This week’s National Journal poll of political bloggers asked for a prediction about how many House seats the Democrats would lose in the November 2010 elections. Significantly, not one of the bloggers predicted a large enough loss to change control of the chamber. On the Right, 45% predicted a loss of 31-40 seats, while the rest predicted lower. On the Left, the median was in the 11-20 range.
The second question asked for a grade on President Obama’s economic performance. The Left gave him a C-, while the Right awarded a D-. I voted for F: “Taking the irresponsible Bush deficits and making them much, much worse. Spending vast amounts of the ‘stimulus’ on wasteful pork, giveaways and political payoffs rather than infrastructure or other useful projects. Continuing the Bush TARP program of transferring wealth from productive working people to the bankers who helped cause the meltdown. And turning the auto industry into a federal welfare program.”
J. Aldridge says:
Republicans don’t want to take the House or Senate in November, just pick up a bunch of seats and let Dems feel the pain for the next 2 years. The House and Senate will fall to Republicans by a large margin in 2012.
January 15, 2010, 10:39 amMartin says:
David, I have a (largely non-rhetorical) question for you:
In giving the Obama administration an F are you
(1) Rejecting, as a matter of technical economics, the broadly Keynsian view that even a sloppy and pork ridden fiscal stimulus, in the economic conditions of early 2009, was likely to significantly reduce unemployment in the short to medium term (i.e. for a year or two or so)?
(2) Accepting that the stimulus could have a significant effect on short to medium term unemployment and concluding that the costs outweighed the benefits?
(3) Basing your conclusion on something other than (1) or (2), and, if so, what?
January 15, 2010, 10:41 amDavid Kopel says:
Martin, the answer to your question is 1. I’m not a Keynesian. 2. Even if I were, I would want stimulus money spent on something that would also have a long-term benefit. 3. I despise corporate welfare, and strongly oppose subsidizing irresponsibility; so if I were a Keynesian, bail-outs for Wall Street and car companies would be strongly disfavored for stimulus spending.
January 15, 2010, 10:48 amorca says:
I think the economy will be recovering nicely come November and the Dems will pick up a few seats in both Houses of Congress.
January 15, 2010, 10:53 amRecovering Law Grad says:
David – What do you have to say about the economic analysis cited in the following reports, both of which suggest that the stimulus has been extremely useful?
http://www.nytimes.com/2009/11/21/business/economy/21stimulus.html
http://www.cbo.gov/ftpdocs/106xx/doc10682/11-30-ARRA.pdf
January 15, 2010, 11:01 amBlue says:
Orca, I’ve seen no evidence that is the case. Unemployment is likely to remain in double digits through the midterms…and that will be devastating for the Ds.
January 15, 2010, 11:12 amPaul says:
Recovering Law Grad
January 15, 2010, 11:18 amI am not an economist – Even the cbo has a hard time pinning down the impact (the cbo’s spread on the impact is almost 300%). That is because they use a multiplier to gage the impact of the spending. My curiosity question – do we use the same multipliers to gauge the impact of his tax policies on jobs (to take the hot potato as an example – if we take 90 billion from the banks to pay back tarp so they don’t have the $ to lend out – how many jobs does that equal)? How about for the interest we send overseas? It confuses me as to why we don’t
lgm says:
How many bloggers are there who think Obama is worse on economic matters than Bush? Probably very few. How many bloggers are there who know a Republican who they think would handle the economy better than Obama is doing? Probably in the single digit percentages.
Just today I read about the Republican candidate for Senate in Massachusetts. He wrote an Op/Ed that started with complaints about budget deficits, then said the way to reduce deficits was to reduce taxes. He’s right, as they say in math, up to a sign (the sign being + or -).
When you’re picking leadership, or anything else, you have to choose from the available alternatives.
January 15, 2010, 11:20 amLaura(southernxyl) says:
I hope Orca’s right.
I hope the economy does recover.
If the Dems pick up a few seats, that will mean that we all approve of what they’re doing, which in turn will mean the country’s doing all right.
And I hope none of us is so partisan as to hope that the country does poorly when the other party is in the driver’s seat, just so we can get our folks back in there.
January 15, 2010, 11:40 amzuch says:
Not surprisingly, the RWers fault Obama for being a commie pinko left-wing extremist, while the LWers fault him for not being Democratic enough. The LWers are right that the bankers ate him for lunch (after munching on Dubya’s meal), and that’s hurting both him and the country.
We’d have a different country with publicly financed elections and no corporate money. Citizens United will be a watershed either way.
Cheers,
January 15, 2010, 11:51 amzuch says:
Write your senators.
Cheers,
January 15, 2010, 11:56 amDave N. says:
I think Orca’s wrong, and very wrong at that. I read somewhere today (and I will post the link when I find it) that there has to be 450,000 jobs a month created for the rest of the year for unemployment to drop to 9%.
I see absolutely no evidence for Ocra’s optimism, other than Democrats whistling past the proverbial graveyard.
My personal prediction: 4-6 gain for Republicans in the Senate; 30+ seats in the House.
January 15, 2010, 12:00 pmwws says:
heh heh – come next tuesday, this Resident is a lame duck for the next 3 years.
“How many bloggers are there who know a Republican who they think would handle the economy better than Obama is doing?”
Oh come on, I could pick any bum out of the gutter at random and they would handle the economy better than Obama. You’ve got to really work to screw things up as much as he has.
January 15, 2010, 12:02 pmLaura(southernxyl) says:
Zuch, I’m not talking about letting the party in power have its way over everything. Is that what you read in my comment?
“Bipartisan” doesn’t mean “now you have to agree with me”. The Democrats (Democratics? I don’t want to be hollered at again) still need to put forth their arguments and make their points.
January 15, 2010, 12:03 pmCharlotte says:
Uh…yeah, I totally agree with this…totally.
January 15, 2010, 12:15 pmWidmerpool says:
What seems more improbable: a Republican elected senator to Massachusetts or the House flipping come November? Kopel, come Tuesday, you may want to revise your opinion.
January 15, 2010, 12:16 pmMark Buehner says:
Source? The devil is always in the details. In the short term, a lingering recession guarantees prolonged drops in tax revenues since the economy isn’t growing. If a short term tax cut can spur commerce and build momentum towards growth and hence tax revenues, on a whole the tax cut can be said to reduce deficits (depending on the scope and length of the cuts compared to the scope and length of the recession and recovery). This is a pretty uncontroversial application of the Laffer Curve- companies (and people) not making profit don’t pay taxes, hence the first order of business must be to spur growth so the tax base grows, and that could mean reducing taxes on those who are still turning enough profit to tax. Unemployed people don’t pay much tax either, same principle applies- grow the economy, find them jobs, increase the tax base.
Something else our current government is doing that is madness in a recession are concentrating on health care reform and cap n trade, less because they should be ‘concentrating on the economy’ (aside from tax cuts, most of what they could be doing is negative), and more because the uncertainty of these HUGE government takeovers creates uncertainty in the market place. How can you open or expand a factory when you dont know what your ‘carbon obligations’ will be in 2 years? Why would you hire an employee if you don’t know your liability for their health care? Its a very scary time to be in a small business, much less thinking of expanding, because we really dont know what government is going to do to us in the next couple of years.
January 15, 2010, 12:39 pmLaura(southernxyl) says:
WORD.
January 15, 2010, 12:45 pmzuch says:
No. I’m talking about mindless and counterproductive obstructionism. Of course, the Dem leadership (and Obama) need to grow a spine and force the “Party of ‘No!’” to actually get on the record and filibuster (and stop this nonsense of allowing purely obstructionist “holds”) as well. If the Republicans can manage to sustain an actual filibuster (and explain why they’re doing it), more power to them. I’d note that the Democratic caucus could also benefit from requiring any Democrats who want to uphold such a filibuster go on public record … and explain their acts as well.
Cheers,
January 15, 2010, 12:51 pmBruce Hayden says:
Well, to start off with, Keynesian economics didn’t work in the 1930s when a technical argument could be made that it might. Instead, we had a decade of double digit unemployment. And it hasn’t worked since then whenever it has been tried.
And, no, I don’t accept (2) either.
What has to be remembered is that all that money has to come from somewhere, and wherever it comes from, suffers. So, you may have a 1.5 multiplier for some sorts of government spending. But that is at a cost of a 1.6, 1.8, 2.0, etc. from those who are paying for the spending. So, you create 1.5 jobs by destroying 1.6 or more of them – plus the output from the 1.5 jobs jobs created is less useful to the economy than for the 1.6 or so that were destroyed.
As I noted above, the Keynesians invariably assume that the money they are spending the “stimulate” the economy is like manna dropping from heaven. It isn’t, and that is why it invariably fails.
January 15, 2010, 12:52 pmRick A. says:
This statement is incorrect even as qualified. The tax cut would have to enable growth and increased tax revenues above and beyond the revenue lost from the decreased tax, or expenditures cut in proportion to the tax revenue reduction.
If any growth spurred did not translate into increased tax revenue or if expenditures were not reduced to offset the revenue lost from the tax cut, the tax cut would of course increase the budget defecit.
There is no uncontroversial application of the Laffer Curve, since the curve’s functional form is never specified. The so-called Laffer Curve is only an heuristic.
January 15, 2010, 12:55 pmorca says:
I’m glad my political beliefs allowed me to get into the stock market for the 70% rise it has experienced over the past few months.
January 15, 2010, 12:58 pmMark Buehner says:
How can anyone look at this monstrosity of a healthcare bill rife with bribes and special interest payoffs cut behind closed doors and budget exploding new entitlements and call obstruction to it mindless? NOBODY likes this bill, even the people trying to shove it down our throats. The best argument i’ve heard is ‘we have to do something’, as though its impossible to make our healthcare system worse. Sadly we’re about to put that to the test.
January 15, 2010, 12:59 pmzuch says:
The Laffer curve lives!!! Back from the dead! Guess that’s why Arthur Laffer got the Nobel Prize in Economics a while back…..
This assumes (as the Laffer curve didn’t; it just claimed that mirabile dictu! revenues would increase if you cut taxes) that tax cuts actually spur growth … and sufficient growth to make up for reduced marginal revenue. And of course, the true comparison here is not between Laffer curve and nothing (the status quo), but rather between Laffer curve and other possible remedies….
Cheers,
January 15, 2010, 12:59 pmzuch says:
Simply not true. If productivity increases, there’s no problem with an increasing money supply.
Cheers,
January 15, 2010, 1:01 pmBruce Hayden says:
I agree. Obama and company have done almost nothing right with the economy, and almost everything wrong that they could.
- Raising (or threatening to significantly raise) tax RATES
- Substituting (refundable) tax credits for cuts in tax rates.
- Spent money we didn’t have on projects that we didn’t need and to pay off friends.
- Spent money to increase government salaries across the board (federal, state, and local) at a time when the rest of the economy is stagnating. Locked those salary and benefit increases in.
- Threatening massive increased regulation through EPA regulation of CO2, Health Care “Reform”, Tax and Bribe (aka Cap and Trade)
- Ignored rule of law in terms of bankruptcy priorities in order to protect union pensions
- Didn’t allow auto companies to go through normal bankruptcy.
- Didn’t shut down banks that needed to fail, forced banks to take TARP money, and now capping bonuses for them.
And just why would a small company right now spend money to increase employment and production? In a normal recession, this is what would be happening right now. But Obama, et al. seem to have done almost all that they can to dissuade them from such.
January 15, 2010, 1:03 pmMark Buehner says:
Right- which is exactly what I posited was a possibility, so how is that incorrect?
Right- which is not what I posited. Mind my statement “IF” the tax cut could be crafted to do so.
Err- is this application controversial- a 100% tax would not produce an ideal (or any) tax return? And a 0% tax would not produce an ideal (or any) tax return? You’re right that the shape of the curve is hotly debated (and whether at our current tax levels it has any application), but your demonstrably wrong that the idea isn’t sound. I’m simply arguing that in a very poor business climate, particularly one in which capital is critically scarce, the most direct method of reintroducing liquidity and hence spurring growth would be to cut taxes. I’m not sure how you can’t believe that. Where do you think that money would end up? Stuffed in Scrooge McDucks money vault?
January 15, 2010, 1:06 pmD.R.M. says:
Then they’re all idiots. The absolute last thing you want to do during a recession is anything that will make smaller businesses reluctant to hire; smaller businesses are the engine of recovery and job growth. Taking up health care during a severe recession is accordingly the single stupidest move in economic policy of the last thirty years. Bush is a thousand points ahead of Obama just for not being quite that dumb (and Bush’s last four months in office were absolutely stuffed full of economic idiocy).
January 15, 2010, 1:07 pmMark Buehner says:
Are you suggesting there is a different reason tax revenues have fallen off a cliff? Please share with the rest of the class.
January 15, 2010, 1:07 pmBruce Hayden says:
While that is true, it is also pretty much irrelevant.
First note that we need to nail down what you mean by productivity. Are you talking production per worker? Or GDP? The former is really almost irrelevant here, since the real issue is the later.
Someone yesterday was talking about how French productivity is similar to ours. What they were talking about though was the former above, and ignoring the large percentage of their population who are not producing wealth.
In any case though, money is not the issue. Wealth is the issue. Money, as so famously said, is a veil. Doubling the money supply does not double wealth, just the medium used to count the wealth.
I think that you are probably really talking about increasing wealth, but that isn’t done in a vacuum, and what we are talking about with Keynesian economics is transferring wealth from the productive sector to the government for it to spend on products and services that mostly do not build national wealth.
January 15, 2010, 1:10 pmMark Buehner says:
Are you suggesting you can’t fill a pool by pouring water from the deep end into the shallow end with a leaky bucket?! Paul Krugman- End of debate.
January 15, 2010, 1:14 pmChem_geek says:
They (the banks) are not lend(ing) out any money anyway. Instead, they have taken the TARP and spent it on “performance bonuses” for their executives. So, recovering 90 billion dollars from the banks that was misspent is the right thing to do, regardless of its effects, pour encourager les autres.
Honestly, I don’t know why bank executives aren’t in prison for lying to the Feds about what they were going to do with TARP funds. I can guarantee you that other Federal dollars had better be spent on what the grantee said they were going to be spent on…
January 15, 2010, 1:16 pmMark Buehner says:
Almost all the banks have paid back their TARP funds with interest. Now the car companies on the other hand… should GMs CEO be in a cell?
January 15, 2010, 1:18 pmRPT says:
Were going so well when Obama took over after 8 years of GWB, and “conservative” policies which led to budget surpluses, less unemployment, financial stability, and so on, that it is now contended that he has made them worse? Nothing that was done in the ’90′s will make things better in the event of D losses and R gains. The result will be more gridlock and more bad news. If D’s maintain, the bad news continues; if the R’s gain, things will get worse.
January 15, 2010, 1:27 pmzuch says:
I think Martin Gardner addressed this issue. But FWIW, why do you assume that a 100% tax rate would necessarily produce no income? It may be generally (or always) true, but it requires more assumptions, not an ipse dixit.
Cheers,
January 15, 2010, 1:31 pmzuch says:
Are you suggesting that tax revenues fell of a cliff because of increased tax rates? That is what the Laffer curve purports to explain.
Cheers,
January 15, 2010, 1:33 pmzuch says:
“… because I say so.”
Cheers,
January 15, 2010, 1:34 pmzuch says:
Both. If people produce more, they ought to earn more. That takes more money (unless you have fewer people).
Cheers,
January 15, 2010, 1:36 pmBruce Hayden says:
Let me rephrase that. Much, if not most, government spending does not increase national wealth directly. It may do so indirectly as a result of spending wages. But that is one level removed, and thus even more wasteful.
But, some government spending does increase national wealth (at, of course, the cost of decreasing it elsewhere to pay for it). Some examples are roads, airports, etc. And, you may be able to argue that schools may do so too, but at a lower rate of return. The problem with the “Stimulus” package in this regard was that all that sort of construction was not “shovel ready”. Indeed, much of it is scheduled for the next decade, long after we should be out of this recession (and maybe into the next one).
January 15, 2010, 1:38 pmShelbyC says:
I thought the Laffer curve purported to show that, under some circumstances increasing tax rates will lead to greater revenues, while under other circumstances increasing them will lead to less revenues. And the opposite for decreasing tax revenues. I still have a hard time understanding why that’s controversial.
January 15, 2010, 1:39 pmzuch says:
Fine. But that wasn’t what Keynes talked about, so is it OK if we ignore you?
Cheers,
January 15, 2010, 1:39 pmzuch says:
That was the claim. This claim was made based on behaviour (or assumed behaviour) at the extrema.
You’re quite right to point out that even Laffer assumed at least one inflection point, and that policies based on his [simplistic] assumption (see Gardner link above) would suggest different policy choices based on where on the continuum we are. Which makes the oft-heard refrain: “Laffer! Tax cuts good!” seem a bit overbroad and simplistic.
Cheers,
January 15, 2010, 1:45 pmBruce Hayden says:
Of course he didn’t. That is why his theory failed. He was operating under the manna from heaven theory, and absent divine intervention, that doesn’t work.
January 15, 2010, 1:53 pmegd says:
Those two sides aren’t necessarily adverse. In fact, communists have a habit of being devoutly non-democratic.
January 15, 2010, 1:53 pmBruce Hayden says:
Well, maybe a bit simplistic. But we aren’t operating at the place in the curve where cutting taxes hurts us. We haven’t been for a long time now.
January 15, 2010, 1:57 pmRPT says:
The Laffer curve best explains USC’s decision to hire Lane Kiffin as their new football coach.
January 15, 2010, 2:04 pmMark Buehner says:
Common sense? Would you work for free if could get the same results by not working at all? OK- certainly there are some outlier lunatics that would, but point being there will unquestionably be tax levels lower than 100% that will produce more tax revenues. Unfortunately I don’t have a laboratory of a nation to test this on to prove it to you (if such a thing were possible under controls, which it isnt) but logically its pretty inescapeable, unless, of course, you ideologically abhor the idea that people’s actions are influenced by personal incentives (at least outside of oil company executives).
January 15, 2010, 2:28 pmzuch says:
Your evidence for this is?!?!?
Cheers,
January 15, 2010, 2:31 pmzuch says:
For that matter: Show us the curve. Is it the Gardner/Diaconis one? Where are we on it?
Cheers,
January 15, 2010, 2:34 pmRecovering Law Grad says:
Note that none of the commenters here extolling the virtues of the Laffer curve have yet responded to the links I posted above, which indicate that both for-profit private economists and non-partisan government economists agree that the stimulus has both boosted employment and GDP.
Can one of you look at the specific claims made in either link and rebut them with evidence?
January 15, 2010, 2:35 pmMark Buehner says:
Spoken like someone that has never written a business plan. If your margin is 5%, a couple of points of tax one way are the other WILL affect your decision making, don’t you think?
I happen to agree that all thing being equal, our current tax levels aren’t at a point on the curve where tax cuts will provide revenue increases- but all things clearly aren’t equal at the moment! We are in the midst of a deep and (it appears) lasting recessions, one of the biggest problems/causes of which is a lack of liquidity due to frosty credit markets. That being the case, targeted tax cuts NOW could provide many times their nominal effect on the economy as a whole by quickly increasing the tax base. As the economy recovers, obviously the utility of that tax cut becomes less and less productive to your revenues, so you either put a time limit on the cut (which isn’t great because it does stymie some of the good effects that are forward looking) or you just wait and raise taxes back later (which is more sensible but politically tricky). I realize this doesn’t have a lot to do with the Laffer Curve as envisioned, but in a special case its a powerful tool.
Would you recommend raising taxes right now? Would that hurt the economy? So conversely wouldn’t tax cuts potentially help?
January 15, 2010, 2:37 pmzuch says:
Thank you.
Cheers,
January 15, 2010, 2:37 pmzuch says:
Fallacy of bifurcation. Those (tax cuts or nothing) aren’t the only choices.
Cheers,
January 15, 2010, 2:41 pmRecovering Law Grad says:
I wish Bruce Bartlett were here to witness the complete misunderstanding of how supply-side tax cuts work. As best as I can tell from the above, the suggestion is that the President should use temporary, short-term tax cuts to stimulate the economy. (Apparently, commenters mean short-term tax cuts in addition to those comprising roughly 40% of the stimulus – a fact forgotten by those who rail against ARRA as “pork.”) In any event, supply siders would argue that short-term tax cuts have insignificant stimulative effect because those affected by them know that taxes will simply go back up. Long-term behaviors do not change, so money ends up being saved rather than spent.
January 15, 2010, 2:44 pmShelbyC says:
Of course, the neo-laffer curve makes just as good a case for tax cuts as the laffer curve. Simply because, since its better to have a sub-optimal rate than a super-optimal, generally speaking you’re better off moving left if the effect of the move on revenue is unknown.
January 15, 2010, 2:47 pmSenator Christmas says:
Then logically, wouldn’t a 0% tax rate produce income because some outlier lunatics would give money to the government?
In either case, it’s essentially 0%.
January 15, 2010, 2:47 pmMark Buehner says:
I would hope so! I’m not sure how you spending 3/4 of a trillion dollars and NOT stimulate SOMETHING. Just writing the checks employs somebody. You could easily hire a million people to dig holes and fill them in. That would sure produce jobs, but would it produce wealth?
The question is was that level of spending production compared to what else that money might have been doing. This particular bill didn’t end up even trying to do much about immediate spending, and was more a sop of pork and special interests than a timely and targeted attempt to stimulate growth.
link
January 15, 2010, 2:50 pmMark Buehner says:
Yeah, not like adding several trillion more dollars to the national debt. I’m not sure how guaranteeing confiscatory taxes (or collapse) in the future by producing untenable debt differs from what you are suggesting.
January 15, 2010, 2:53 pmMark Buehner says:
I’m not interested in playing Introduction to Philosophy with you. If you want to talk about realistic world scenarios, fine. But otherwise, play quaternio terminorum with somebody else.
January 15, 2010, 2:55 pmegd says:
Please don’t confuse welfare with tax cuts.
Tax cuts can only apply to those who pay taxes. Giving money to people otherwise is welfare.
January 15, 2010, 2:56 pmjakecollins says:
If Obama, hadn’t averted a second Great Depression, what grade would you have given him? A F-???
January 15, 2010, 2:59 pmDave N. says:
jakecollins,
The fallacy in your question is assuming that the stimulus “averted a second Great Depression.”
January 15, 2010, 3:24 pmWidmerpool says:
Zuch has the same grasp of the effects of incentives on human behavior as Lysenko did of the effects of snow on crop seeds. Why encourage him?
January 15, 2010, 3:26 pmorca says:
Maybye, maybe not. Economics beliefs that are really just religious beliefs have no place in a logical discussion.
But one thing’s for certain…when the U.S. economy turns around, most Americans will give the Democrats the credit for it whether they deserve it or not.
January 15, 2010, 3:33 pmjakecollins says:
The point is debateable.
January 15, 2010, 3:55 pmNonetheless, if we had slipped into a Depression then presumably Obama would get a F. But if he also gets a F when we don’t go into Deperssion, then I have to question the grading scale. If the difference between Depression and not-Depression is nil, then what feats of magic would he have to perform to rise from a F to a D-?!
geokstr says:
No one is recalling that less than a third of the “stimulus” has even been spent yet, quite purposely so too. It is intended to be spent this year to produce a temporary but conveniently timely downward spike in unemployment coincidentally just in time for the 2010 elections.
Then in 2011, the Dems can blame the resulting upward spike in unemployment on Bush, Reagan, Ike, Rove, Palin, and Cheney in order to pass a second “stimulus”, 2/3 of which will be spent in 2012 to produce a temporary but conveniently timely downward spike in unemployment coincidentally just in time for the 2012 elections.
Then in 2013…
January 15, 2010, 4:00 pmgeokstr says:
You are absolutely correct, sort of like the religious belief that forced redistribution of wealth by benevolent government is good, or put in other words, from each according to his abilities, to each according to his needs.
January 15, 2010, 4:10 pmzuch says:
You misstate the case. As I pointed out, even Mark Buehner agreed with the claim I did make. If you think I made a claim that I did not make, that’s your problem, not mine.
Cheers,
January 15, 2010, 4:15 pmShelbyC says:
Isn’t that like a student who got an F on a lousy paper saying, geez teach, if I had wiped my butt with the paper and turned it in you would have given my an F, but you’re also giving me an F just because my paper said we fought WWII against the English…
January 15, 2010, 4:15 pmzuch says:
Pass more tax cuts, hand out guns to everyone, and appoint anti-abortion ideologues to the Supreme Court. But he’d still be a Commie.
Cheers,
January 15, 2010, 4:20 pmzuch says:
Mirabile dictu! Geokstr believes that the stimulus reduces unemployment.
Cheers,
January 15, 2010, 4:22 pmPeteP says:
Orca – “I think the economy will be recovering nicely come November and the Dems will pick up a few seats in both Houses of Congress.”
Put down that pipe, and slowly back away …..
January 15, 2010, 4:28 pmBruce Hayden says:
How about if he passed just one tax cut first. As pointed out above, one time refundable tax credits to those who do not pay income taxes are welfare payments, not tax cuts. What Laffer would likely suggest, and what is most likely to work are actual multi-year tax rate cuts, which is one thing that Obama, et al. have gone out of their way to avoid.
January 15, 2010, 4:31 pmjakecollins says:
Your analogy is false. Depression isn’t just a hypothetical worse result.
When Obama took office, most people thought there was a reasonable chance we might slip into Depression. Maybe Obama got lucky or Bernake should get credit, but clearly we avoided catastrophe.
The grade scale is askew.
January 15, 2010, 4:40 pmBill Woods says:
Slightly off topic, but does anyone know whether Paul Kirk’s term as senator ends when the special election to replace him is held, or not until his replacement is sworn in?
January 15, 2010, 5:11 pmSenatorX says:
The government should keep printing money and buying futures through their “agents” (forever). What more of a recovery could anyone ask for? Of course with the debt needing to be rolled over this year a retest might be what the doctor orders. What a country!
January 15, 2010, 5:19 pmegd says:
Whether porkulus prevented a depression is debatable, whether your question contained a fallacy is not.
Also, an ‘F’ usually means anywhere from 0-60%. The President may still have a long ways to go until he really reaches the bottom.
January 15, 2010, 5:20 pmorca says:
It’s sillier to believe that the Republican’s recession will continue into the fall…
January 15, 2010, 5:30 pmgeokstr says:
Of course.
Building another highly needed and heavily utilized Murtha International Airport, or erecting a few thousand more Robert Byrd Highway signs in WV, or hiring a ton of New Black Panthers to patrol polling sites, or paying a host of website designers to count jobs created or saved in non-existent congressional districts, or surreptitiously funding a lot of professorial spokesmen for Obamacare, or having ACORN employ a bunch of convicts to collect census data from a couple million fake homeless people, if done with the proper timing, can create that temporary upward spike in employment at politically necessary times.
However, since each of these short-lived temp “jobs” seems to cost somewhere around the median lifetime earnings of the average American, the benefit is somewhat debatable in the long term, non? Unless you’re a Democrat, of course.
January 15, 2010, 5:44 pmAndyM says:
It ends when his successor is sworn in.
That’s why the MA government has started to discuss how long it can legally stall that swearing if the republican wins — the polls are tightening up, so they’re starting to wonder if the senate will be back in filibuster territory soon (though I for one am pretty sure that when it comes down to actual voting, we’re going to elect the democrat; the more reputable polls put her ahead by 5-10%).
January 15, 2010, 5:56 pmDave N. says:
Orca,
I would be more than happy to bet anything you wish to bet that the Republcans gain seats in both Houses of Congress in the upcoming election.
Right now, the Republican advantage is somewhere between +4 and +9 in the generic ballot according to most polls. Democrats need something above a +4 advantage to stay even (a minimum of a 8 point turnaround) because Black and other minority seats are so overwhelmingly Democratic.
So take comfort in your TPM and DailyKos and other left-wing sites that cannot accept the reality that the Republicans stand to make substantial gains in 2010.
January 15, 2010, 5:57 pmorca says:
The only thing Americans hate more than the Democrats in Congress is…the Republicans in Congress.
If the economy continues to grow (and there’s no reason to expect it won’t) then the Democrats should do quite well in November.
January 15, 2010, 6:04 pmDave N. says:
Orca,
You are probably a very nice person. But you are also blindly partisan. The average voter might be mad at GWB. They might have voted Democratic in both 2006 and 2008 to teach the Republicans lesson. But this is 2010. The Democrats are in power and they will be blamed for a sputtering economy come the Fall.
So go ahead and blame Republicans and George Bush and whatever. Just don’t be shocked when you find out the average voter is not as blindly partisan as you are.
January 15, 2010, 6:09 pmorca says:
True, but there’s no reason to believe the economy will be spluttering in November.
January 15, 2010, 6:16 pmDave N. says:
Orca,
Except that everyone else is predicting it will be. For example, that bastion of conservatism, the editorial page of the New York Times, notes that unemployment is very likely going to be bad in November.
I agree that unemployment is a lagging indicator of economic growth. But I also predict that if the Democrats push through their health plan, private sector job creation (to the extent that is happening) will come to a screaching halt.
I firmly believe that the unemployment rate will be between 9 and 10% in November. Frankly, I wish and hope it was otherwise, since my spouse has been out of work for more than a year.
You are singing a solo about a rosy economic forecast for the Fall. I don’t hear even the other liberals who comment on this site joining your chorus.
January 15, 2010, 6:28 pmBruce Hayden says:
The other factor is that there are a lot (40-50 or so) seats now held by Democrats that were recently held by Republicans, most of which districts went for either Bush (43) and/or McCain. That is another reason that the Democrats need such an edge (which they don’t have right now) to even think of holding on to what they have right now. That is why I think that the Democrats’ estimation of 11-20 is low. Likely way low.
January 15, 2010, 6:40 pmA Criminal says:
The links you provided aren’t really evidence unless you consider self-reporting by recipients of government largess to be reliable. I sure don’t.
These are fairly anecdotal…but there’s so many of them if you choose to look:
http://reason.com/blog/2009/11/11/more-stimulus-shenanigans :
In other cases, federal money that recipients already receive annually – subsidies for affordable housing, for example – was reclassified this year as stimulus spending, and the existing jobs already supported by those programs were credited to stimulus spending.
http://reason.com/blog/2009/11/06/work-boots-give-the-economy-a :
The New York Times notes, “the data suggests that well over half of the jobs claimed so far have been in the public sector.”
It’s trivially easy to create public-sector jobs:
– make up a bunch of bogus jobs
– hire people for those jobs
– pay the new employees with borrowed and/or newly printed money.
Obviously a great plan.
January 15, 2010, 9:34 pmorca says:
Everyone? Really?
I think you’re showing us how confirmation bias works.
January 15, 2010, 9:55 pmdreadnaught says:
That makes it official.
January 15, 2010, 10:39 pmsteve s says:
Ok, I skipped most comments. Doesnt anyone actually look at budget numbers? Most of the increase in the deficit comes from a drop in revenue. The actual amount of discretionary spending contributed by Obama’s administration is relatively small.
January 15, 2010, 11:26 pmleo marvin says:
Maybe, but that example makes it sound like you subtract the 2% tax hike from your 5% margin, netting you 3%, for a 40% hit. That would be major. But most of the costs that get you down to 5% are taken before taxes are calculated, so the effect of adding a couple of points to the tax rate isn’t nearly that dramatic. Assuming a 28% tax rate, and your 5% margin is net of taxes (.05/.72 = .0694 pre-tax), raising the rate to 30% makes your margin (.0694 X .7 = .0486), i.e., .486%. In other words, raising the tax rate reduces your margin by about 2.8%, not 40%. Not meaningless, but hardly a game changer. The calculation wouldn’t be that simple, but it’s a lot closer to the actual result than the draconian haircut your example seems to imply.
January 16, 2010, 1:34 amPaul says:
Chem_geek says:
Paul: Recovering Law Grad(to take the hot potato as an example — if we take 90 billion from the banks to pay back tarp so they don’t have the $ to lend out — how many jobs does that equal)?
They (the banks) are not lend(ing) out any money anyway. Instead, they have taken the TARP and spent it on “performance bonuses” for their executives. So, recovering 90 billion dollars from the banks that was misspent is the right thing to do, regardless of its effects, pour encourager les autres.
Ok – so the answer to the question is – even if the money creates jobs for people outside of the banking industry – those consequenses are irrelevant to decison making. I knew I chose a hot potato – I’m not sure i disagree with you in a general philosophical sense. The problem is that more and more the tax code is being used to penalize people rather than just raise money. There is no thought to the repercussions ie to the jobs of others.
January 16, 2010, 6:16 amScott Alden says:
The bugdet numbers from the GPO website do not support your claim. While revenues did drop from 2,524,326M to 2,156,654M outlays increased from 2,982,881M to 3,997,842M.
January 16, 2010, 8:20 amRandy says:
David Kopel: “. I despise corporate welfare, and strongly oppose subsidizing irresponsibility; so if I were a Keynesian, bail-outs for Wall Street and car companies would be strongly disfavored for stimulus spending.”
But these are two separate discussions. The question is whether Obama’s actions have helped the economy. That should be judged solely on the results, not on whether the actions promote corporate welfare. It may be that the economy was saved because of that; if so, then you must judge his plan as doing what it hope to accomplish.
As to whether Obama deserves a C or D or whatever, we can only know that if we examine a parallel universe whereby the prez does nothing in the form of a stimulus. Undoubtedly, today’s economy would be much worse, but by how much is anyone’s speculation. Since we can never know how bad the disaster would have been but for the stimulus package, we can’t really grade the prez on it. If it would have been only slightly worse, then he deserves a poor grade; but if it would have been an economic meltdown, then he deserves a higher grade.
Question: If, hypothetically speaking, an economic situation occurred in which you know that it will continue to a complete disaster, and they only realistic way to avert it were to bail out Wall Street and Detroit, which would you be more willing to sacrifice: Your ideology, or the economy? And would your answer depend on how you personally may suffer financially under either outcome?
Methinks that if your job were dependent upon the economy, you would be more willing to sacrifice ideology in favor of putting food on the table.
January 16, 2010, 12:26 pmMnZ says:
“It’s the economy…stupid.”
Democrats seemed to forget that when they passed the stimulus package. Instead of passing a targeted package undoubted focused on the economy and unemployment, they surrendered to their baser instincts and passed a package laiden with pork and special interest buy-offs. Sure, that is politics. However, if the economy is still poor and unemployment is still high, they will be vulnerable to charges that they put their machine politics ahead of the economy and unemployed.
January 16, 2010, 12:42 pmOhio Scrivener says:
“How can you open or expand a factory when you dont know what your ‘carbon obligations’ will be in 2 years? Why would you hire an employee if you don’t know your liability for their health care? Its a very scary time to be in a small business, much less thinking of expanding, because we really dont know what government is going to do to us in the next couple of years.”
+ 1
Really, the above point should be repeated over and over again. Obama has terrified small businesses. They are not too big to fail, but plenty big enough to tax, regulate and unionize. And on each of these issues, Obama is not on their side.
January 17, 2010, 11:22 amOhio Scrivener says:
Orca writes: “The only thing Americans hate more than the Democrats in Congress is…the Republicans in Congress.”
If so, they shouldn’t. When the Republicans last controlled Congress at the end of 2006 the Dow was over 12000, unemployment was under 4.5 percent and the deficit was a mere 249 billion.
January 17, 2010, 11:43 amThe Dirty Mac says:
Across the street from me there is a WWII memorial that was dedicated in late 2008. It was recently disassembled and put back together again with stimulus money. That “economic activity” counts toward our inceased GDP.
Ohio: You are correct. Small businesses don’t have lobbyists or compliance departments.
January 17, 2010, 9:13 pm