Saturday, July 30, 2011

Spending or revenue?

So not only do I read Jack Kelly and watch Meet the Press, I also like Bill Maher's Real Time on HBO on Fridays. On the most recent episode, Maher's discussion panel had the co-founder of FreedonWorks, Matt Kibbe (FreedomWorks is Dick Armey's astroturf (as opposed to grass roots) organization that helps/funds the Tea Party). It also had Margaret (I believe) Hoover, grand daughter of Herbert and employee at the Hoover Institute (in other words, a Republican) and also Elliot Spitzer (no introduction needed). The Hoover woman harped and interrupted about government spending (in response to Maher's initial comment about the debt ceiling). Maher responded that the stimulus is only 4% or 7% of our current debt and Spitzer tried to get her (or anyone) to admit our situation is Bush's fault. Then later Spitzer suggested that instead of a spending problem, we have a revenue problem. The economy has not rebounded from the contraction during the financial crisis at the end of the Bush administration, so tax receipts are down. This shut up the Hoover woman, but it is not as though she walked back her claims about a spending problem. By the way, Krugman talked about revenue here.

Which brings us to Jack Kelly's latest column. He regales us with the story of the Gordian knot, which is a perfectly fine little story. He also complains that in a recent poll a majority of Americans think things will get worse next year. Kelly doesn't say anything about whether that poll or any other recent poll says who Americans think can handle our problems (Democrats including Obama come off badly, but inevitably Republicans come off worse).

In any event Kelly goes on to choose 1960 as his point of comparison (fifty years ago, admitted a nice round number) and makes negative comparisons in terms of spending, debt and regulations. Of course, Eisenhower had really wanted a balanced budget, and we were yet to get concerned about having clean air and water (anyone remember Pittsburgh in the sixties, or the burning Cuyahoga?). So, in the immediate actual context of the events of 1960, in the previous eight years the government had been trying to create an optimal financial situation. Interestingly, that was not enough to get Richard Nixon elected, instead the American public elected a Democrat.

But the important point, I think, is that always the strength of the American economy is the product of the actions of the most recent administration, at least in the early years of a new administration.

But past the lack of validity of Kelly's comparison between 1960 and 2011 is that he is mis-characterizing our problems, just like the Hoover woman did on the Maher show. Again, our problem is not spending but revenue. Of course, revenue is a tricky thing in a recession. But at least we could look at the high end of the Bush tax cuts before we ct aid to the poor, infirm, unemployed and elderly. And let's keep in mind that those low tax rates (really low marginal tax rates), the zero percent tax collected from corporations and the subsidies to oil companies (and no doubt others) are not helping our revenue picture. These are the places we should look, not at agencies, spending or any of the rest.

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