Naysaying the Economic Naysayers

Things are starting to look better economically in the United States. Not because of any particular thing that is going on, but because of several things that spark guarded optimism for 2013. Of course in expressing this optimism we cannot be naïve, nor can we ignore or deny the extreme resistance that remains in some quarters – particularly among the naysaying, sky-is-falling denizens of the Republican Party.

But as we acknowledge that resistance we cannot be distracted from the facts. The nation is, indeed, a long way from experiencing robust economic growth. (After all, we just learned this week that fourth quarter GDP was a negative 0.1 percent.) Yet, there are signs all around us that we are making steady strides toward coming to grips with what ails this nation economically. In doing so we may finally be able to make some fixes if we can just get enough people to accept policies over politics.

America is not in decline, no matter how often the extreme declare it. America is not on the verge of bankruptcy, no matter how loud the extreme proclaim it. America is not headed toward “European-style Socialism,” no matter how forcefully the extreme assert it.

How do I know this? Why do I express such optimism?

For one, the amount of investment some companies are pouring into their businesses. Just recently, General Motors announced that it plans to invest $1.5 billion in its plants around the country. The company said $600 million of that will go into its complex in Kansas City. Although the improvements will not result in more hiring at the plant it should help several businesses that supply the plant and will be assisting in its makeover. At the same time, Ford, Daimler and Nissan announced that they will work together to build fuel-cell electric cars by 2017, and Ford and Toyota have partnered to develop hybrid rear-drive trucks.

We also have more people recognizing the need to create an infrastructure bank to pay for numerous much needed projects, which should lead to jobs and economic growth, as Mark Thoma argued in his Fiscal Times article, "One Investment That Can Reduce Our Long-Term Debt." And even though the fourth quarter GDP numbers were not impressive, there were some impressive things in the report. For example, "real disposable personal income increased 6.8 percent," leading to a rise in both personal consumption and personal savings. There were also increases in nonresidential fixed investment (up 8.4 percent.) and residential investment (up 15.3 percent).

The icing on the cake came Friday when the Bureau of Labor Statistics released its January jobs report. According to the bureau's preliminary numbers, the nation added 157,000 private sector jobs last month. The bureau also revised its jobs numbers for November (247,000) and December (196,000). That means the country has experienced more than 30 months of positive job growth. Included in those January numbers were 28,000 construction jobs and 33,000 retail jobs. The education, health care, and business services industries each added 25,000 jobs.

In addition, for what might be the first time in many years, economists across the ideological divide have come to grips with one of the most argued points since the start of the Great Recession: It’s not about the national debt; rather it is about revenue, jobs, and economic growth. While that could be seen as a minor adjustment in emphasis, it is an important one because it removes the cover that so many hid beneath.

Economists from Paul Krugman to Bruce Bartlett to Jan Hatzius to Richard Koo to Alan Blinder to Lawrence Summers to James K. Galbraith to John Makin and Daniel Hanson have declared that the way to worry about the nation’s long-term deficit is to not worry, to stay calm, to deal with it in a few years when the economy is better.

“The federal government is not on the verge of bankruptcy,” economics columnist Martin Wolf said last week in the Financial Times. “If anything, the tightening has been too much and too fast. The fiscal position is also not the most urgent economic challenge. It is far more important to promote recovery. The challenges in the longer term are to raise revenue while curbing the cost of health. Meanwhile, people, just calm down.”

According to E.J. Dionne of The Washington Post, Wolf, a “thoroughly pro-market economist," offers excellent advice. Wolf is not alone.

In the same column, Dionne quotes conservative economist Bruce Bartlett, a former White House advisor to Ronald Reagan and George H.W. Bush, saying: “In fact, our long-term deficit situation is not nearly as severe as even many budget experts believe. The problem is that they are looking at recent history and near-term projections that are overly impacted by one-time factors related to the economic crisis and massive Republican tax cuts that lowered revenues far below normal.”

In his Jan. 29 column, “Outsourcing, Insourcing and Automation,” for The New York Times, Bartlett wrote that one of the major issues facing the nation is unemployment, in particular cyclical unemployment that is turning into structural unemployment. Cyclical unemployment, Bartlett argues, does not have the same long-term impact as structural unemployment, which occurs when workers’ skills do not match the jobs being created.

“The longer someone is out of work, the less likely that person is to find a job,” Bartlett wrote. “Skills deteriorate, younger workers tend to be hired for available vacancies, jobs move to new geographical locations and so on.”

According to former treasury secretary Lawrence Summers, we cannot “lose sight of the jobs and growth deficits that ultimately will have the greatest impact on how this generation of Americans live and what they bequeath to the next generation.”

Even the International Monetary Fund has admitted that it underestimated the damage poorly-timed austerity has on economic growth.

Meanwhile, economic analysts at Goldman Sachs recently told clients that this country still has the world’s strongest economy. Goldman’s analysts also said there are “key economic, institutional, human capital and geopolitical advantages the U.S. enjoys over other economies.”

For example, gross domestic product in the U.S. is almost $16 trillion, “nearly double the second largest (China), 2.5 times the third largest (Japan).” Goldman also says America will continue to enjoy an advantage over other nations because this nation's work force is younger and more energetic; America has greater natural resources, including oil, gas and arable land; America performs the greatest amount of research and development; and America is still the land of choice for motivated immigrants, including those who are highly educated.

So as James K. Galbraith said: Stop worrying about our long-term deficit problem because we don’t have one.

“Foggy rhetoric about ‘burdens’ that will ‘fall on our children and grandchildren’ sets the tone of discussion,” Galbraith wrote in an Aug. 9, 2011, article for The New Republic. “The concept of ‘sustainability’ is often invoked, rarely defined, never criticized; things are deemed unsustainable by political consensus. Backed by a chorus of repetition from the IMF, headline-seeking academics, think-tankers, and, of course, the ratings agencies.

“But there isn’t, in fact, a ‘long-term deficit problem.’ So long as interest rates stay below the growth rate, as they are, debt-to-GDP levels eventually stabilize and even decline. The notion that there is a big problem is pure propaganda based on pseudo-debate, pitting two viewpoints that nevertheless converge on the practical issue.”

Galbraith’s point from more than a year ago was recently supported by Makin and Hanson of the conservative American Economic Institute. The two concluded that trillion dollar deficits are sustainable for now because of low interest rates.

“The Chicken Little ‘sky is falling’ approach to frightening Congress into significant debt reduction has failed because the sky has not fallen,” the two wrote. “Interest rates have not soared as promised… Trillion dollar federal budget deficits have continued to be sustainable because the federal government is able to finance them at interest rates of half of a percent or less. Two percent inflation means that the real inflation-adjusted cost of deficit finance averages -1.5 percent.”

Indeed, it's about jobs and growth.

Republicans Say the Most _______ Things

Art Linkletter was right – kids do say the darndest things. If he was alive today he could start a new show – Republicans say the scariest, most dangerous, most asinine things.

That is especially true when it comes to guns, rape, and anything Obama.

Take a look at some of the recent statements from Republican leaders and their followers, particularly the Tea Party and evangelical Christians.

The National Rifle Association, whose top leaders have pushed arming teachers across the country in response to the Newtown, Conn., shooting, have vowed to fight any gun control legislation and have been warning members that President Barack Obama is coming after their guns. That argument has led to a right-wing declaration that a civil war is brewing in this nation.

For example, James Yeager, the chief executive of Tactical Response, which teaches people weapons handling and other tactical skills in Tennessee, produced a YouTube video in which he declared that he will kill anyone who tries to confiscate his weapons. In the clip, Yeager said increased gun measures would “spark a civil war” in which he would be “glad to fire the first shot.”

“If it goes an inch further,” he said, “I’m going to start killing people.” While he now states that his pledge to “start killing people” was just overwrought anger, he has not backed away from his overall claims.

No wonder since Fox has become the major purveyor of the gun control will lead to insurrection meme.

Bill O’Reilly recently warned that we could have a civil war if Obama uses executive orders to alter gun control laws. O’Reilly said Obama could “chose to be a good President or whether he just wants to have blood in the streets.” O’Reilly went on to suggest that the President should cut spending on such things as Medicare and Social Security to avoid armed conflict.

O’Reilly was not the only rabid Fox employee to talk about insurrection. Several conservative – is there any other kind? – Fox contributors compared the President to Hitler and Stalin, and cited Nazi Germany to argue against his policies. They also warned of civil war, revolution, and insurrection if Obama’s policies on guns, spending, and entitlements are enacted.

Brian Kilmeade and Steve Doocy told their Fox and Friends audience that if the Obama government tried to confiscate guns nationally “there would be an insurrection.” A short time later, Todd Starnes, a Fox radio host tweeted: “I can assure you the federal government will not be confiscating the Starnes family guns,” which seems reasonable since there has been no recommendation that federal officers go door to door taking guns out of people’s homes.

Columnist Arthur Herman wrote in a Jan. 3 op-ed on FoxNews.com that riots in Argentina foreshadowed a coming civil war in America.

“Some have said my warnings about a coming civil war between makers and takers are exaggerated,” Herman wrote. “It’s true that Argentina’s politicians have been waging class warfare since Juan and Eva Peron – and they aren’t fazed when it turns bloody. Obama and the Democrats are relative newcomers to the game. But Argentina reveals who really suffers when those who create a nation’s wealth get mugged by those who spend it.”

Then there are the rape comments.

Months after Todd R. Akin and Richard Mourdock destroyed any Republican chances of picking up U.S. Senate seats with asinine comments about rape, Republican Rep. Phil Gingrey of Georgia decided to come to Akin’s defense by saying Akin was “partly right” in his declaration that in the case of legitimate rape, women’s bodies have the ability to shut down to avoid pregnancy.

“I’ve delivered lots of babies, and I know about these things,” said Gingrey, a former OB/GYN. “It is true. We tell infertile couples all the time that are having trouble conceiving because of the woman not ovulating, ‘Just relax. Drink a glass of wine. And don’t be so tense and uptight because all that adrenaline can cause you not to ovulate.’ So he was partially right wasn’t he? But the fact that a woman may have already ovulated 12 hours before she is raped, you’re not going to prevent a pregnancy there by a woman’s body shutting anything down because the horse has already left the barn, so to speak. And yet the media took that and tore it apart.”

As if such wild comments are not enough, Republicans have threatened to shut down the government or default on the nation's debt in an effort to force the President and Democrats to cut the safety net.

But the most egregious attacks may revolve around Obama’s efforts to fill his cabinet. Republicans have attacked him for seeking like-minded appointees. They have also assailed him for recommending a former Republican Senator, Chuck Hagel, for a major security post. Apparently, reaching across the aisle for talented people is against the rules.

Sen. John Cornyn, a Texas Republican, says Hagel should not be confirmed as Secretary of Defense because Hagel was against imposing economic sanctions on Iran. One would think that would make Hagel a good candidate in the eyes of the GOP since its members spent the last election saying the sanctions are weak and ineffective. The Iran sanctions, according to Republicans, made Obama weaker than Jimmy Carter.

Then there are the attacks against feeding poor children in America. Guest on Fox Business’ Varney & Co. spent a great deal of time recently claiming that children receiving food assistance through the Supplemental Nutrition Assistance Program are becoming a “group of entitlement nation children.” Feeding those kids through the SNAP program, the Fox contributors said, means those children will grow up with a sense of entitlement that will hamper their productivity throughout life.

We can’t forget the comments concerning same-sex marriages. According to one conservative preacher, an acceptance of homosexuality and same-sex marriages mark the end of time. The pastor, Scott Lively, who is on trial for inciting human rights abuses against members of the LGBT community in Uganda, recently said that the great flood of the Bible was caused by people writing songs about same-sex marriages.

“We need to remember that in the time leading up to the Flood what the rabbis teach about the last straw for God before He brought the Flood was when they started writing wedding songs to homosexual marriage and Jesus said that you’ll know the End Times because it will be like the days of Noah,” Lively said in an interview with Sandy Rios of the American Family Association.

“I think this is the issue of the End Times, homosexuality,” he continued in the interview. “It’s present, if you do a careful investigation of all the scriptures dealing with this from the beginning and all the way to the end, God is painting a very clear picture that this represents the outer extent of rebellion against Him in a society and the last thing that happens before wrath comes.”

His comments echoed those of another conservative southern preacher, Aaron Fruh of Alabama, who also blamed the biblical flood on homosexuality. Fruh said God “knew that the people on the earth were going to destroy themselves through same-sex marriage.”

Of course, there is also the denial of climate change (Fox asked if the government faked the hottest year on record data released recently); Wyoming’s effort to nullify any federal firearms regulations by making it a felony punishable by up to five years in prison for any federal official to enforce any gun laws; the downplaying of a government default on the nation and the world economy; the hostage style negotiations over the debt limit; and Sean Hannity’s attacks against John Brennan.

Indeed, Republicans say the scariest, most dangerous, and most asinine things.

On the Redolence of Washington

There is a repugnancy that permeates our political system, a malodor that wafts from Capitol Hill across this vast nation. It hovers not only in the air around us, but also reaches deep into our social consciousness, and leaves a stench that overwhelms ours and the nation’s souls. Occasionally, though, a strong wind comes through providing us with a cleansing or a reprieve.

The deal to avert the so-called fiscal cliff was such a moment. For a short time, it seemed that Republicans and Democrats on Capitol Hill smelled what the rest of us had smelled for the last four years. Our lawmakers in Washington came together, albeit at a late hour, to keep us from plunging in what many had described as an economic abyss. Although the deal was less than perfect, it gave many a moment of hope, a sense that the best way to pass meaningful legislation is to begin in the U.S. Senate.

Of course, it was a fleeting moment. Before the fiscal cliff bill could reach President Barack Obama’s desk for signature Republicans had already returned to their recalcitrant ways.

House Speaker John Boehner, who had thrown the fiscal cliff debacle to the President and Senate, announced to the nation that his party would again use the debt ceiling in seeking to wrest spending cuts from the President and Democrats.

His statement was reinforced by Sen. John Cronyn of Texas, who declared that the GOP is willing to shut down the government in order to extract concessions from Obama.

“The coming deadlines will be the next flashpoints in our ongoing fight to bring fiscal sanity to Washington,” Cornyn wrote in an op-ed for the Houston Chronicle not long after a fiscal cliff deal was reached. “It may be necessary to partially shut down the government in order to secure the long-term fiscal wellbeing of our country, rather than plod along the path of Greece, Italy and Spain. President Obama needs to take note of this reality and put forward a plan to avoid it immediately.”

Cornyn, like many of his GOP colleagues, has decided that the only way to go is to slash the safety net that helps to support as many people in the red states as it does those in the blue states.

“Republicans are more determined than ever to implement the spending cuts and structural entitlement reforms that are needed to secure the long-term fiscal integrity of our country,” Cornyn wrote days after Sen. Pat Toomey, a Pennsylvania Republican, said Republicans should be ready to tolerate a partial government shutdown in the battle over the debt limit.

The declarations by Boehner, Cornyn, Toomey, and other Republicans of course sent the pundit class into a tizzy. Within hours of the fiscal cliff deal and the Republican announcements, pundits began debating, pontificating on, and dissecting the winners and losers of that deal as if the obstinate players were the only ones that mattered.

But while the talking heads search for new ways to describe the game they help promote the rest of us should look deeper for answers and connections. The problem is we may not find many.

The Jan. 1 deal does bring much needed revenue – granted not as much as desired – to the federal coffers. It also preserves unemployment insurance – while not a substitute for employment – for 2 million people without incomes. It will keep the cost of milk – already high – from rising through the roof. And it will allow poor, working, and middle-class people to continue using the child and tuition tax credits to lower their tax bills.

But what price will we have to pay?

Indeed, the fiscal cliff deal fell short on many fronts. It failed to include a stimulus package. It failed to avert another battle over the debt ceiling. It allowed the temporary payroll tax cut to expire. It did not raise taxes on capital gains and estates high enough. And it did not solve any long term fiscal problems.

More important, it put us back where we were 18 months ago, preparing to fight another battle with a political party that believes not only in taking hostages, but in executing them as well.

That is why we may not find those deeper answers and connections.

The fact that the deal was negotiated by Vice President Joe Biden and Senate Minority Leader Mitch McConnell signals just how bad things have become in Washington in general and the House of Representatives in particular.

That so many urged the President to allow the Bush-era tax cuts to expire in an effort to gain greater negotiating leverage over the Republicans shows that too many people in Washington fail to recognize the real consequences of such actions. Theirs are arguments steeped in politics not policy.

For the millions of people whose unemployment ran out a few days before the deal was struck, it was no game. Yes, Congress could have passed a bill after Jan. 1, resulting in retroactive benefits. But unless one has lived from paycheck to paycheck one does not understand how a delay, even of a few days or weeks, can create havoc. Allowing those benefits to expire would have caused real harm to real families, something lawmakers should avoid at all costs.

The problem of course is that Washington is unable to do anything – even the things on which all parties agree – until the last moment

“Debt-ceiling dilemma: In the short run, it enables Republicans in Congress to excite their base about entitlement reform that base doesn't really want. (After all, it's the over-65 Republican base that collects most entitlements.) In the long run, it hardens the image of the congressional GOP as a collection of desperadoes who can never safely be trusted with power," David Frum, a The Daily Beast writer and former speechwriter for George W. Bush, said after the fiscal cliff deal.

The debt-ceiling dilemma and the Republican response so far also remind us that the slightest shift in the wind can bring back that fetid aroma emanating from inside the Beltway.