Romney's Economic Plan Relies on Magic, Not Math

Romney's Economic Plan Relies on Magic, Not Math

Joseph Stiglitz has a decent résumé. He won the Nobel Prize in economics and served as chairman of Bill Clinton’s Council of Economic Advisers before being named chief economist of the World Bank. His C.V. , however, pales before his passionate commitment to pushing for economic policies that help the poor and powerless — inside and out of the United States. For Stiglitz, economics and social justice can’t be separated.

Since the election of Barack Obama, Stiglitz has also been something of a thorn in the side of the current administration, consistently critiquing the White House for falling short. He wasted no time in pointing out that Obama’s stimulus was too weak and his housing policy woefully ineffective — and he’s been particularly biting on the topic of Obama’s subservience to banking interests. But with Election Day fast approaching, it’s always useful to look at what the other guys would do, instead. Stiglitz took some time out to explain to Salon why, when the topic is economy, there’s really no choice for progressives in this election.

What’s at stake in this election for the U.S. economy?

Quite a lot. First, there’s what we call the macro-economy. The budget cuts that Romney/Ryan propose will certainly slow growth. If the European downturn continues that could tip us into a recession. The cuts certainly won’t provide the kind of stimulus that Obama’s jobs bill, for instance, pushes. Romney’s plan is based on magic: Just because he gets elected, the economy is supposed to take off. There is no evidence that anything like that would happen. Quite the contrary — I think the opposite would happen. The business community would see the cutbacks coming and that would itself cause a slowdown in the economy.

So that’s the macroeconomy. Secondly, the Romney/Ryan budget promises to spend more on the military while cutting taxes and cutting the deficit, and that means only one thing. If you look at the arithmetic, it means less investment in infrastructure, R&D, education … it just can’t add up any other way. And that means we’ll be growing more slowly in the future.

The irony is that these two things — lower growth now and lower growth in the future — means that our debt-to-GDP ratio won’t improve, it will get worse. So even if you were foolish enough to think that the debt-to-GDP ratio is the main determinant of future prosperity — which it’s not — the Romney agenda will fail.

And although I don’t like what’s called “presidential economics,” where you look solely at what happens under a particular presidential regime, the fact is that Romney has many of the same economic advisers that Bush did. Those economic advisers essentially doubled the debt in eight years. And that was in a period of relatively high growth. Why would we think that wouldn’t happen again? I don’t see any reason for that. Particularly when the global environment is more adverse.

And then the third part has to do with what kind of society we will be. If Romney wins, we will become a more divided society, a more unfair society. And that in turn will bring greater inequality, and will also undermine our growth.

Your most recent book is titled “The Price of Inequality.” Conservatives are pushing back, however, at the very idea that inequality is growing. One of Romney’s advisers just published an Op-Ed in the Wall Street Journal declaring, basically, that because everybody has a cellphone and an HDTV now, we’re better off than we were 10 years ago.

A lot of people living in shacks in South Africa also have cellphones and TVs, but that doesn’t mean they have an adequate standard of living — adequate nutrition or access to adequate healthcare, adequate life expectancies …

In any case, when we measure inequality we take into account the fact that the prices of some things go down while the prices of other things go up. That’s what we call “real income” — adjusting for those prices. And median household real income today is lower than it was 15 years ago.

You’ve made the negative case for how the economy will suffer if Romney is elected. Is there a positive case to be made for Obama? You’ve been one of the people on the left most critical of Obama’s efforts on the economy. Why should progressives vote for him now?

I think the main reason, quite honestly, to vote for him is that if he loses there could be a major step backward in every aspect. Not the least important of which is the importance of the Supreme Court, which would affect inequality of political power, as with the Citizens United case. The Court will also rule on basic human rights, gender rights, discrimination, things I think progressives should care a lot about.

But in terms of the economy, while I’ve been critical, there still has been progress in an awful lot of areas. Less progress than there should have been, less progress than was promised, but progress all the same.

Where do you see that progress?

Healthcare. Access to healthcare for everybody is an important step. It wasn’t the kind of deep reform that one would have liked where you would have done something about the pharmaceutical industry and health insurance industry and so forth, but it did result in increased access and that was terribly important. In education, getting the banks out of student loans saved $80 billion over 10 years. That’s a big deal. So while the housing program …

I was about to ask, what have been your biggest disappointments?

Housing policy has been a big disappointment. But compared to Bush, who didn’t do anything, and the Republicans, who haven’t proposed anything — Romney has been totally silent on the issue — at least Obama did something. So I am disappointed, but it represents a small step forward rather than zero. And I am worried that under Romney we will go back to the kind of deregulatory environment where we allow the banks to exploit our homeowners once again.

Looking ahead, are there things Obama could do that would represent a real step forward, rather than just consolidate what has already been achieved, or simply prevent going backward?

There aren’t many magic bullets, but let me talk about a couple things. Obviously, more progressive taxation — getting rid of the distortionary provisions in corporate welfare, special treatment of capital gains, carried interest — would make our economy more efficient and less unequal.

Conservatives seem to think if they try the same failed policies over and over again with different faces those regressive policies will magically work eventually.

How Fox News Created a New Culture of Idiots. Just a caution that this article makes some good points about how Fox has dumped down the news, but there is some strong language.

Last-Minute Ohio Directive Could Trash Legal Votes And Swing The Election

In Mitt Romney's Debate Performance He Proved That Shameless Lies Trump Facts

In Mitt Romney's Debate Performance He Proved That Shameless Lies Trump Facts

Mitt Romney turned in a polished performance in last night's presidential debate – and revealed himself to be an accomplished and unapologetic liar. In an evening where he sought to slice and dice the president with statistics, Romney baldly misrepresented his own policy prescriptions, made up numbers to fit his attacks and buried clear contrasts with the president under a heaping pile of horseshit.

Here are mendacious Mitt's five most outrageous statements:

1. "I don't have a $5 trillion tax cut." Romney flatly lied about the cost of his proposal to cut income-tax rates across the board by another 20 percent (undercutting even the low rates of the Bush tax cuts). Independent economists at the Tax Policy Center have shown that the price tag for those cuts is $360 billion in the first year, a cost that extrapolates to $5 trillion over a decade.

2. "I will not reduce the taxes paid by high-income Americans." Romney has claimed that he will pay for his tax cuts by closing a variety of loopholes and deductions. The factual problem? Romney hasn't named a single loophole he's willing to close; worse, there's no way to offset $5 trillion in tax cuts even if you get rid of the entire universe of deductions for the wealthy that Romney has not put off the table (like the carried interest loophole or the 15 percent capital gains rate.) The Tax Policy Center report concludes that Romney's proposal would create a "net tax cut for high-income tax payers and a net tax increase for lower- and or middle-income taxpayers." Moreover, some of Romney's tax cuts are micro-targeted at American dynasties, particularly his proposal to eliminate the estate tax, which would reduce his own sons' tax burden by tens of millions of dollars.

3. "We've got 23 million people out of work or [who have] stopped looking for work in this country." Romney is lying for effect. The nation's crisis of joblessness is bad, but not 23 million bad. The official figure is 12.5 million unemployed. An additional 2.6 million Americans have stopped looking for jobs. How does Romney gin up his eye-popping 23 million figure? He counts more than 8 million wage earners who hold part-time jobs as also being "out of work."

4. Obamacare "puts in place an unelected board that's going to tell people ultimately what kind of treatments they can have." Romney is reviving Sarah Palin's old death panels lie here. Obamacare does establish an Independent Payment Advisory Board to help constrain the growth of Medicare spending. The body has no authority to dictate the practices of the private insurance marketplace. And the law also makes explicit that this body is banned from rationing care or limiting medical benefits to seniors.

5. "Pre-existing conditions are covered under my plan." In the biggest whopper of the night, Romney suggested that his health care proposal would guarantee coverage to Americans with pre-existing conditions. This is just not true. Under Romney, if you have a pre-existing condition and have been unable to obtain insurance coverage or if you have had to drop coverage for more than 90 days because you lost your job or couldn't afford the premiums, you would be shit out of luck. Insurance companies could continue to discriminate and deny you coverage, as even Romney's top adviser conceded after the debate was over.

But conservatives and the media say that Romney won. In other words lies and moral corruption won. As if the USA was not already being dragged down the rabbit hole of moral nihilism by the conservative movement. Greed, theft, unpaid for wars, lying us into wars, bankrupting the nation - these things are patriotic according to the morally bankrupt conservative Republican movement. Romney;s lack of conscience is seen as a plus among that crowd. At Last Night’s Debate: Romney Told 27 Myths In 38 Minutes. Mitt and Republicans think the trip to the gutter is a race. Whoever can be the most soulless wins.

Conservatives think the improved job numbers are part of a conspiracy. Most people are made of about 75% water, conservative are made out of urban myths.

GOP in Florida: Crying Fraud, Then Creating It. When Republicans voted for criminal Rick Scott as governor, that was not a stupid mistake. They needed a 'Godfather" type figure as head of their organized crime organization.

Republicans have obstructed 3 jobs bills, Obama moving forward anyway

Why Is CNN Pushing Factually Wrong Picture of Paul Ryan Medicare Plan

Why Is CNN Pushing Factually Wrong Picture of Paul Ryan Medicare Plan

CNN's Sanjay Gupta claimed that the proposed changes to Medicare that Congressman Paul Ryan has offered would allow seniors to choose between "a voucher" system and "traditional Medicare," while keeping the system affordable. In fact, experts say the Ryan plan would threaten Medicare's long-term viability and potentially would increase seniors' medical costs by thousands of dollars.

CNN's Gupta: Ryan Plan Will Give Future Seniors Option To Retain "Traditional Medicare"

Sanjay Gupta Claimed Ryan's Proposal Will Give Future Seniors A Choice Between Voucher System And Traditional Medicare. On the September 28 edition of CNN's Early Start, CNN chief medical correspondent Sanjay Gupta reported on the differences between the Ryan Medicare plan and the Affordable Care Act and claimed that the Ryan plan would offer those under 55 "the option of getting a voucher to purchase private insurance, or they could stick with traditional Medicare":

    GUPTA: Romney and his running mate Paul Ryan proposed to cap malpractice insurance, cut Medicaid by $810 billion dollars over the next 10 years, give states more control over their Medicaid funds, overhaul Medicare. The overhaul? People now younger than 55, when they reach retirement, would have the option of getting a voucher to purchase private insurance. Or, they could stick with traditional Medicare. [CNN, Early Start, 9/28/12]

But Experts Say Ryan's Plan Threatens Medicare's Long-Term Viability

CBPP: Ryan's Promise To Ensure "Traditional Medicare Remains An Option" Cannot Be Kept. Paul Van de Water, an economist and senior fellow at the Center for Budget and Policy Priorities, wrote in March that Congressman Paul Ryan's plans for Medicare in his latest budget could lead to the unraveling of traditional Medicare:

    Chairman Ryan claims that his proposal "ensur[es] that traditional Medicare remains an option." Unfortunately, that's not the case. Under premium support, traditional Medicare would tend to attract a less healthy pool of enrollees, while private plans would attract healthier enrollees (as occurs today with Medicare and private Medicare Advantage plans). Although the proposal calls for "risk adjusting" payments to health plans -- that is, adjusting them to reflect the average health status of their enrollees -- the risk adjustment process is highly imperfect and captures only part of the differences in costs across plans that stem from differences in the health of enrollees.

    Inadequate risk adjustment would mean that traditional Medicare would be only partially compensated for its higher-cost enrollees, which would force Medicare to raise beneficiary premiums to make up the difference. The higher premiums would lead more of Medicare's healthier enrollees to abandon it for private plans, very possibly setting off a spiral of rising premium costs and falling enrollment for traditional Medicare. Over time, traditional Medicare would become less financially viable and could unravel -- not because it was less efficient than the private plans, but because it was competing on an unlevel playing field in which private plans captured the healthier beneficiaries and incurred lower costs as a result. Ryan also would allow private plans to tailor their benefit packages to attract healthier beneficiaries and deter sicker ones, which only makes this outcome more likely. [Center on Budget and Policy Priorities, 3/28/12]

CBPP: Voucher Systems That Include Medicare Option Could "Threaten Traditional Medicare's Long-Term Viability." In a September 2011 report titled, "Converting Medicare to Premium Support Would Likely Lead to Two-Tier Health Care System," CBPP explained that under a "premium support" system such as the one in the Ryan plan that was passed by the House in April 2011, "inadequate risk adjustment" could lead to healthier seniors abandoning traditional Medicare for private plans. The report explained that could leave only the less healthy in the traditional Medicare program, which could "drive up its costs and threaten traditional Medicare's long-term viability." [Center on Budget and Policy Priorities, 9/26/11]

Brookings Institute: Financing For Ryan Plan Would "Throw Into Doubt The Very Survival Of The Program." Brookings Institute senior fellow Henry Aaron evaluated the Ryan Medicare plan and concluded that "the financing for traditional Medicare would become progressively less adequate, throwing into doubt the very survival of the program":

Liberal media. The only people who think the media is liberal are the same people who dance with ghosts and think the Loch Ness monster talks to them in the shower - oh, and Republicans.

NBC’s David Gregory is a hack. he is of that right-of-center no real news school of journalism. Democrats says world id round, Republicans disagree. Though he has moved on to just making crap up like his conservative brethren - NBC’s David Gregory Misquotes Obama, Falsely Claims President Said ‘Al Qaeda Has Been Defeated’

Mitt Romney: Free Speech Is for Billionaires, Not School-Teachers

Mitt Romney's 47% World View is Dangerous and Hypocritical

Mitt Romney's 47% World View is Dangerous and Hypocritical

Will Moocherpalooza have an impact on the presidential campaign? It might. Mitt Romney, Paul Ryan and their allies have been decrying the “entitlement society” and supposedly low number of Americans paying federal taxes for some time now. But the specific language and circumstances of Romney’s comments at a May fundraiser, first reported in Mother Jones on Monday, may capture the attention of average Americans in a way those previous speeches and writings did not.

The episode may also undermine Romney’s support among members of a Republican elite that was already wary of him. Politically speaking, the most significant op-ed on Tuesday wasn’t the even-keeled critique of Romney by David Brooks, a conservative who cares about ideas. It was the more caustic and, apparently, more exasperated blast from Bill Kristol, a conservative who cares about winning elections. That’s going to resonate with the surrogates, strategists, and financiers whose support Romney desperately needs to remain competitive.

But, in the long run, whether this episode affects perceptions of Romney may matter less than whether it affects perceptions of government.

Romney’s argument is actually an amalgam of two separate, although related, claims that you hear all the time in conservative circles. The first is about who pays taxes and, more important, who does not. Romney pointed out that, today, 47 percent of Americans don’t pay federal income taxes. But Romney neglected to point out that most people still pay federal payroll taxes and state taxes, both of which are regressive. And most of the people who don’t pay income taxes now either paid them in the past or will pay them in the future. Romney really has no excuse for making this argument; critics, among them my valiant and persistent colleague Timothy Noah, have been pointing out these omissions for months. (And that's not to mention the fact that Romney himself pays relatively little in taxes, since he relies heavily on investment income that is subject to lower rates and can be easily sheltered.)

The other claim might seem the more defensible of the two: It’s the argument that many more people have become dependent on government programs, placing unsustainable claims on the federal treasury and reducing incentives to work. A seminal text for this argument is “A Nation of Takers: America’s Entitlement Epidemic,” an essay by Nicholas Eberstadt of the American Enterprise Institute. Its key piece of evidence is the observation that, since 1960, “government transfers to individuals” have risen sharply. According to Eberstadt,

    What is monumentally new about the American state today is the vast and colossal empire of entitlement payments that it protects, manages, and finances. Within living memory, the government of the United States has become an entitlements machine. As a day-to-day operation, the U.S. government devotes more attention and resources to the public transfers of money, goods, and services to individual citizens than to any other objective: and for the federal government, these amounts outpace those spent for all other ends combined.

Mark Schmitt, a regular contributor to TNR and senior fellow at the Roosevelt Institute, wrote an elegant critique of Eberstadt’s argument. So did Lane Kenworthy, a sociologist at the University of Arizona. As they note, Eberstadt is correct when he says that the entitlement state has expanded significantly in the last 50 years. But that increase reflects two factors more than anything else: Health care and old people. (Relatively speaking, the cost of low income programs outside of health care is actually declining.) In 1965, with the enactment of Medicare and Medicaid, the federal government assumed responsibility for financing medical care for the elderly, as well as the poor and disabled. It also boosted Social Security payments to provide more of the elderly with adequate incomes. The aging of the population and rising cost of medical care have made these propositions significantly more expensive over time. 

Are the people who benefit from these programs today takers rather than makers? Hardly. Most of these people contributed what they could towards he cost of these programs, via payroll taxes, during their working years. If they don’t contribute now—and, remember, the majority of them still contribute something, since Medicare has both cost-sharing and premiums—it’s because they are no longer capable of doing so. They’re too old or disabled to work, and their fixed incomes leave them relatively poor. As Jared Bernstein of the Center on Budget and Policy Priorities reminded me recently, median income for Medicare and Social Security beneficiaries is about $25,000.

The growth of these programs has placed significant new demands on the federal budget. That’s why there should be, and has been, a vibrant debate about how to make the programs sustainable, whether by reducing the money they send out or increasing the money they take in. The growth of other, more narrowly tailored programs (like welfare) has also contributed to the fiscal strain, although far less significantly. That’s why there should be, and has been, an equally vibrant debate about who is eligible for these particular programs and under what conditions they should get them. More nuanced conservatives, among them Brooks, Ross Douthat, and Ramesh Ponnuru, have been part of these discussions for some time.

But the fact that the entitlement state has grown shouldn’t, by itself, alarm us. It’s actually a sign of progress, because it’s a reminder that the government has stepped in to do what the market would not. We saw, in the years before Social Security, what the world looks like when seniors don’t have adequate pensions. And we saw, in the years before Medicare and Medicaid and (now) the Affordable Care Act, what the world looks like when people can’t afford to pay their medical bills. It was not pretty. But the price for addressing those failures was the creation of some massive government programs. They cost a lot of money, yes, but we all benefit from them at some point, as Schmitt noted in his essay: “Most of us, other than the permanently disabled, are givers and takers to government, because that's what it is to be part of a community or a nation.”

It also happens that in what has been called the "The Submerged State" - the part of government subsidies done largely through the tax code and other programs, Romney is one of the 47% who apparently, according to his words, needs to learn how to be independent. Two examples: Mitt Romney Benefited From Government Bailout: Report and Romney’s 'Crony Capitalism': Bain's Big Government Subsidies. In other words Romney and Bain are massive corporate welfare queens. So is every millionaire that buys a mansion whose mortgage is subsidized by tax incentives that we all pay for. Romney and his mindless followers have surely drunk the kool-aid. They live in a world totally detached from reality and guess what, they refuse to take responsibility for their lives and the damage their sick world view is having on the USA.