Look: I am eager to learn stuff I don't know--which requires actively courting and posting smart disagreement.

But as you will understand, I don't like to post things that mischaracterize and are aimed to mislead.

-- Brad Delong

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Thursday, May 13, 2010

Republicans - All Wrong, all the Time, Pt 17: Regressive Denialism and the Great Stagnation

Over at AB, RDan posted on the economic effects of Dem and Pug presidents, with predictable results.

In an open thread there, I just posted this rant.

Since this is an open thread, I'm going to editorialize about the comments to RDan's recent post and Cactus's 2007 series on economic consequences of presidencies.

The negative comments are rather amusing, in a dismal sort of way.  Back in '07, a commenter would carp about some detail of Cactus' methodology, Cactus would repost addressing that objection, then another objection would be raised.  Lesson there is that a denialist will always find some way to deny, and there is always another direction from which disruptive nonsense can be hurled. 

Back then, and now again you have the ongoing objection that there is no underlying theory to support the observations.  I think Cactus pointed out that empirical observation precedes the development of a theory.  However, this is only true for scientists and progressives.  Regressives (I can't even use the word "conservative" anymore - it sounds too positive to have any current validity) search for data that supports their theories, and if they can't find any, they make shit up.  Here is an example.

But the commenter's objection is specious, since the underlying theory - fully supported by the available data - has been stated over and over again.  Here is my version.  Policy matters.  Traditional Repug policy has been to decrease taxes, most significantly on the wealthy.  Cactus points out that Dems are more diligent at collecting taxes.  I'll add that Repugs are more strongly in favor of deregulation, though Dems have contributed (?) there as well.  The net result is a transfer of wealth from the poor to the rich.  There can be no dispute that this has happened. Further, this discrepancy has expanded at every level of wealth.  The top .1% have more than ever.  The bottom 10% have suffered the worse. The middle class is being driven down.

Meanwhile, GDP growth (Yr over Yr) has been on a bumpy, but relentless, downward slide since the beginning of the Reagan administration.  In my narrative, this is not a coincidence. Tax rates, especially on the rich, have gone down steadily, except for a slight up-blip during the Clinton Administration.  During Bush II, the richest 400 tax payers were further enriched by over $1.5 Billion each.  That's right - BILLION.  Each.

The poor and middle class have a much higher propensity to spend.  And the foundation of capitalism that almost never gets talked about is that it is totally dependent on these people spending.  A lower class that is ground into abject povery and a middle class ground into the lower class lead to economic stagnation, irrespective of the prevailing political style or economic philosophy.

This is a big part of why GDP growth is stagnating.  Meanwhile, the M1 Money multiplier has collapsed from over 3 in the late 80's to about 0.7, with no bottom in sight.  Think about that - a decrease by a factor of about 4.5!  M1 expansion and massive deficits at the same time have been ineffective at stimulating the economy, because money doesn't move.  It doesn't move because the rich have it squirreled away.

This is a rational narrative that is in total agreement with observable data.  There is no such valid narrative in support of the Repug regressive position that lowering taxes is stimulative.

Another objection is that GDP growth is not a good measure.  This prompts two thoughts. First: OK - go find one that's better.  Come back and we'll talk.  Second: many other measures have been addressed: National  Debt, deficit vs surplus, real tax collections, value of the dollar, health care costs, employment, unemployment, people below the poverty level - either as absolute number or % of the population.  Cactus has dealt with many of these, and it's an indisputable fact that by every one of these measures the country is better off with a Dem in the White House and worse off with a Repug.  Ditto, social measures as well, BTW: abortions and unwed motherhood, marriages and divorces, sexually transmitted diseases, youth crime.  This is all from Cactus' posts back in '07.

If you think the president's Party doesn't matter, than you have to believe that policy doesn't matter. And you also have to believe in a hell of a lot of coincidence. 

Still another objection is that there are secular trends that render the policy effects meaningless.  First, secular trends are just that: trends.  There can be isolated times above or below the trend lines.  It just so happens that Dems mostly reside above the lines, while Repugs pretty much own the negative territory.  More coincidence, I guess.

I'll add that another contributor to the great stagnation has been the shift in Democratic policies to more Republican-like positions. In my assesment, Obama is to the right of Clinton, and Clinton was to the right of Eisenhower.  In contrast, Bush II was to the right of Ramses II.  Clinton raised taxes, but never came close to the top rate under Reagan.  Obama has lowered taxes so that they are now less than under Bush II.  The Wing nut Obama-hating reaction to this has been to cry about excessive taxation(!) 

The reality is we have something close to a flat tax here.  The income tax is progressive, but nowhere near progressive enough. It has become consistently less progressive since Reagan.  Besides, the wealthy have all sorts of tax dodges and shelters that are not accessible to mere common people.  The payroll tax starts on the first dollar earned, with no exemptions nor deductions and has a ceiling.  It's regressive as hell.  The net effect of all this is poor people pay too much, rich people don't pay enough, and the deficit is growing.

IMHO, the great stagnation will continue because Democrats no longer pursue progressive policies.  I fear it will lead us all to a very bad end.

To the best of my knowledge and ability, everything stated here as fact is fact; everything stated as opinion is consistent with those facts.  Regressives will deny every bit of it.


BadTux said...

Oh puh-LEEZE. You're talking about that nasty REALITY thingy again. Right-wing economists don't need no steenkin' reality, they have their models, and if the models disagree with reality, well, it's reality that's wrong, not the models! So there!

- Badtux the Snarky Penguin

Jazzbumpa said...

Tux -

You are singing from my hymnal.

Thing is, these aren't even economists. Their just ignorant people with opinions not backed up by facts or theory, who throw brickbats at all the good work the posters at AB do.

It's really quite distressing.