President Trumps two big ideas to boost the economy are:
1. Spend lots of money on infrastructure
2. More tax cuts, particularly for the wealthy.
This blog addresses the notion of increased infrastructure spending.
At the current time our National debt amounts to about 104% of GDP.
In the history of this country only twice has debt exceeded 100% of GDP, at the end of World War II (when it hit an all time high near 120%) and in the aftermath of the Financial Crash of 2008, where the previous round of infrastructure spending continued the explosion in the debt begun by the invasion of Iraq and pushed the debt to GDP ratio up each year since 2009.
On top in infrastructure spending President Trump has talked about major increases in military spending.
President Trump says he can cut taxes and regulations and spur growth that will generate additional taxes that will reduce the debt. As discussed in the last blog, history suggests that notion is a fantasy. Even the vaunted Reagan tax cuts in the 1980's cost more than they produced in increased revenues (according to a Congressional Budget Office study a few years later) even though that was a period of rapid worldwide growth. In fact the Reagan years were where our National debt began climbing again after falling continuously beginning a few years after the end of WW II.
Infrastructure spending is a good thing, but the current problem we have with crumbling infrastructure is a direct result of the Republican conviction that has dominated politics for the last 35 years that focusing on tax cuts and reducing Government spending are the keys to a good economy. Their formula has not worked in the past and will not even come close to working this time.
Next - the flaws history reveals of the conviction reducing regulations will spur to growth.
Wednesday, February 8, 2017
Thursday, February 2, 2017
President Trump - Part 2 - Improving the Economy - Tax Cuts
President Trumps two big ideas to boost the economy are:
1. Spend lots of money on infrastructure
2. More tax cuts, particularly for the wealthy.
This blog addresses the efficacy of further tax cuts.
President Trump says tax cuts are the answer. Reduce government income in the hope the tax cuts generates enough economic activity to increase tax Revenues.
The notion tax cuts will boost the economy enough to control our National debt and make everyone better off has been repudiated by history.
This Republican ideology is rooted in Ronald Reagan's tax plan sold to the public with the memorable slogan, "a rising tide raises all boats".
When Reagan took office individual tax rates were as high as 70% on people with very high incomes. In 1981 he pushed Congress to cut the top rate to 50%, then in 1986 it was brought down to 28%. Republicans claim those tax cuts both created more jobs and increased Government revenues, both of which assertions fly in the face of the actual facts. According to a later Congressional Budget Office study the Reagan years created fewer jobs than imagined and greatly aggravated government debt.
During the 1990's the Clinton administration raised some taxes over the objection of Republicans in Congress, then when Republicans took control of both houses of Congress in 1995 they pushed through legislation to again cut taxes, in particular to Capital Gains taxes that benefit the wealthiest and encourage speculation. Once George Bush arrived we had both a tax phobic Congress and President so 2003 saw major additional tax cuts, even as we were going to war (the start of the current explosion in the National Debt).
President Reagan's tax ideas have dominated Congress for the last 35 years. Have all the tax cuts over the years paid for themselves and made everyone richer? There is no room for any answer other than an emphatic No.
Our National debt has climbed relentlessly since the Reagan tax cuts and is approaching the levels we saw after the Great Depression and WW II.
The wealthiest are vastly richer and the bottom 50% significantly poorer while the rest of us are stuck about where we were in 1980 (but with a much bigger per person national debt). The rising tide raised the wealthy, mired the middle income folks in the mud and swamped working folk.
The Reagan tax cuts occurred in the best of all possible circumstances. In 1981 this country was coming down off the highest interest rates in modern history, the highest inflation rates in modern history and were entering into a period where the biggest percentage of the population in history were moving into their most productive years. Never in history had each productive worker been balanced by fewer non productive citizens (kids and retired folk). Thus the Reagan tax cuts failed to control the National debt in the best possible circumstance, a time when pent up economic energy was ready to explode.
Contrast that with the current situation. We are coming off the lowest interest rates in history, virtually no inflation, anyone with ambitions to borrow money could do so very cheaply for the last half decade, but new business start ups are falling each year. The biggest chunk of our population are those moving into retirement.
We need tax increases, not tax cuts.
We need to suck it up and accept the formula that reduced our Great Depression \ WW II debt from 1950 to 1980. We need tax increases on the wealthiest Americans. During period from 1950 to 1980 the highest tax brackets took 70 to 90% of every extra dollar of very rich folks income. Yet that was a time of high growth and low income inequality. Right now rich folks pull as much money as they can out of businesses and spend it on non-productive assets that increase their relative wealth. Because of the high tax rates from 1950 to 1980 rich folks left their money in businesses and reinvested in productive activity that employed people.
That is the historical path we should be following.
1. Spend lots of money on infrastructure
2. More tax cuts, particularly for the wealthy.
This blog addresses the efficacy of further tax cuts.
President Trump says tax cuts are the answer. Reduce government income in the hope the tax cuts generates enough economic activity to increase tax Revenues.
The notion tax cuts will boost the economy enough to control our National debt and make everyone better off has been repudiated by history.
This Republican ideology is rooted in Ronald Reagan's tax plan sold to the public with the memorable slogan, "a rising tide raises all boats".
When Reagan took office individual tax rates were as high as 70% on people with very high incomes. In 1981 he pushed Congress to cut the top rate to 50%, then in 1986 it was brought down to 28%. Republicans claim those tax cuts both created more jobs and increased Government revenues, both of which assertions fly in the face of the actual facts. According to a later Congressional Budget Office study the Reagan years created fewer jobs than imagined and greatly aggravated government debt.
For details link to https://www.washingtonpost.com/news/fact-checker/wp/2015/04/10/rand-pauls-claim-that-reagans-tax-cuts-produced-more-revenue-and-tens-of-millions-of-jobs/?utm_term=.2c8bc2e9ff34
During the 1990's the Clinton administration raised some taxes over the objection of Republicans in Congress, then when Republicans took control of both houses of Congress in 1995 they pushed through legislation to again cut taxes, in particular to Capital Gains taxes that benefit the wealthiest and encourage speculation. Once George Bush arrived we had both a tax phobic Congress and President so 2003 saw major additional tax cuts, even as we were going to war (the start of the current explosion in the National Debt).
President Reagan's tax ideas have dominated Congress for the last 35 years. Have all the tax cuts over the years paid for themselves and made everyone richer? There is no room for any answer other than an emphatic No.
Our National debt has climbed relentlessly since the Reagan tax cuts and is approaching the levels we saw after the Great Depression and WW II.
The wealthiest are vastly richer and the bottom 50% significantly poorer while the rest of us are stuck about where we were in 1980 (but with a much bigger per person national debt). The rising tide raised the wealthy, mired the middle income folks in the mud and swamped working folk.
The Reagan tax cuts occurred in the best of all possible circumstances. In 1981 this country was coming down off the highest interest rates in modern history, the highest inflation rates in modern history and were entering into a period where the biggest percentage of the population in history were moving into their most productive years. Never in history had each productive worker been balanced by fewer non productive citizens (kids and retired folk). Thus the Reagan tax cuts failed to control the National debt in the best possible circumstance, a time when pent up economic energy was ready to explode.
Contrast that with the current situation. We are coming off the lowest interest rates in history, virtually no inflation, anyone with ambitions to borrow money could do so very cheaply for the last half decade, but new business start ups are falling each year. The biggest chunk of our population are those moving into retirement.
We need tax increases, not tax cuts.
We need to suck it up and accept the formula that reduced our Great Depression \ WW II debt from 1950 to 1980. We need tax increases on the wealthiest Americans. During period from 1950 to 1980 the highest tax brackets took 70 to 90% of every extra dollar of very rich folks income. Yet that was a time of high growth and low income inequality. Right now rich folks pull as much money as they can out of businesses and spend it on non-productive assets that increase their relative wealth. Because of the high tax rates from 1950 to 1980 rich folks left their money in businesses and reinvested in productive activity that employed people.
That is the historical path we should be following.
Friday, January 20, 2017
The Obamacare Trap
As Republicans set about repealing Obamacare all they talk about is fixing it with “market’ based solutions. Were they awake in basic economics class?
An efficient market requires sellers who are not acting under compulsion. A functioning market needs buyers who can walk away when the price is too high. Being sick is the epitome of compulsion. Healthy people don’t go to doctors and who is going to walk into a Doctor’s office with a kid with a broken arm, or a lump in their breast, or pain in their liver, and then walk out because the price is too high? Health Care consumers are not in a position to put price pressure on Health care providers.
As a country we have tried for decades to encourage Insurance companies to fill the role of pressuring Health providers to be more efficient and cost effective. But Insurers and the Health Care providers negotiate deals that are good for both of them, while the consumer foots the bill and Health care costs continue their relentless climb.
Republicans beat Democrats over the head with criticism of Obamacare for the last six years. It worked well enough to allow Republicans to grab control of both houses of Congress four years ago and maintain it in this last election, despite the fact that last time the Republicans controlled both houses of Congress (1995–2007) they blew up the middle east and then blew up the world economy.
Now as they turn from celebrating their most recent victory it is beginning to dawn on some of them they have painted themselves into a corner. Voters like the big government mandate parts of Obamacare (for example protecting those with pre-existing conditions or kids staying on the parent’s plan until age 26). What they don’t like are the “market” parts of Obamacare - for profit insurers raising rates or bailing out of a market because they can’t make a profit and have little control over health care costs.
It flies in the face of their ideological beliefs but they should consider that maybe no market based approach rooted in our existing system of for profit insurers and providers will be an improvement. History suggests the only way Health Care for profit works is by catering to the wealthier parts of society and leaving the rest to fend for themselves (or get all their health care in the most expensive place - the emergency room - at public expense). That’s what we had before Obamacare. We paid twice as much per person for health care as any other country in the world, with lousy results (measured by infant mortality and lifespan). People in dirt poor communist countries (like Cuba) where they spent less than a dollar per person compared to every $10 we spent lived longer and had lower infant mortality rates.
Ironically Republicans could turn for inspiration to the some of the big blue coastal states who realized decades ago profit and health care don’t mesh well. They created regulatory schemes that allowed non profits that focus on health maintenance to thrive. They have blossomed under Obamacare because the insurance and the health care are linked within the same non-profit entity. They can work for efficiency at both ends of the process, and don’t have to worry about investors clamoring for bigger profits. They are also motivated to help people stay healthy, instead of making their living off of curing sick people.
In 2010 Republicans, upset that they lost control of Congress, tried to undermine Obama by undermining Obamacare instead of trying to help make it work. If they had worked at making it work then they certainly would have had a better grasp of what they were getting into when they started talking repeal. But now that voters have had a taste of Universal health care, even a badly designed version, there is no going back.
There is little the Republicans can feasibly do, politically, that will affect me personally. My Health care comes from an HMO. Its pretty inexpensive and as a consumer I am very happy with what I have. I wish I could help all the folks who will be hurt by the turmoil we are about to experience but I voted and my views did not prevail.
But I am concerned politicians desperate to save face will try to distract us with misdirection - start a war or otherwise create distractions and leave us with bigger problems than just health care. I think back to 1971 when President Nixon used wage and price controls to distract the public from the fact he took the country off the gold standard so he could print money to pay Viet Nam war debt without raising taxes. That played a big part in the most ferocious bout of inflation and high interest rates in modern US history over the next decade. Luckily for the Republicans it was Democrat Jimmy Carter who got caught in the storm, not a Republican. As the storm was receding Ronald Reagan walked in the door and to this day Republicans fervently believe the growth of the 1980’s was caused by Reagan’s tax cuts rather than to the fact he happened to be the guy in the oval office when a perfect storm of positive economic factors converged (rapidly falling inflation and interest rates coupled with rising productivity from the baby boom generation moving into their productive years).
But I feel like there isn’t much I can do that will not be counterproductive. My Republican friends are pretty well inoculated against facts and history by the media outlets they rely on, talking to them just causes them to withdraw deeper into their ideological comfort zone. Sometimes in life you need pain to break out of a comfort zone that is not working, so until enough voters in Red States suffer enough pain to move beyond slogans and ideology I don’t think there is a whole lot those of us in Blue states can do. We just have to take care of ourselves and our families and be patient.
An efficient market requires sellers who are not acting under compulsion. A functioning market needs buyers who can walk away when the price is too high. Being sick is the epitome of compulsion. Healthy people don’t go to doctors and who is going to walk into a Doctor’s office with a kid with a broken arm, or a lump in their breast, or pain in their liver, and then walk out because the price is too high? Health Care consumers are not in a position to put price pressure on Health care providers.
As a country we have tried for decades to encourage Insurance companies to fill the role of pressuring Health providers to be more efficient and cost effective. But Insurers and the Health Care providers negotiate deals that are good for both of them, while the consumer foots the bill and Health care costs continue their relentless climb.
Republicans beat Democrats over the head with criticism of Obamacare for the last six years. It worked well enough to allow Republicans to grab control of both houses of Congress four years ago and maintain it in this last election, despite the fact that last time the Republicans controlled both houses of Congress (1995–2007) they blew up the middle east and then blew up the world economy.
Now as they turn from celebrating their most recent victory it is beginning to dawn on some of them they have painted themselves into a corner. Voters like the big government mandate parts of Obamacare (for example protecting those with pre-existing conditions or kids staying on the parent’s plan until age 26). What they don’t like are the “market” parts of Obamacare - for profit insurers raising rates or bailing out of a market because they can’t make a profit and have little control over health care costs.
It flies in the face of their ideological beliefs but they should consider that maybe no market based approach rooted in our existing system of for profit insurers and providers will be an improvement. History suggests the only way Health Care for profit works is by catering to the wealthier parts of society and leaving the rest to fend for themselves (or get all their health care in the most expensive place - the emergency room - at public expense). That’s what we had before Obamacare. We paid twice as much per person for health care as any other country in the world, with lousy results (measured by infant mortality and lifespan). People in dirt poor communist countries (like Cuba) where they spent less than a dollar per person compared to every $10 we spent lived longer and had lower infant mortality rates.
Ironically Republicans could turn for inspiration to the some of the big blue coastal states who realized decades ago profit and health care don’t mesh well. They created regulatory schemes that allowed non profits that focus on health maintenance to thrive. They have blossomed under Obamacare because the insurance and the health care are linked within the same non-profit entity. They can work for efficiency at both ends of the process, and don’t have to worry about investors clamoring for bigger profits. They are also motivated to help people stay healthy, instead of making their living off of curing sick people.
In 2010 Republicans, upset that they lost control of Congress, tried to undermine Obama by undermining Obamacare instead of trying to help make it work. If they had worked at making it work then they certainly would have had a better grasp of what they were getting into when they started talking repeal. But now that voters have had a taste of Universal health care, even a badly designed version, there is no going back.
There is little the Republicans can feasibly do, politically, that will affect me personally. My Health care comes from an HMO. Its pretty inexpensive and as a consumer I am very happy with what I have. I wish I could help all the folks who will be hurt by the turmoil we are about to experience but I voted and my views did not prevail.
But I am concerned politicians desperate to save face will try to distract us with misdirection - start a war or otherwise create distractions and leave us with bigger problems than just health care. I think back to 1971 when President Nixon used wage and price controls to distract the public from the fact he took the country off the gold standard so he could print money to pay Viet Nam war debt without raising taxes. That played a big part in the most ferocious bout of inflation and high interest rates in modern US history over the next decade. Luckily for the Republicans it was Democrat Jimmy Carter who got caught in the storm, not a Republican. As the storm was receding Ronald Reagan walked in the door and to this day Republicans fervently believe the growth of the 1980’s was caused by Reagan’s tax cuts rather than to the fact he happened to be the guy in the oval office when a perfect storm of positive economic factors converged (rapidly falling inflation and interest rates coupled with rising productivity from the baby boom generation moving into their productive years).
But I feel like there isn’t much I can do that will not be counterproductive. My Republican friends are pretty well inoculated against facts and history by the media outlets they rely on, talking to them just causes them to withdraw deeper into their ideological comfort zone. Sometimes in life you need pain to break out of a comfort zone that is not working, so until enough voters in Red States suffer enough pain to move beyond slogans and ideology I don’t think there is a whole lot those of us in Blue states can do. We just have to take care of ourselves and our families and be patient.
Monday, November 28, 2016
President Trump - Part 1 - How to Respond to the New Reality
Reality - Donald Trump is President for the next four years.
So how does a thoughtful person respond to this new reality?
There is little to be gained in complaining. He has a guaranteed four years. Protests and denials are not going to make him go away. They may actually enhance his credibility with the base of voters who elected him.
I believe the most productive way to respond is to focus on his substantive policies. Educate the public with pertinent historical facts, scientific data and common sense about likely results from his policy initiatives.
The good news is that Mr. Trump is not an ideologue. He has ideas he thinks are right but seems flexible on almost anything. In fact he doesn't seem to really care about what policies he pursues, he just wants to be the guy running the show. He said a lot of offensive things in his campaign but in his mind that just seems to be what he needed to say to get elected. He is already, in fits and starts, backing away from virtually every outrageous claim he made during the campaign.
Of course that could change. But lets be positive and push constructive dialogue.
So this is the introduction to a series of blogs addressing specific policies the President Elect has proposed in the hope constructive dialogue can make his Presidency a positive for the nation.
My next topic with be his proposed tax cuts.
I invite others to pick a topic and join the conversation.
Wednesday, November 23, 2016
Democrats and the Media Were Oblivious to History
Donald Trump began using his slogan "Make America Great Again" at least a year and half ago.
Republican tax and government phobic policies have dominated national (and many states) policy for two decades.Republicans have controlled both houses of Congress for 17 of the last 21 years, including the last 4 years. During that time we have had the worst economic collapse since the Great Depression (after 10 continuous years of Republican control) and as we started to recover Republicans again grabbed control and stymied efforts to build on the recovery. In addition Republicans control and have controlled for some time the Governorship and legislature of virtually every state where the "forgotten" workers, who led the states to a Trump victory reside.
Taking the longer view, twice in the last 100 years Republicans obsessed with cutting taxes, government and regulations controlled Congress for a decade, the first ended in the Great Depression, the second in the Great Recession?
Yet during the entire campaign I did not hear one single word in the major media or from the Democratic party or Hillary Clinton asking the simple question "If America is not great, whose fault is it?"
Has ideology blinded us to history? Are we so busy peering into our magnifying glass at the tree in front of us we no longer see the forest?
Sunday, November 20, 2016
The Dangers of Childhood
According to the Brady Campaign guns kill 7 children a day in the United States, 5 are homicide and 2 shoot themselves.
Compare to:
About 2 children a day die from unintentional drowning.
CDC figures suggest that a child dies from a bike accident a couple times a week (about 3 people die a day, but mostly adults and adolescents).
One child is killed every 2 weeks by having furniture topple over on them (Economist, 7/2/16 p8).
Compare to:
About 2 children a day die from unintentional drowning.
CDC figures suggest that a child dies from a bike accident a couple times a week (about 3 people die a day, but mostly adults and adolescents).
One child is killed every 2 weeks by having furniture topple over on them (Economist, 7/2/16 p8).
Wednesday, November 16, 2016
Publish or Perish
When I was young (in the 1960's and early 1970's) the higher education establishment came under attack as a privileged good old boy network, if you knew the right people you got tenure on a college faculty and were set with a cushy job for life. In part, it seemed to me, the attacks, while they had some merit, were largely driven by the political right who wanted to undermine the influence of the generally liberal leaning higher education faculties.
The solution that developed was to require professors to publish prolifically in their field of expertise to retain their position on the faculty.
Looking back on what has happened since it appears to this outside observer the solution was worse than the problem.
It became apparent pretty early on that teaching suffered. Now it is rare for a professor to actually teach a class, graduate students with little teaching experience do that so the professor can pursue their research.
But the bigger problem that has become more apparent as the years go by is that all fields of human study are being buried under mountains of research findings that are unreliable at best.
Major research studies have announced big breakthroughs with great fanfare, earning their authors tenure and riches, only to be unreproducible by any other lab. A prominent recent example is that the (probably) billions of dollars that has been poured into thousands of MRI studies to try to understand the brain was probably largely wasted because of huge flaws and assumptions built into the software that found statistical effects where none existed.
The fundamental problem is publish or perish does not align motivation with the public interest. If an individual has to publish to survive in their chosen field the need to publish eclipses the detached view that is necessary for effective research. Publishing volumes of useless or misleading research findings forwards the individual interest but makes the search for knowledge vastly more complicated and difficult.
The solution that developed was to require professors to publish prolifically in their field of expertise to retain their position on the faculty.
Looking back on what has happened since it appears to this outside observer the solution was worse than the problem.
It became apparent pretty early on that teaching suffered. Now it is rare for a professor to actually teach a class, graduate students with little teaching experience do that so the professor can pursue their research.
But the bigger problem that has become more apparent as the years go by is that all fields of human study are being buried under mountains of research findings that are unreliable at best.
Major research studies have announced big breakthroughs with great fanfare, earning their authors tenure and riches, only to be unreproducible by any other lab. A prominent recent example is that the (probably) billions of dollars that has been poured into thousands of MRI studies to try to understand the brain was probably largely wasted because of huge flaws and assumptions built into the software that found statistical effects where none existed.
The fundamental problem is publish or perish does not align motivation with the public interest. If an individual has to publish to survive in their chosen field the need to publish eclipses the detached view that is necessary for effective research. Publishing volumes of useless or misleading research findings forwards the individual interest but makes the search for knowledge vastly more complicated and difficult.
Subscribe to:
Comments (Atom)