Kelly fights economics, does economics win?

So this week Jack Kelly turns to economics. He presents a damning comparison (that he implies actually Democrats are making) between Obama and Ronald Reagan. He then presents instances of how Republican governors are beating Democratic governors during the Great Recession. I will address these as best I can.

But in someways maybe the most interesting thing is how Kelly starts his column. He begins with the beginning of the Dickens classic "A Tale of Two Cities": ""It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness""and""It was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair."".

Kelly suggests that Democrats and Republicans embody these traits:

"To get the economy moving again, increase spending, bail out failing businesses, invest taxpayer money in "green" technologies and redistribute wealth, Democrats think.

Reduce government spending and debt, lower tax rates, slash government red tape, Republicans think.

What is Light to Democrats is Darkness to Republicans, and vice versa. Both approaches have been tried. They've produced very different results."

Does this count as insightful? In my opinion, it does, to some extent. But it is the equivalent of Mitt Romney's assertion that income inequality should only be discussed in "quiet rooms" (in other words, only whispered about, not the subject of protest signs and Occupy camps). Yes, Republicans are using a different sort of economics than Democrats do. Ron Paul states he looks forward to the day when we will all say "We are all Austrians now", referring to the Austrian school of economics. I don't know that Romeny and Gingrich particularly embrace Friedrich Hayek, but certainly neither man publicly rebuked Congress when they held the debt ceiling hostage. As Kelly says (whether there is a theory that supports it or not) Republicans believe in cutting spending and red tape and taxes. The assumption is that growth will result as the free market is unfettered, and that even though tax rates are reduced, the revenue will explode. Of course, that would require incredible growth.

I have to admit that the our corporate tax rate of 38% is among the highest in the world, although I think we have all heard about the GE's, Exxon's and other huge companies that pay no corporate taxes. On the personal income tax front, our tax rates are the lowest they have been in 50 years. Personally I can't see personal spending increasing that much if rates go even lower, but perhaps that's just me. On the regulation ("red tape") front, there is major disagreement on how much and how effective it is. Lower regulations scare me (in much the same way Republicans claim "the climate of uncertainty" for new regulations, since there are not that many actual new regulations, scares them); I like to have water I can drink, air I can breath and a job where my safety is at least a minor concern.

But Republicans would disagree or dispute all of what I just wrote. We apparently no longer have a common language with which to discuss economics. All I can say is that in 1979 when I was first studying economics, Paul Samuelson's introductory economics textbook that so many students studied firmly stated that (deficit) government spending is the best cure for a recession, as it was for the Great Depression. I guess Republicans say he was wrong, as we all were, about economics and particularly the Great Depression.

Which is maybe why Kelly chose to compare the current recovery with the end of Stagflation during Reagan's administration: "This recession was very bad, Democrats note. The only one comparable was in 1981-82.". Really? What about comparing to the Great Depression?

And does Kelly mean Democrats are saying the only recession comparable to our current one is '81-'82? He doesn't actually say that, he just implies by mentioning Democrats in the previous sentence. But why bother actually telling us the truth, when playing word games is so much more satisfying.

Kelly pushes us in the direction he wants us to go; Obama versus Saint Ronald (Reagan). I remember maybe six months ago that Obama was losing (in polls about who would you vote for) to a "generic" Republican presidential candidate. I believe now Obama is beating Romney slightly, Gingrich much more, these days in those polls. What better "generic" Republican to run now against Obama than Saint Ronald (Reagan)? All the better that Reagan is conveniently dead, so he can't talk about how he worked with an opposition Congress to achieve what he did. And apparently we will ignore Reagan's deficit spending.

Also apparently we will ignore Paul Volker, the chair of the Fed appointed by Jimmy Carter and re-appointed by Ronald Reagan, the guy Kelly doesn't mention once. Volker raised the Fed Funds rate to 20% in 1981 which I believe acted like chemotherapy - it killed inflation slightly faster than it killed the overall economy. After inflation had dropped sufficiently, Volker's Fed dropped the Fed Funds rate and the economy came roaring back. I suspect some of the growth post-stagflation and post-recession was the Reagan deficit spending, somewhat vindicating the ideas of Keynes. But that's not the myth, so Republicans/Kelly ignore the actual history and broadcast the myth.

By the way, this 2008 interview with Nobel laureate in economics Joseph Stiglitz gives us an interesting perspective on the economy. But Stiglitz must an ivory tower academic liberal who doesn't understand the real world, I guess, since he calls for more regulation, and a change in our view of regulation.

Kelly goes on to tell us that states with Republican Governors are doing better than state with Democratic Governors. Perhaps, okay. Then Kelly gives us this "Democrats control the state house and the legislature in three of the four states where unemployment rose." First of all, in our system of government, generally speaking a "state house" is either the entire legislature or part of a legislature, along with a state senate. But no matter, Kelly's factual sloppiness only peripherally informs his intellectual rigor. In this case, apparently Kelly wants to engage in those things he sometimes accuses the "liberal" media of, cherry picking facts.

For example, in response to the positive (downward) trend of unemployment, Kelly brings up discouraged workers who are not counted in unemployment. Certainly as the recession has dragged on, that number has become more important, so the accusation becomes that Obama has not done enough for the unemployed. But Obama himself does not make policy per se, Congress votes laws and budgets. Which brings us back to Reagan and his opposition Congress. Reagan's rhetoric included "In this present crisis, government is not the solution to our problem; government is the problem.". Yet Reagan and Tip O'Neill and Congress worked together to pass bills (for better or worse). In the last three years, Republican Senators have continued to filibuster to stop almost all legislation, and since January 2011 the House has simply ignored the President and gone in bizarre directions.

And how were George W Bush's job growth numbers in his first term? Pretty anemic (lower than Obama's so far, according to Wikipedia). His second terms was actually negative. But then Republicans have long since thrown dubya under the bus.

I mean, yes, Truman famously said "the buck stops here", but we are not a monarchy (yet); the President has to work with a Congress and then there are the actions (and ability) of the Fed affecting things. But conservatives like Kelly (and Limbaugh and Fox News in total) don't care about reality, they want to spin and cherry pick any news to benefit their side, regardless of the effect on Americans in general.