Trickle Down Revisionism

That was a humdinger of a speech that Hillary Clinton delivered last week, packing more nonsense into a 30-second sound bite than most politicians can manage in an hour-long oration. Speaking at a rally on behalf of Massachusetts’ Democratic gubernatorial nominee Martha Cloakley, which is outrageous enough by itself, Clinton warned an adoring audience “Don’t let anybody tell that, uh, you know, it’s corporations and businesses create jobs,” and added “You know that old theory, ‘trickle down economics,’ that has been tried, that has failed. It has failed rather spectacularly.”
Hearing such astounding ignorance from a woman widely presumed to be the next president of the United States was alarming enough, and the roar of the crowd was downright dispiriting. Given that it was a Democratic gathering in Massachusetts it is possible than a smaller-than-usual proportion of the crowd held jobs created by corporations and businesses, but even in that bastion of liberalism any crowd anyone anyone who was around in the ’80s should know better than to cheer that tired old trope about the failure of “trickle down economics.” For those too young to have experienced that halcyon age, “trickle down economics” was the derisive nickname that the left attached to President Ronald Reagan’s policies of aggressive tax-cutting and de-regulation and generally getting out of the economy’s way. Instituted after too many desultory years of “stagflation” the policies reduced a runaway inflation rate to a near-optimal level and then set off a record-setting run of economic expansion that lowered the the unemployment while increasing the labor participation rate, boosted median household income, brought down the poverty rate, launched revolutions in consumer electronics and telecommunications and other crucial industries, doubled federal revenues and financed a defense build-up that brought the Cold War to a victorious conclusion, and was agreeable enough to the American that Reagan won 49 states in his re-election bid and saw his vice president elevated to the top job four years later. It is true that there were deficits, although the numbers seem quaint by today’s red-ink-soaked standards, and there were all those videos bands with big hair and skinny ties, but it’s hard to see this record as a disaster. All true-believing liberals of the time regarded this as a spectacular failure, however, and have stuck to the story ever since.
Oddly enough, they’ve had considerable success in this effort. “Trickle-down economics” has long been a pejorative, to the point that its adherents insist on “supply side economics” or even “Reaganomics” to avoid the connotations, and by now most people have developed a clear recollection of its spectacular failure. We recall a a fellow patron at a local tavern who was still cursing “trickle down economics” as a failure, and when we recited all the same indices recounted above he said “Yeah? Well, I didn’t get rich,” and a similarly subjective understanding of economic history has given his self-serving theory wide currency. A large portion of the electorate is too young to recall the fall in the inflation rate and the rise is gross domestic product and the rest of what happened in the trickle-down days, and they’ve all been educated by public school teachers who also didn’t get rich in the ’80s, and by now any candidate promoting lower taxes and less regulation and getting out of the economy’s way will surely be be tarred with the slur of “trickle-down economics.”

Mark Twain would probably be sick of hearing it repeated by now, but he famously remarked that “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so,” and the mis-remembering of “trickle down economics” is an excellent example of the aphorism. There aren’t plenty of them, from the do-nothing policies of Herbert Hoover and how the New Deal ended the Depression to the military defeat America suffered in the Tet Offensive to the black teenagers gunned down on the streets by white racists freed by an uncaring justice system, but the nonsense about “trickle down” economics is especially troublesome. A public gullible enough to believe it is likely to also believe the upcoming narrative about the spectacular success of Obamanomics, and to elect a woman who doesn’t believe that corporations and business create jobs.

— Bud Norman

Gloom and Doom and Whom to Blame

We’ve been espousing gloom and doom for the past many years, and it seems the rest of the country has at last caught up to us. No less a mainstream source than the Politico web site has taken measure of the latest public opinion polling and distilled it into the headline “Everything is terrible.”
A cursory glance at the latest headlines easily explains the widespread sentiment. The post-war international order is breaking down across the globe, the social order is unraveling around St. Louis in a series of riots, an invasion of unaccompanied minors continues on the disappearing southern border, and as the youngsters head back to school their parents’ and teachers’ bake sales are being subjected to bureaucratic bullying. There are stray stories about a suspiciously strong market and an improving labor market, although if a closer look that the former is a result of inflationary money-printing by the Fed and the latter its mostly a matter of part-time jobs going to those invaders from the southern border, and most people seem more convinced by their diminishing bottom lines than by the press. At this point, judging by the Politico analysis, it’s just a matter of assigning blame.
The left-leaning publication seems hopeful that there’s enough of it go around stave off another mid-term shellacking by the Republicans, and cites the example of a Senate race in North Carolina where the Democratic incumbent holds a lead despite some being unfavorably regarded by a majority of the state, but it seems unlikely to be apportioned in equal measures. Foreign policy is mostly a presidential prerogative, and efforts to blame the current mess on the president who left office six years ago are growing tiresome, especially when they’re a result of decisions the current president has repeatedly bragged about. There’s no way of knowing what happened in the police shooting that touched off that St. Louis rioting, although it’s a safe bet that the liquors stores and Taco Bells that are being targeted had anything do it, and in any case it is yet another reminder that the president’s promised post-racial America has not yet arrived. That invasion on the southern border can hardly be blamed on the welcoming attitude of Republicans, not after they’ve been relentlessly portrayed as xenophobic racist rednecks, and the president’s executive actions to defer deportations of unaccompanied minors seems a far more likely explanation. The crackdown on school bake sales is directly attributable to to the current administration, as are countless other burdensome and silly regulations. Despite the best efforts of the press to pretend that Sen. Harry Reid isn’t the majority leader in the do-nothing half of Congress the Republicans only control one half of one branch of the government, and given the president’s low ratings on his economic policies there’s not likely to be much of a market for the idea that our current sluggishness is a result of too little Obamanomics.
There is plenty of blame to go around, of course, and among those registering their disgust to the pollsters are bound to be a number of liberals who believe the president just hasn’t been appeasing enough in his foreign policy or angry enough in his racial denunciations or friendly enough in his attitudes to southern border invaders or exhaustive enough in his micro-regulation of America’s diet, and that just a few more trillion dollars of federal spending would have set everything right, but we doubt there are enough of them who will march to the polls with hope and change in their hearts to affect the mid-term elections.

— Bud Norman

When Winter Lingers into Summer

You might not have noticed, what with all the political scandals and foreign crises and invasions of unaccompanied minors and soccer games vying for your attention, but the American economy remains very, very lousy. According to the ultimately official numbers that were released with little fanfare this week, the American economy is lousier than it’s been since the bad old days of the ’08 meltdown.
The first and most ballyhooed estimate of the first quarter’s Gross Domestic Product was for 0.1 percent growth, which was horrible enough but at least kept alive a streak of anemic growth and could plausibly be blamed on the miserably cold winter that had afflicted much of the nation. That was more quietly followed by a revised estimate of a 1.1 percent decline, and the administration’s apologists arguing that the winter was even worse than they’d realized and it would have been more dire if not for the miracle of Obamacare causing an uptick in health care spending. Only the most nervous sorts of investors and the hard-core news junkies would have heard about the final report of a 2.9 percent decrease in GDP, which is even harsher than the past winter and includes the unsettling news that Americans actually spent less money on their health. Upon closer examination the numbers become even more dismal, with declines in private inventory investment, exports, state and local government spending, and residential and non-residential fixed investment that cannot be explained by snowy roads and falling temperatures.
Still, those ever-bullish proponents of Obamanomics in the popular press are reassuring their readers that the lazy, hazy days of summer will correct the situation. Presumably this is the time of year when a young executive’s fancy turns to thoughts of private inventory investment, and everyone will be herding the kids into the car and hitting the road to a relaxing yet economically stimulative vacation despite the gas prices rising from all those foreign crises that have nudged the economy off the front pages. Those of us less enamored of the high-tax, high-regulation, high-minded anti-caplitalist scheme that has been imposed on the American economy the past six or so years remain bearish.
The smart fellows over at zerohedge.com note that after the miserable winter even if spring and summer and fall bring the rosy 3 percent growth rates that the government has been promising it will average out to a meager 1.5 percent growth for the year. They don’t seem at all confident of that, either, noting that the past 50 years of economic history have never found two years with growth of less than 2.6 percent that weren’t followed by a recession. After a long stretch below that economic Mendoza line another quarter of contraction would force the headline writers to use that dreaded “R word,” and the economy would be once again jostling with the latest scandals at home and catastrophes abroad for news space.
Such dire news should make the stock markets happy, as it will likely force the Federal Reserve Board to keep printing up money and pushing down interest rates at least through the mid-term elections next fall, but it will have an unsettling effect on those portions of economy that make their money honestly. All those scandals and crises don’t inspire much confidence in the nation’s leadership, either, nor do they bode well for the price of energy. Perhaps that invasion of unaccompanied minors from will rescue the economy, but even in the midst of a wet and warm summer we’re still feeling those wintertime blues.

— Bud Norman

That Confounding Obamanomics

Perhaps it’s because Barack Obama’s genius is so far beyond the comprehension of mere mortals, but even after four years of pondering we’re still having the hardest time understanding his economic theories,
We’ve never quite grasped, for instance, the part about how the economy crashed in 2008 and has never fully recovered because the income tax rates for the top 2 percent of earners were set a few points too low way back in the dark days of the Bush administration. So far as we can tell the president has never attempted to explain this counter-intuitive contention, and instead seems content with the knowing nods that it always gets from his avid admirers, but we’d love to hear him walk us through it some day. We thought the recession had something to with the government’s insistence that the banks make hundreds of billions of dollars in home mortgage loans to people who were never going to be able to pay the money back, but the president has never made any mention of that so there must not be anything to it.

Some people have explained on the president’s behalf that the too-low tax rates for the hated rich caused the deficit to rise, which somehow caused all those people to default on their mortgages, and they seem to truly believe this. When we note that federal revenues actually increased in the years after the tax rates were lowered, and continued to rise until all those bad loans brought the banks down, they always respond with an exasperated sigh that sounds quite convincing. We also note that the deficits have doubled since Obama took office, but apparently this is also Bush’s fault, and we’re assured that deficits are necessary to stimulate the economy.

It makes some tenuous sense, we suppose, that if the too-low tax rates caused the recession then upping them a few points would restore the nation’s economic health, but that leaves us wondering why the president is also insisting on another round of multi-billion dollar stimulus spending. According to one story the spending is needed to offset the economic drag of a tax hike, but if so it would seem much simpler to just skip the tax hike. Adding to the confusion, the proposed spending would add to the deficit that is said to have caused the economy to tank and remain tanked, but maybe it will only add to the good kind of bigger deficit that stimulates the economy.

All those trillions of dollars of deficit spending over the past four years don’t seem to have done much stimulating, not at first glance at the statistics measuring economic growth and job creation, yet the president’s many fans insist that without it everyone in the country would now be rubbing sticks together in caves and shooting each other over the last bushel of grain. There’s no way of proving this, economics being such a dismal science, but neither is there any way of disproving it so we’ll just do the fashionable thing and take the president’s word for it.
We’re also assured that no matter how many trillions of dollars of debt accrue there will none of the negative consequences that have followed in Greece, Spain, Argentina, or any of the other countries that have taken such a profligate path. Why this is so we’re not sure. Something to do with American exceptionalism, probably, although the president only believes in that to the same extent that the Greeks believe in Greek exceptionalism.
Oh well, there’s another four years to figure it all out. We’re sure that happy days will be here again by then, and the genius of it all will be clear.

— Bud Norman

Obamanomics Explained

For more than three years, ever since President Barack Obama was elected on a promise of hope and change, America has been waiting for the speech that reveals his bold economic vision and precisely explains what kind of transformational change he hopes to effect. That speech finally arrived last week when Obama told an Arizona audience that he envisions “an America where we build stuff, and make stuff, and sell stuff all around the world.”

We have no fancy-schmantzy economics degree, and are therefore only vaguely familiar with such technical terms as “build,” “make,” “sell,” and “stuff,” but we suspect that Obama might be on to something. Counter-intuitive as it might seem, an economy based on both building and making things, and then selling them, could be viable. Indeed, now that the idea has been laid out in the crystalline prose that has earned Obama a reputation as the greatest orator since Demosthenes, one is left wondering why nobody ever thought of it before.

While speaking a day later at a campaign event in Las Vegas, Nev., a city that somehow survives on a markedly different economic model, Obama elaborated on his so-crazy-it-just-might-work scheme by saying that he wants an America “where we’re making stuff and selling stuff and moving it around and UPS trucks are dropping things off everywhere.” This plan omits the building of stuff but retains the making of it, an elegant simplification, then adds the brilliant idea of moving the stuff around, perhaps to the people who bought it, although Obama was not clear on this point.

We assume that the moving around of the stuff will be done exclusively in UPS trucks because that company’s workforce is more heavily unionized than that of its main competitor, Federal Express, and yet not as inefficiently government-run as the United States Postal Service, but we hope that future Obama orations will answer a few nagging questions that remain

In both of the aforementioned speeches Obama devoted much time to his call for a higher tax on the wealthiest Americans. Apparently the current rates prevent the building, making, selling, and moving around of stuff, but Obama did not explain why this is so. We do know that Obama’s insistence on higher taxes for the rich is not intended to exploit any envy of the rich, however, because he assured us that “Nobody envies the rich.” He sounded genuinely baffled by the suggestion that anyone does envy the rich, as it is a well-known fact that all people regard them with pity. The rich have to eat all that caviar, ride around in fancy automobiles, and consort with glamorous women, after all, and thus will never know the simple pleasures of ground beef, aging pick-ups, and a drunken peroxide blonde at closing time.

We’re also wondering who will decide what stuff to build and make, who to sell it to, and at what price, and except for the part about the unionized UPS trucks we’re not clear who will determine how and where the stuff is to be moved around. Such weighty decisions cannot be left to the people who are doing the building, making, selling, and moving around, of course, so we suggest that a government agency be formed to ensure that any building, making, selling, or moving around of stuff is strictly regulated by at least one regulator per builder, maker, seller, or moving around person. This would not only help to achieve full employment, but the agency could also make sure that the building, making, selling, and moving around of stuff is done only by individuals or corporations or that have made the correct campaign contributions, as with Solyndra.

Having already told us that “At some point, you’ve made enough money,” Obama should also let us know when we’ve built, made, sold, and moved around enough stuff, and can get back more spiritually rewarding pursuits such as community organizing. We expect that at some point in Obama’s post-presidential career as a speaker, writer and corporate board member we’ll find out exactly how much money is enough, and expect that it will prove a very large sum, but he should set a limit now so that no one will be in danger of expending any excess energy.

Building, making, selling, and moving around stuff is darned hard work, after all, just like figuring out this economics stuff.

— Bud Norman

Stimulating Reading

Few things in life provide as much voyeuristic thrill as a leaked memo, at least for people afflicted with a politics obsession. Previously the most tantalizing batch of purloined documents we’d come across were the embarrassingly frank e-mails hacked from some alarmist climate scientists a few years back, but even those juicy missives might be topped by the “sensitive and confidential” memo recently provided to The New Yorker.

The 57-page document was written in December of 2008 by Larry Summers, then an economic adviser to President Barack Obama, offering advice to his boss on the “stimulus plan” being developed by the White House. Filled with arcane economic and political arguments, and laden with the awful bureaucratic jargon common to inter-office communications, the memo makes for sluggish reading, but critics of the plans who slog through to the end will find plenty of vindicating nuggets along the way.

James Pethokoukis, one of the smart guys at the American Enterprise Institute, discovered “11 stunning revelations” in the memo. One was that the stimulus was intended “as a key tool for advancing clean energy goals and fulfilling a number of campaign commitments.” We find this stunning in much the same way that Claude Rains’ Captain Renault was “shocked, shocked” to learn of gambling at Rick’s American Café in “Casablanca,” but are pleased to find confirmation for a long-held suspicion that the stimulus bill wasn’t crafted for the sole purpose of stimulating the economy.

Also stunning to Pethokoukis was Summers’ warning to Obama that the deficit spending for the bill was greater than the campaign had promised, posed serious dangers to the long-term health of the American economy, and that no one at the White House seemed to have any idea what to do about it. Although we are somewhat stunned to learn that Summers was ever so prescient, the rest of these revelations are not surprising. Another of Pethokoukis’ stunners was Summers’ admission that “it is difficult to identify feasible spending projects on the scale need to stabilize the macroeconomy,” a highfalutin way of putting what Obama himself laughingly admitted when he said that “shovel-ready was not as shovel-ready as we expected.”

Summers’ memo also reveals that the stimulus bill could have been worse, and one might even say stunningly worse. Several administration officials wanted more spending, fewer tax cuts, and using the courts to force massive mortgage principal write-downs, all ideas that were rejected not because of their inherent craziness but for fear they would outrage international financial markets, the American public, and even congressional Democrats. Only one economist consulted by the Obama team, Greg Mankiw, now an advisor to Republican candidate Mitt Romney, voiced any skepticism about the Keynesian assumptions underlying the stimulus plan.

The New Yorker might seem an unlikely publication to reveal such a document, given its previous enthusiasm for all things Obama, but rest assured that Ryan Lizza’s lengthy article strives mightily to make the best of it. He begins by noting the angry, divisive, and harshly partisan atmosphere that prevailed at the time, caused entirely by those crazed right-wing extremist Republicans, and recalling the glorious promise of hand-holding unity offered by candidate Obama. Lizza concedes that perhaps the Obama of ’08 wasn’t an entirely immaculate messiah, noting his hypocritical decision to forgo public campaign funding in order to blanket the airwaves with negative advertising, among other things, but he clearly blames Obama’s opponents for preventing a more expensive and therefore better stimulus plan.

Democrats so thoroughly controlled both chambers of Congress at the time that the stimulus was passed with few Republican votes, and Obamacare with none at all, but Lizza helpfully explains Obama’s fear of being “caricatured by the right-wing press” as a free-spending liberal restrained his ambitions. Although Lizza seems slightly disappointed that Obama didn’t turn out to be the transformational figure of his campaign, a failure entirely attributable to those darned Republicans, he settles for portraying Obama as the moderate, centrist fellow he also claimed to be.

Even in the midst of such strained apologetics, however, Lizza makes a few grudging concessions to Obama’s critics. He notes that Obama’s most ambitious proposals, so-called “moon shot” programs such as smart grid energy systems and high-speed railroads, were found to be well beyond the government’s means and had little support even among a star-struck Democratic congress. Even the actual moon shot programs at NASA wound up taking budget cuts. Lizza even admits that “Obama didn’t remake Washington.”

Ending on the obligatory high note, though, Lizza recalls the heady days of total Democratic control as “one of the most successful legislative periods in modern history,” and repeats the now-familiar claim that Obama “saved the economy from depression.”

The stimulus bill objectively failed to live up to the claims that were made for it at the time, by the administration’s own predictions it has made things worse, and the reckoning for its deficit spending might yet come crashing down us, so its defenders have to say something, and they’re saying that it saved us from catastrophe. The boast can’t be disproved, as there is no way for economists to conduct a laboratory experiment that recreates the economic circumstances of early 2009 and tests what would have happened without the stimulus, but one can doubt it. The claim that economic cataclysm would have resulted if we hadn’t racked up $800 billion in debt, handed it out to Democratic Party allies, blew millions of it on far-fetched and soon gone “green jobs” run by campaign contributors, and forestalled the necessary changes in state budgets for two years, is going to be a hard sell.

Thanks to Lizza, though, at least we have documented proof that someone in the White House had at least pondered the possibilities.

— Bud Norman