Idiot of the Week - House Republican leader John Boehner
Posted in Uncategorized by demandside on January 29th, 2009 Painful to watch political hacks channeling Republican Old Guard. Stimulus package necessary.
Part of the problem of sorting out the good economics from the bad is the historical range of discussion. About two weeks. The Great Depression is involved only because the Right has to debunk the lessons learned there that are completely applicable to the present.
But coming out of Mr. Obama’s attempts to gain bipartisan support for a necessary program to combat the latest meltdown, Republicans are like little plastic wind-up toys, barking the same line they have used for the past ten years. They are espousing the same policies that got us into this mess.
If Supply Side had any validity would there not be at least one company somewhere in the world who was prospering rather than declining? The economy is ruled by the demand side. There is not one company with a great product that is bucking this trend. The only survivors are those whose exposure to demand destruction is mitigated by being on the low end of the market, by having monopoly, or by being in the business of necessities.
This nonsense has been the core of bad economics for a century. The Old Guard Republicans are back, with John Boehner as their spokesman, making as little sense as ever.
One of the most absurd contentions is that public infrastructure spending will do no good for jobs, partly because it is not quick enough, while tax cuts have to be made permanent in order to work. Question mark.
Yes, proper stimulus requires permanent tax cuts for the wealthy, that is the Bush tax cuts, but spending on infrastructure and saving the planet as not quick enough to be of any use.
The tax cuts are gong to create jobs how? By inducing people to spend on what?
Infrastructure spending is going to create jobs by hiring people to do things.
This line of babble has been running for, as I said, the Cal Coolidge days of quote the business of America is business. It runs on not because there is evidence to support it, or a paucity of experience to contradict it, but because it has consistent sponsorship from the wealthy. University chairs are endowed and institutes are funded to be staffed by those of appropriate persuasion. Since it is not intellectual honesty or rigor that is required, these attributes lag, and a great laziness has grown up.
All the more so in politics, where the sponsorship is more obvious and the required ideology more explicit. So you have a generation of politicians who only need to find out how to reach an already agreed upon conclusion through whatever the news background of the day is. It has created a variation of the Wall Street greed, which allowed you to say whatever was necessary to get what you wanted, no matter its relevance or truth.
The Bush tax cuts of 2001 and 2003 produced conservatively $3 trillion dollars in deficit. We’ll give the Iraq War a trillion and the damage of the economic collapse a trillion. The Bush years produced maybe three million total new jobs. A back of the envelope calculation finds that each job cost one million dollars in deficit.
Anyway, it is Idiot of the Week, with John Boehner, head of the House Republicans. He appeared fit and tanned from the Ohio winter on the talk shows last weekend and then in interviews the following week.
Here he is.
BOEHNER
Calling up the “let people keep their money” from the Bush campaign of 2000 is unfortunate. Tax cuts, you will recall, could not be sold on that basis, as the average citizen was concerned about fiscal responsibility. It was only with the advent of the first Bush recession that tax cuts were sold to a bipartisan majority in Congress on the basis of being stimulus.
So Boehner is an expert on what won’t work, or at least he’s had a direct hand in getting those kind of policies adopted. Small businesses, as you are probably aware, are not the Mom and Pop businesses you and I might think of, but those under $250,000,000 receipts which might write a campaign check.
Government has to do this. No matter how much money you give to corporations, they are not going to invest in a down economy. It would be bad business. The incentives to spend and invest arise only with a return to healthy demand.
They are a parody of themselves. I am reminded of the damage the stupidity of those who controlled governments across Europe prior to the Great War. While art and business may have advanced, it was unfortunate that from Russia to Great Britain to Germany, perhaps most notably in the Austo-Hungrarian Empire, government and the military had remained in the hands of the landed aristocrats. Inheriting land required no particular intelligence and very little was demonstrated in the actions of these leaders, either in government or on the battlefield.
So the Old Guard Republicans trot out the old standards, tax cuts and minimal government. And they finally succeeded in dismantling the New Deal. Only to see the conditions that stimulated the New Deal Return.
At least that war ended the millenia of dominanance of the landed and marked the rise of if not the brilliant, at least the competent. We can only hope this current economic calamity will end the dominance of the economically dull and disingenuous.
And of course, until the sponsorship of the deep pockets disappears, the tired prattle will not disappear. This is going to be a long time. One wishes a ruthlessness on behalf of the public similar to the ruthlessness of greed on behalf of the entrenched financial interests. The public would benefit enormously from the extinction of market fundamentalism. But a few on Wall Street and Capitol Hill rely on it for their position.
ow to lie about tax cuts
Andrew Leonard Salon.com
Here’s what appears to be the House Republican strategy going forward: lie, misrepresent, and obfuscate. And when you get called on it, just ignore reality and repeat yourself.
A Wednesday afternoon case in point: The Republican leadership is now declaring that their economic recovery plan, which consists primarily of tax cuts, will result in the creation of 6.2 million jobs in two years. As the authority for their claim, they cite none other than Christina Romer, President Obama’s Chair of the Council of Economic Advisers.
From a press conference:
…We have an analysis by the president’s senior economic adviser who also shows that tax cuts actually provide more immediate relief and more jobs than spending, so you get more — a bigger bang for the buck.
Well, using the methods and economic models developed by the president’s top adviser — and when those are applied to our Republican plan, it shows the Republican plan could create as many as 6.2 million jobs over the next two years.
Now, let’s just be clear about where these estimates come from, the nation’s top economic adviser, the president’s nominee to chair the Council of Economic Advisors, Dr. Christina Romer, and her peer-reviewed research.
Now, it is true that in their classic paper, “The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks,” Christina Romer and her husband David Romer found that certain types of tax cuts in certain types of economic situations provided considerable “bang for the buck.”
But as has already been endlessly hashed out in the econoblogosphere, their findings primarily applied to tax cuts that were enacted during periods when the economy was healthy. In other words, when the economy’s normal job creation engine is plugging along nicely and companies are turning profits and unemployment is relatively low, a tax cut can provide an added stimulus.
But the Romers did not find the same was true when the economy was in recession. Explicitly: “Policymakers’ efforts to adjust taxes to offset anticipated changes in private economic activity have been largely unsuccessful.”
There is an intuitively obvious explanation for this, which will be familiar to anyone who has been reading How the World Works this week. In a recessionary economy, tax cuts do not necessarily encourage consumers to spend and businesses to hire. When confidence in the economy is low, people are inclined to pay off their bills and boost their savings. Tax cuts might provide a little more cushion for consumers and businesses to wait out the storm, but they are unlikely to incite a wave of euphoric shopping.
Pointing out, again that the House Republicans are misrepresenting the academic research on tax cuts is unlikely to make House Minority Leader John Boehner or Minority Whip Eric Cantor change their tune. But it might help to explain why after two consecutive walloping defeats for Congressional Republicans, the two men have little power to make their obfuscations change policy.
Andrew Leonard, Salon.com
response to economists view:
This is wrong, but too often accepted as fact:
from Bruce Bartlett as reproduced on the Economists View Blog
Keynes was right, but many of his followers weren’t. They thought that budget deficits would stimulate growth under all circumstances, not just those of a deflationary depression. When this medicine was applied inappropriately, as it was in the 1960s and 1970s, the result was inflation.
Economists then concluded that it was a mistake to pursue countercyclical fiscal policy, and the idea of “fine-tuning” became a derogatory term. …
In the 1980s and 1990s, economists came around to the view that only monetary policy could act quickly enough to reverse or moderate a recession. … [But…] As we have seen, the Fed could not prevent the greatest financial downturn the world has seen since 1929. This has revived the idea that fiscal policy must be the engine that pulls us out.
The tepid Kennedy tax cut of 1963 was not the cause of inflation. It was the Johnson guns and butter program. Johnson made a 10% tax surcharge the centerpiece of his economic policy in his last years. The last president to be so friendly with taxes.
The inflation of the 1970s had much more to do with oil prices than anything else, and the bungling of them with Nixon’s wage-price freeze.
We never got into deficits in earnest until the 1980s and 2000s, with Reagan and the Bushes. Nine out of ten dollars in the federal debt come from those years. To say otherwise is simply wrong, and probably disingenuous.
Keynesian economists were held in high regard in the 1960s. The stagflation of the 1970s did them in, but only with the constant harping of the Monetarists and the fantasy economics of Supply Side. We see how well that worked out. Whether or not they “came around to the view that only monetary policy could act quickly enough…,” it hasn’t worked out that way, as the moderate recession of 2001 needed 1% interest rates for too long along with the huge tax cuts to generate weak GDP and very weak employment growth. Along with the grotesque mispricing in housing, risk, stocks, and the gross explosion of private debt as well.
As we have seen, the Fed could not prevent the greatest financial downturn the world has seen since 1929.
Could not prevent? They didn’t even slow the train. They couldn’t even manage the orderly activity of the banking sector which is their purview.
Standard Podcasts: 
