Category Archives: political economy

Excuses

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During the Great Depression, in an effort to help farmers, the FDR administration got legislation passed that put a floor under the prices farmers could collect for their produce.  At roughly the same time, in order to help out the working man in a time of enormous unemployment (ranging from nearly 16% to over 25%), FDR got legislation passed that put a floor under the prices a man could charge for his work.  With this combination of artificially inflated food prices and a unemployment exacerbated by artificially inflated labor prices, it became exceedingly difficult for Americans to buy food for their families.

The FDR administration “cured” this, not by removing their harmful pricing controls, but by inventing and issuing food stamps—subsidies for purchasing food.

Fast forward to the present, and look at Oregon.  In an era of government mandates for fuel efficiency in our cars (not all of which originated in Oregon, to be sure), governments are seeing falling tax revenue from decreasing private sector fuel purchases.  In Oregon, in particular, though, folks are buying fuel-efficient automobiles, with some vehicles getting over 55 mpg.  The Oregon state government is looking at “curing” this, not by stimulating its economy tax and spending reductions, but instead at creating a new tax.

Beaver State lawmakers, in their upcoming session, are expected to consider legislation that would impose a charge on vehicles that get at least 55 miles per gallon of gasoline, in an effort to make up for lost gas-tax revenue[.]

After 2015, owners of these high-efficiency vehicles would either have to pay an undetermined per-mile tax calculated by GPS technology, or some alternative flat rate option.

Hmm….

Any excuse to grow government, it seems, is a good excuse to grow government.

What Are They Prepared to Do?

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Kimberly Strassel asked this, and three specific questions, in a Wall Street Journal op-ed last week.

Her questions:

Question one: Do they mean it?  In the abstract, the debt ceiling is a powerful tool for forcing the president to give in to spending cuts. …

In the non-abstract, failure to raise government borrowing limits means US default—and with it potential credit downgrades, market panic and resulting economic distress.  Is the GOP willing to inflict that on the economy?  If Republican members instead run for cover, as they did with the cliff, the GOP will have been exposed as bluffers, and the administration will never again have to fear the debt ceiling.

Then,

Question two: What do they want?  Throughout the fiscal-cliff negotiations…the GOP shrunk from laying out its specific demands on Medicare, Social Security and Medicaid.

Do House Republicans have the courage to lay out big demands (say, premium support for Medicare or block grants for Medicaid), send a bill to the Senate, and sell entitlement reform to the public?  If they can’t face the demagoguery that Democrats will use against them for making substantive proposals on entitlements….

Finally,

Question three: What other hostages are Republicans willing to see shot?  Knowing he has lost his tax trump card, Mr Obama seamlessly moved on this week to the defense budget.  …Mr Obama intends to make further tax hikes the price….

Are the GOP’s defense hawks willing to stomach those cuts as a price for entitlement reform?  Having publicly campaigned against this slashing of the military, can the party stare down the president with a unified position?  Mr Obama is betting they can’t….

It’s pretty clear from the Republicans’ past performances in showdowns with Obama that all they’ll do is run for cover—too much of the party consists only of bluffers.  During the just concluded tax cliff matter, hey could have put up big demands concerning tax structure and tax rate reductions—just putting forward the Romney tax plan would have sufficed—but they quailed at the thought and shrank from their duty.  They also could have put up big demands concerning spending cuts—just putting forward the Ryan plan would have sufficed on entitlements—and big demands concerning so-called discretionary spending (so-called because all government spending is at the discretion of the Congress).  After all, Obama was publicly willing to conclude such a “grand bargain;” the Republicans should have held him to his word.  But they failed here, also.

On the matter of selling their position to the public, it’s pretty clear the Republicans have no capability for that, even if they had an actual position to sell.  They’re still not talking to us.

Vernon Pinkley, on walking the Republican halls of the House (or of the Senate), might ask, “Very pretty, Speaker/Minority Leader. Very pretty.  But, can they fight?”  The answer is, “No.”

I pointed out nearby the necessary and encouraging words of a rookie Republican Senator from Texas.  Unfortunately, there’s no reason to believe there are enough more Republicans like him to accomplish much of anything.

Japan’s Sovereign Debt

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With our just completed tax “deal” adding $4 trillion to our national debt by 2022, I thought it might be interesting to look at the debt load of another country that used to be an economic powerhouse, but whose economy has been stagnant while its population ages: Japan.  In no particular order, we see the following:

  • Japanese administrations have accumulated debt worth $14.6 trillion, roughly 230% of GDP.
  • Since the 1990s, administrations have bailed out failed banks and insurance companies.
  • Tax revenues are less than half of expenditures.
  • Interest on Japanese debt has been held to 0.75% by the Bank of Japan, their central bank.
  • Since 2011, the BoJ has fed emergency programs a total of ¥213 trillion ($1.2 trillion).
  • The BoJ Governor, Masaaki Shirakawa, acknowledges
    • At the moment, the effect of our monetary policy in stimulating economic growth is very limited.
    • Fully one-quarter of the government’s overall budget currently goes toward servicing debt.  Were Tokyo forced to pay higher interest rates, it’s mountain of debt would grow even more rapidly.
  • The new Japanese Prime Minister, Shinzo Abe, wants more of the same: a new ¥14.4 trillion ($120 billion) economic stimulus program, this time for the construction sector.  At the same time, Abe wants Shirakawa to pump unlimited cash into the economy.

This graph illustrates:

Any of that look familiar?

The data and graph are via Spiegel Online International.

Now that the Bill Has Been Passed

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…and we can see what is in it, the pork for President Barack Obama’s paymasters that is in it is quite impressive.  Here are some, in no particular order.  Enjoy the sausage.

  • Accelerated tax write-off for owners of NASCAR tracks: $78 million
  • Tax credit for companies operating in American Samoa: $62 million
  • Distillers rum tax rebate: $222 million
  • Film and television producers expense the first $15 million of production costs incurred in the US ($20 million incurred in economically depressed areas in the United States): $430 million
  • Wind production tax credit: $12 billion
  • Cellulosic biofuels tax credit continued and expanded to include producers of “algae-based fuel:” $59 million
  • Biodiesel and “renewable diesel” tax credit: $2.2 billion
  • Plug-in motorcycles tax credit: $7 million
  • Energy-efficient appliances tax credit: $650 million
  • Energy-efficient homes tax credit: $154 million

Most of these seem like chump change, but they, with other inclusions, sum to $40 billion of pork in the tax “deal.”

Whining

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Here’s Senate Minority Leader Mitch McConnell (R, KY) on leadership in the context of the coming debt ceiling fiasco.

Now, the question is, will the president lead?  Why should we have to be bringing him to the table?  Why isn’t he leading us in the direction of beginning to solve our long-term debt and deficit problem?  It’s perplexing to me that the president of the United States, elected to lead the country, is so reluctant to engage on the most important issue confronting our future.

In McConnell’s defense, this is a typical Republican whine.

When are you guys going to stop whining about the President being mean and supply your own leadership?  When are you guys going to stop surrendering the field to the Progressives, put up your own plans, push for them, talk to us Americans in your constituencies and your neighboring Democratic constituencies, and be leaders yourselves?

Quit worrying about bringing the guy who sits in the President’s chair to the table—move on without him.  Pass the relevant bills in the House, and call out the Progressives in the Senate and the White House over their intransigence in refusing to be part of the solution.  Show some responsibility—and take the initiative from the Progressives.

Or are you really so used to your status that none of you can conceive of actual Republican leadership?