took place on Fox News Sunday. Why were viewers not informed immediately of this misinformation? Why is it even lawful for a politician to misstate facts he/she knows or certainly has a responsibility to know, in what is no less than a deliberate attempt to mislead average citizens?

 

U.S Ungovernable?

I usually don’t direct comments toward a party but after now the 40th vote to repeal the Affordable Healthcare Act, I just can’t help it. The masters however beat me to it. Paul Krugman; Chaos Looms:

“Over the longer run the point is that one of America’s two major political parties has basically gone off the deep end; policy content aside, a sane party doesn’t hold dozens of votes declaring its intention to repeal a law that everyone knows will stay on the books regardless. And since that party continues to hold substantial blocking power, we are looking at a country that’s increasingly ungovernable.”

Reports everywhere are calling this the most unproductive congress ever. Someone fill me in on the cost of 40, yes FORTY votes, all done with the foreknowledge they will not fly, just getting on the record after the fact. Jus what amount of U.S tax money, yours and mine, have these obstructionists spent? But wait, this fall we’ll see a stand-off sponsored by these same guys over the government spending too much money. Any bets?

 

 

Cutting Unemployment Benefits

Along with the recent drug testing idea comes the “theory” that cutting unemployment benefits will reduce unemployment. I’m not sure how politicians in Virginia conclude that starving people will somehow get to work within an economy bearing millions more workers than jobs, but they are pushing forward anyway. Today we have Billy Mitchell’s take on it:

“Unfortunately, the legislators in the State of Virginia clearly don’t log into the US Bureau of Labor Statistics all that often to study the latest data. Because they have determined that the way to cure their dreadful unemployment problem is to cut unemployment benefits and starve the unemployed into a job.

The problem is there is no credible theory that relates starvation with an increased capacity to gain employment when the economy is some millions of jobs short of the level necessary to provide work for all those who desire it.

Forget the smallest margin of unemployed who do not want to work. They are of a second-order of smallness that doesn’t warrant attention. The overwhelming majority (comprising millions of citizens) want to work but cannot find work because it is not to be found.”

Perhaps a bit boring for some but I can’t quit. The austerity argument is over, dead, buried. But the political calls to cut government help in spite of proof the help is needed and those dollars provide now missing stimulation for the economy continues to surprise me.

And check this little gem out. Republicans in the House of Representatives began quoting from an alleged letter from a constituent. Rep. Louie Gohmert (R-Texas) retelling a constituent’s story of watching a food stamp recipient in a supermarket checkout line pay for crab legs with an Electronic Benefit Transfer card. “He looks at the king crab legs and looks at his ground meat and realizes,” Gohmert said, “because he does pay income tax . . . he is actually helping pay for the king crab legs when he can’t pay for them for himself.”

Bad yes, and also quite untrue. But then again how much truth actually propagates on the U.S. House floor these days? Here is the Huffington Post’s take: ..” it would be a compelling story if letters to the editor featuring the same complaint didn’t appear in The Columbus Dispatch in 1993 and in the Myrtle Beach Sun-News in 2007. The crab complaint has recurred more than a dozen times in newspapers around the country..”  And the Post backs their assessment of falsehood with all the data. Who buys what, fraud rates, etc. Permanently slaying the perception that my tax money is being wasted by providing food stamps for the poor and needy.

“Nearly a third of SNAP recipients earn money by working, and 91% have annual incomes at or below the poverty line. Most recipients are either children, elderly or disabled. Fraud such as SNAP trafficking, whereby recipients exchange cards for lesser sums of cash, has dropped from 4 cents per dollar of benefits in 1993 to 1 cent per dollar from 2006 to 2008, according to the Department of Agriculture.”

There are more people on Supplemental Nutrition Assistance Program (food Stamps) and Unemployment than in 2006. That IS what happens when the economy collapses and many lose jobs, homes, and more. But to think we should starve them is clearly out of bounds. Besides Bill Mitchell brings all the data to the table demonstrating how the ratios of dependency are improving since 2010. We are heading in the right direction albeit slowly. Perhaps getting it right is why some of these guys have a problem. Hmm?

Drug Tests for Food?

While I dwell on the cost-benefit analysis for doing drug tests, Steven Strauss goes direct for the double standard:

The Republicans support massive Federal programs that protect farmers from price fluctuations, and subsidize their insurance and maintenance of their land — without any requirement for drug testing. But if you’re a laid-off factory worker, needing food stamps to feed your family for a few months while you find another job — you need to “pee in a cup” to satisfy a coven of Republican Congressmen.

I like his approach. While we’re at it, how about all those fossil fuel subsidies, no drug tests there. Bank bailouts…Nope. Mortgage deductions for the multi-million dollar 3rd home/yacht…Nope. It appears only the hard up folks are subject to this demeaning requirement. But then who contributes to the campaign coffers?

 

Disappearing Deficit

I’ve said it before but once again…Don’t listen to the politicians. Policymakers in DC continue to fight over how to curb the deficit in spite of it being a very bad idea until unemployment is much lower. But look…it is going away by itself… without their help.

May budget report

Budget Totals from The May 7 CBO Report

Well it’s not really going away by itself. The deficit is shrinking because people are slowly getting back to work, in turn making money, both adding to the federal tax receipts and reducing outlays required for substance and unemployment. Nice how that works. Take a look at the comments from this months CBO report:

“The federal government ran a budget deficit of $489 billion in the first seven months of fiscal year 2013 (that is, from October 2012 through April 2013), according to CBO’s estimates. That amount is $231 billion less than the shortfall recorded during the same period last year

Individual income and social insurance (payroll) taxes together increased by $184 billion (or 16 percent). Taxes withheld from workers’ paychecks rose by $99 billion (or 9 percent), mainly because of higher wages and salaries, the expiration of the payroll tax cut in January 2013, and increases (beginning in January) in tax rates on income above certain thresholds.”

Outlays for unemployment benefits declined by $15 billion (or 25 percent), mostly because fewer people have been receiving benefits in recent months.”

Of course there is a lot more, but economic improvements in short order solve both the need for spending and increased revenue to offset the deficit. People working… while policy makers sit idle.

The Debt Lie

I’ve talked of spending patterns under different administrations prior to the election and several times since. The common theme is the guys hailing smaller government and lower spending keep spending more and growing government.

Two days ago Paul Krugman posted Naive Fiscal Cynicism where he again critiques the “math” or (my view lack of math) regarding austerity programs sweeping Europe, the IMF, and US. But down in the article he hits on what I call the debt lie, breaking out a nice chart of the gross debt as related to the GDP. Proof of the point we’ve explored here.

Gross Federal Debt relative to GDP

Interesting how closely it resembles some posts here like “Keep Kicking This Horse“.

Or how Kevin Phillips in American Theocracy points out how policymakers created this debt monster by repeatedly cutting taxes, but one sect wants to fix it solely by cutting the safety net. Hmm.

But here’s Krugman’s take in comparing how the debt has added up relative to the GDP since the depression. Interesting how this doesn’t correlate with what the politic is saying at all:

“Between World War II and 1980, every US president left the debt ratio lower when he left office than when he entered. Reagan/Bush I broke that pattern; Clinton brought it back; then came Bush II. And yes, debt is up under Obama, but a depressed economy in a liquidity trap is precisely when you’re supposed to do that.”

Entitlements–Social Security Fixes

After yesterday’s outing of “entitlements bankrupting the West” being spewed by one side of the isle, I ran across a good piece on EconoMonitor posted by Ed Dolan titled Is the Chained CPI the Right Fix for Social Security?

He puts up a great analysis of wealth distribution among seniors and discusses the impacts of the CPI adjustments to Social Security. He reaches beyond face value on the data being used among policymakers to justify the cuts. Part of his summary:

“When all is said and done, the economic arguments for switcing from the CPI-W to the chained CPI for inflation adjustment of Social Security benefits is a good deal weaker than it is often represented to be. We cannot really be confident that the chained CPI is a better approximation to changes in the cost of living of the elderly population than the CPI-W. In addition, switching to the C-CPI-U without adjusting benefit floors and caps could very well increase the inequality of income distribution among the elderly, which is already greater than for the population as a whole”

“The fact is, the proposal to switch Social Security to the chained CPI has much more to do with politics than with economics. In the current phase of the budget debate, the White House appears eager to assume the role of the reasonable party by offering to cut entitlements, in order to set up a contrast with a conservative opposition that is unwilling to consider even small increases in revenue. The administration apparently hopes that it can minimize the backlash from its core supporters by passing off the C-CPI-U a purely technical adjustment.”

After reading I see the biggest impacts of CPI adjustment being a negative one regarding income inequality…a theme becoming too common within todays policymaker options. Some great data in the article, good charts depicting poverty rates among age groups, tearing down much of the fiction behind support for the CPI adjustments.

As mentioned yesterday, there are a few pretty simple solutions for SS making it solvent for the long haul without enacting the CPI proposal. Recall that among the “entitlements” Social Security has a miniscule 1.6% projected growth relative to the GDP over the 74 year period studied…4.8% of GDP in FY2011 to 6.4% of GDP by FY2085” Radical changes are just not needed to fix a 1.6% shortfall.

How it Works—Five points from Krugman

It’s not always like this, where I advocate increased government spending. Nor do I agree with everything Paul Krugman in spite of the fact I will never achieve or even approach his credentials. He has held his position since the start of this recession. He as been critiqued, contradicted, and misquoted. As the dust clears, he is proven correct. Unfortunately there are still a few quibblers.

This morning Mr. Krugman posted five points in his Blog titled The Ignoramus Strategy as reply to some of the quibbles. The five points below from his blog today are the foundation of the argument. They are not always true, but they fit this situation and time…he makes that point too. If you’re new to the issue or want to shore up your discussion points, these few short paragraphs are the summary of how the economy works differently than our families’ budget, what should be done, and why. Paul Krugman, enjoy:

“1. The economy isn’t like an individual family that earns a certain amount and spends some other amount, with no relationship between the two. My spending is your income and your spending is my income. If we both slash spending, both of our incomes fall.”

“2. We are now in a situation in which many people have cut spending, either because they chose to or because their creditors forced them to, while relatively few people are willing to spend more. The result is depressed incomes and a depressed economy, with millions of willing workers unable to find jobs.”

“3. Things aren’t always this way, but when they are, the government is not in competition with the private sector. Government purchases don’t use resources that would otherwise be producing private goods, they put unemployed resources to work. Government borrowing doesn’t crowd out private borrowing, it puts idle funds to work. As a result, now is a time when the government should be spending more, not less. If we ignore this insight and cut government spending instead, the economy will shrink and unemployment will rise. In fact, even private spending will shrink, because of falling incomes.”

“4. This view of our problems has made correct predictions over the past four years, while alternative views have gotten it all wrong. Budget deficits haven’t led to soaring interest rates (and the Fed’s “money-printing” hasn’t led to inflation); austerity policies have greatly deepened economic slumps almost everywhere they have been tried.”

“5. Yes, the government must pay its bills in the long run. But spending cuts and/or tax increases should wait until the economy is no longer depressed, and the private sector is willing to spend enough to produce full employment.”

 

Business Insider-Krugman Has Won

Business Insider Henry Blodget has posted a great piece titled: The Economic Argument is Over–Paul Krugman Has Won.  A worthy, very quick read of the debate and evidence as to what happens when austerity is applied. Pretty much all points Paul Krugman has been making for five years now. Couple quotes here:

“So the empirical evidence increasingly favored the Nobel-prize winning Paul  Krugman and the other economists and politicians arguing that governments could  continue to spend aggressively until economic health was restored. And then, last week, a startling discovery obliterated one of the key premises  upon which the whole austerity movement was based.”

 

“And in the meantime, for the sake of the country, it would be nice if our  government came together and agreed to restore full funding for basic  services. Because the current state of government dysfunction in  the United States is not just economically harmful. It is also embarrassing,  depressing, and based on a premise that is now demonstrably false.”

Keep Kicking This Horse

A short look back at post recession jobs in a continued effort to keep the R-R discussion alive. Perhaps surmise over what worked well in the past, diffuse a couple myths regarding past policy, and ponder at what could have been without the misguided effort to cut budgets at perhaps the worst time.

BUSHvOBAMA_jobsREVFirst one from my own archives…the comparison of public sector and private sector job growth between the current and last administrations. Pretty surprising given current conservative rhetoric about how much smaller they prefer government.

 

Next we have a look at what happened to federal growth during the Reagan Administration. Again conservatives grew government.

 federal-employment-1981-1984-Reagan

And here is an interesting one again from the pre-election americanmoneylies archives, a comparison of where unemployment would be IF the current (Obama) administration had spent and retained government at the same rate as the Bush Administration.

Unemployment if Government Remained at Bush Levels

Unemployment if Government Remained at Bush Levels

Oh what a recovery it might have been with all those folks working and paying taxes in lieu of being cut, then held from a complete fall under our social safety nets…costing the feds additional spending anyway. With the R-R theory in shambles there is still time to frame a reasonable response. And a response demonstrated acceptable to the GOP when it was “their guy” in office.