Tuesday, July 2, 2013

Those Radical Democrats

Proof today that people just don't understand the basic Keynesian ideas about deficits. At Roll Call, Nathan Gonzales claims that Obama-era Democrats are "rallying against two of the highest profile accomplishments" of Bill Clinton's presidency. Timothy Carney:
How extreme have Dems become? GOP adopts 1990s Dem policies, Dems blast them for it
Well, not really.

On one of the two issues Gonzales raises -- DOMA -- is certainly a large flip for most Democrats. I wouldn't call it a Clinton "high profile accomplishment," but no question about it: calling the Democrats "extreme" on LGBT issues in 2013 compared with where they were in the 1990s is a fair call. Of course, that also would require calling over half the nation "extreme," but it's a big change, no question.

But the other one? No way. Gonzales raps Democrats for celebrating a balanced budget in the 1990s while running deficits in the current decade. He's sort of dimly aware of a justification:
Of course, Democrats will point to a difference in the state of the economy from the mid-1990s to today, but that doesn’t completely explain the marked change in philosophy when it comes to a balanced budget.
That's totally wrong; there's no "philosophy" change here at all! Basic Keynesianism says: run deficits during hard times, and then balance the budget (or run surpluses) during good times. Okay, it's a bit more complicated; given the very particular circumstances of 1993-1994, Team Clinton was convinced that medium-term deficit reduction was good for short-term growth (although they also pushed a stimulus package in 1993 that was killed by filibuster). At any rate, while they certainly did and do brag about the Clinton balanced budgets, there was never a "philosophy" of balanced budgets. 

The actual principle? It's even simpler than "deficits during recession, balance during booms." It's: deficits are a tool of economic policy. That's all. There's no inherent correct level for budget deficits, and there's nothing particularly good or bad, in the abstract, about deficits; it's all about how fiscal policy affects the larger economy.

And Democratic have pretty much stuck with that from the 1930s, certainly from the 1940s, to now. They've made mistakes, certainly, along the way, and every once in a while they'll give in to the rhetoric of deficits fetishists, but there's zero change of philosophy that I can see.

22 comments:

  1. If a bunch of men showed up at my house, broke the windows and used high-pressure hoses to spray water through them, I'd be pissed. But, strangely enough, my taxes pay for a group of men and women who do just that. What the hell? What could possibly justify such wanton destruction? Why are some people not pissed, but actually grateful when the hosers show up? The only thing I can figure is that the fact their houses were on fire somehow made them receptive to acts that would be vandalism in another context. It's a very difficult concept to wrap one's head around.

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  2. Government by analogy can be dangerous if it is not accompanied by reasoning and evidence.

    Two analogies that are pernicious: Government should operate like a family; Government should operate like a business.

    Government should run like government. It should assume more global responsibilities toward the nation and toward the national economy than families or businesses. Families and businesses have more local responsibilities.

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    1. Davis X. MachinaJuly 2, 2013 at 7:07 PM

      You won't get people to swallow 'government should run like government' who believe that government shouldn't run at all.

      Except possibly bombing the crap out of brown people who worship the wrong God.

      And policing their neighbors' sex lives.

      Maybe siphoning off the contents of the treasury into their friends' Gulfstreams, cleared for take-off to the Caymans, too.

      The night-watchman state turns out to be mostly a cat burglar, and a peeping tom.

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  3. Obama's true extremism can be found in his attitude towards transparency and civil liberties. Not that most Republican party leaders would care about that sort of thing either.

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    1. If the leader of the Democratic Party takes the same position as Republican Party leaders, can that position really be called "extremism"?

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    2. Of course it can -- on some issues, libertarians are the only moderates left.

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    3. If you see yourself as moderate and everybody else as extreme, that's pretty good evidence that you're an extremist.

      It's not necessarily wrong to be an extremist-- abolitionists were extremists. The kind of changes that might avert climate change and save the world could well be called extreme.

      Personally, I think the entire idea of teaching 18-year-old kids to kill for an abstract concept of patriotism is absolutely insane, and we should abolish standing armies. I think this is far more rational than the standard doctrine of national defense-- but there's no doubt that I'm extreme on the issue, and to correctly analyze my position and my chances of advancing causes I believe in, I should recognize that.

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    4. "If you see yourself as moderate and everybody else as extreme, that's pretty good evidence that you're an extremist."

      I'm using those terms relative to the constitution and pre-9/11 policy. Also, it's not clear to me that the voting public is entirely on board. Even in the GOP, we have Rand Paul leading in polls in both Iowa and New Hampshire. I'll be surprised if there isn't an equally libertarian reaction in the Democratic primary.

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  4. Speaking of radical Democrats (and redirecting the thread), as the resident ACA-dumping alarmist, I feel duty-bound to comment on the 1-year delay of the employer penalty. I think its probably brilliant, and not for political reasons.

    The dumping alarmist argument is that the penalty is too small. A company that spends $12 K/year/employee on health care can take as much as $9 K/year to the bottom line, after the $3K penalty and whatever bone they throw to the unhappy workers. With today's announcement, a company that dumps gets the full $12 K in 2014 (yeah!), but then, unless they can slip a reserve past their auditors, takes a $3 K hit/employee in 2015 (boo!).

    There have been several occasions over the last five years where the Obama Administration has seemed really sneaky clever. As the media gets in a huff over this latest sign of "weakness", it occurs to me that the delay in the penalty may end up being quite brilliant.

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    1. Interesting take, CSH. Josh Barro over at Business Insider also sees it as an interesting move, but he is reading the strategy differently than you. Essentially, he argues (along with Ezra Klein) that the employer mandate was always a stupid idea, but was cynically included in the ACA to keep the projected costs down.

      The question is what will this have to do with dumping? Will this move discourage dumping or encourage dumping? And how does the administration feel about that? Barro seems to be leaning in the direction (although he never comes out and says it) that the administration is not that worried about increased dumping, because the more people who end up on the exchanges the stronger the law will turn out to be (i.e. once people get dumped onto the exchanges their employers are never going to take them back onto employer subsidized policies, so the pressure on Congress to strengthen the ACA and increase the subsidies will be overwhelming). In this scenario, the administration is stealthily trying to unravel the employer-based system without LOOKING like that's what it is doing, moving the country toward something like Wyden-Bennet without actually endorsing such a goal.

      Personally, I suspect that is making people out to be waaaaaaay too smart and waaaaaay too farsighted. However, I can readily believe the part about the employer mandate having been something that was mainly included a cynical measure to keep cost projections down, with little actual commitment to it.

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    2. @Anastasios, like you, I think that it is too much to buy into any eleventeen dimensional chess playing strategy on anyone's part. But however it happens, moving away from an employer-based system is a good thing.

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  5. @JB, you're too modest to award yourself "Catch of the Day." In my book, you deserve it for this one. I particularly like how you point out that the majority of the country has gone over the edge on accepting LGBT. Horrible! ;-)

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  6. How about the extreme turnabout of Republicans of the Cheney era's deficits don't matter school? Republicans had no problem running up the tab then, and now that we could use some sensible deficit spending....

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    1. @nanute: "now that we could use some sensible deficit spending"? I have to assume that 'sensible' is the key point there since we are and having been running trillion dollar deficits per year for a while now.

      Unless you mean to say that you think it ought to be even higher than that.

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  7. @Truth > Spin, Not advocating higher deficits at all. How about cutting parts of the military industrial complex part of spending, broaden the tax base to increase revenue and make sure that people that can't find a job don't starve to death.

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    1. By broaden the base do you mean start having the "bottom 50%" start paying federal income taxes.?

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    2. It could also mean getting corporations to pay the share they used to pay.

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    3. It is very difficult to know what % corporations are paying in taxes sine the GAAP financials we have access to are different from the income they report on their tax returns.

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    4. Or taxing capital gains at the same rate as other wealth.

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  8. Keynes was never in favor of chronic, structural deficits. It's not as simple as saying you just run deficits during a recession. We got up to 9-10% of GDP, which was huge.

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    1. Is it really chronic when your addiction to guns cuts into your butter budget?

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