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The Republicans haven’t taken over yet but they’ve made their plans known and it won’t come as much of a surprise that their top priorities are tax cuts. One of the very first changes will be gaming the system that tracks whether or not tax cuts work. By every legitimate measure, including common sense, they don’t. The Pubs are going to change all that.
AS Republicans take control of Congress this month, at the top of their to-do list is changing how the government measures the impact of tax cuts on federal revenue: namely, to switch from so-called static scoring to “dynamic” scoring. While seemingly arcane, the change could have significant, negative consequences for enacting sustainable, long-term fiscal policies.
Whenever new tax legislation is proposed, the nonpartisanCongressional Budget Office “scores” it, to estimate whether the bill would raise more or less revenue than existing law would.
[The] conventional estimates do not, however, include any indirect feedback effects that tax law changes might have on overall national income. In other words, they do not incorporate macroeconomic behavioral changes.
Dynamic scoring does. Proponents point out, correctly, that if a tax proposal is large enough, then those sorts of feedback effects can aim the entire economy on a slightly different path.
“Dynamic scoring” basically allows the injection of unjustified assumptions about the future performance of the economy. IOW, adding a baseline article of faith from Reaganomics that all tax cuts on the wealthy raise revenues and if they don’t, it’s because they weren’t deep enough.
Federal deficits are on an unsustainable path (as it happens, because of undertaxation, not excessive spending). Simply cutting taxes against the headwind of structural deficits leads to lower growth, as government borrowing soaks up an ever-increasing share of savings.
The most optimistic dynamic models get around this by assuming that the world today is in fiscal equilibrium, where the deficit does not grow continuously as a percentage of gross domestic product. But that’s not true. If you add the reality of spiraling deficits into those models, they don’t work.
To make these models work, scorekeepers must arbitrarily assume either that we tax more and spend less today than is really the case — which is what they did for the Camp bill — or assume that a tax cut today will be followed by a spending cut or tax increase tomorrow. Economists describe such a move as “making counterfactual assumptions”; the rest of us call it “making stuff up.”
Again IOW, they’re going to enshrine in law a faith-based assessment mechanism guaranteed in advance to justify both their rosy predictions and their brutal get-tough-on-the-poor cuts to human services along with their go-easy-on-corporations cuts to everything from the SEC to the FDA. They will now be able to point to government-authorized conclusions that everything is fine even as it collapses around ordinary folk not rich enough to protect themselves from it.
The Republicans’ interest in dynamic scoring is not the result of a million-economist march on Washington; it comes from political factions convinced that tax cuts are the panacea for all economic ills. They will use dynamic scoring to justify a tax cut that, under conventional scorekeeping, loses revenue.
When revenues do in fact decline and deficits rise, those same proponents will push for steep cuts in government insurance or investment programs, because they will claim that the models demand it. That is what lies inside the Trojan horse of dynamic scoring.
A win-win. When their tax cuts make the economy worse, their scoring model will demand more tax cuts as a fix.
Priority #2 is likewise financially related: further weakening if not killing outright Dodd-Frank, once again allowing banks to rig their own scams.
The Dodd-Frank financial reform law was supposed to curb speculation in swaps. But as The Journal has reported, hedge funds are increasingly using swaps to wager on whether weak firms will live or die. RadioShack, the troubled consumer electronics retailer, is one of several prominent examples. In December, RadioShack’s total debt came to about $1.4 billion, but swaps outstanding on the performance of the debt totaled $23.5 billion. Similarly, J.C. Penney, the ailing department store chain, had total debt of some $8.7 billion, but swaps outstanding on the debt totaled $19.3 billion.
Those gaps suggest excessive speculation, though it is hard, if not impossible, to gauge the precise exposure of funds to big losses. What is known is that a hedge fund that is betting on a company’s default has an incentive to push it over the edge. Conversely, a fund that is betting a troubled company will not default has an incentive to keep it afloat, at least long enough to avoid a big payout. Either way, the company becomes a pawn in a financial game.
Speculative activity is likely to increase. Last month, Congress repealed an anti-speculation provision of Dodd-Frank that would have prevented federally insured banks from conducting several types of swap transactions. In addition, the Federal Reserve recently gave the banks two extra years to meet a Dodd-Frank provision requiring them to sell their investments in private equity funds and hedge funds.
And when the 2 yrs are up, the Fed will extend the deadline for 2 more yrs and then 2 more after that and so on and so on.
The Democrat minority will, of course, “compromise” by unconditionally surrendering when their corporate sponsors tell them to.
And so it goes.
The NYT’s block of editorial blockheads have had quite a week for themselves. First Tom Friedman embarrasses himself by writing about economics as if he knew what the word meant, and now David Brooks notices the country isn’t in very good shape after years of the austerity and corporate theft he’s been championing as solutions without actually realizing that’s what he’s doing. Pretty good trick for a normal person but a necessary skill for right-wingers. Without it their heads would explode collectively. (more…)
A few little tidbits:
1) Thomas Friedman isn’t just an idiot, he’s ignorant too. But then he’s an ideologue and ideologues are professional morons.
2) The 1% can justify every single policy in their (financial) favor…but only if they lie their asses off.
3) Jeff Bezos has just made Amazon a CIA asset and himself The Bagman. In retrospect, it was predictable if not inevitable.
4)Exxon CEO and Frackmeister extraordinaire Rex Tillerson is a strong advocate, even a champion of fracking technology but only until it’s his backyard getting fracked. Then, not so much.
Rex Tillerson has joined a lawsuit to stop construction of a water tower near his $1.3 million estate on Dove Creek Road. That water would be used in fracking, a process to drill oil and gas.
Tillerson even appeared at a Bartonville Town Council meeting to speak against it.
The lawsuit claims the project would create a noise nuisance and traffic hazards.
Yah. Well. You know.
5) Budget hawks Alan Simpson and Erskine Bowles – two of Pete Petersen’s most reliable anti-SocSec thugs, set up an anti-deficit group. In the Irony of Ironies category, this group is now, um, broke. (scroll down)
The sterling-silver New York Times took a break from its long series of tear-stained stories covering the tragic consequences on the rich of our economic disintegration to notice – briefly – how destructive our attitudes toward the unemployed have become.
Ms. Barrington-Ward…was laid off from an administrative position at the Massachusetts Institute of Technology in 2008; she had earned about $50,000 that year. With the recession spurring employers to dump hundreds of thousands of workers a month and the unemployment rate climbing to the double digits, she found that no matter the number of résumés she sent out — she stopped counting in the thousands — she could not find work.
“I’ve been turned down from McDonald’s because I was told I was too articulate,” she says. “I got denied a job scrubbing toilets because I didn’t speak Spanish and turned away from a laundromat because I was ‘too pretty.’ I’ve also been told point-blank to my face, ‘We don’t hire the unemployed.’ And the two times I got real interest from a prospective employer, the credit check ended it immediately.”
Apparently it’s finally dawning on Republicans that redistricting to win seats has its limitations. There comes a point when even your supporters have had enough destruction and death.
Their problems are threefold and intertwined. First, the GOP has become effectively agenda-less, advocating policies that lack popular support, and that they quite possibly couldn’t execute even if they controlled the government entirely.
Second, as Politico honchos Jim VandeHei and Mike Allen explain, “The party is hurting itself even more with the very voters they need to start winning back: Hispanics, blacks, gays, women and swing voters of all stripes.” That’s partially a consequence of theiragenda-less-ness, and partially a consequence of its members’ propensity to say things and advocate ideas that further alienate women and minorities.
Third, a combination of chance and poor decisions will turn the coming midterm into a referendum on issues custom tailored to energize Democratic demographics that tend to sit out midterms.
Actually there are four problems, not three. Number 4 is that it isn’t just that their policies “lack popular support”. It’s that their policies are batshit crazy and as destructive as a plague. (more…)
Twenty years ago, Michael Moore started asking, “If corporations won’t pay employees enough to live on, who do they think’s going to buy all the shit they make?”
The answer, when it came, was, basically, “The Chinese”. They thought “emerging markets” were going to take up the slack if they stopped caring about the home market, so they did. They froze wages and increased upper management incomes by some 800% in the last quarter of the 20th century and by more than 2000% over the past decade or so, most of which came directly out of the pockets of their employees. The middle class has been decimated and poverty has risen exponentially but so far there has been no corresponding rise in exports. Emerging markets have failed to emerge, at least they have failed to emerge in a way that would sacrifice their home consumers for the benefit of American corporations.
Finally, after almost 35 years of unfettered greed, the American business press (if not American business) is coming to the conclusion that it may just be possible that the deliberate corporate destruction of the American market by an American business theory that focused on short-term profits and dumped every other consideration was, well, just maybe, a mistake.
The fundamental law of capitalism is that if workers have no money, businesses have no customers. That’s why the extreme, and widening, wealth gap in our economy presents not just a moral challenge, but an economic one, too. In a capitalist system, rising inequalitycreates a death spiral of falling demand that ultimately takes everyone down.
Low-wage jobs are fast replacing middle-class ones in the U.S. economy. Sixty percent of the jobs lost in the last recession were middle-income, while 59 percent of the new positions during the past two years of recovery were in low-wage industries that continue to expand such as retail, food services, cleaning and health-care support. By 2020, 48 percent of jobs will be in those service sectors.
This from Bloomberg News, hardly a left-wing rag. What it means is that things have gotten so bad that even dyed-in-the-wool corporatists are at last attempting to face reality.
Be gentle with them. They’re new to it.