Posts Tagged ‘ economics ’

GOP Presidential Candidates Series: Rick Perry

(For past entries in the series, see: Herman Cain and Tim Pawlenty)

Time for another entry in the series, and today we look at Texas Governor Rick Perry, the most recent entrant into the Republican nomination contest. Perry’s campaign image is based on two claims:

1)  He is just as credible a candidate as Mitt Romney, which means he is a strong, smart leader who can beat Barack Obama, and 2) He is more conservative than the flip-flopping Mitt Romney. If Perry can successfully portray himself as fulfilling both of those claims, then he will win the Republican nomination. Initially, it looked like Perry had both qualities down. Now, it appears there are some serious holes in Perry’s narrative.

Perry’s policy and stances on the issues

Perry has dense ties to the Tea Party. They like his staunch fiscal conservatism, no-apologies attitude and his strong religious faith. Perry is very well known on the faith side, having declared three “Days of Prayer for Rain in Texas”  during that state’s historic wildfires. He also hosted a huge, evangelical, semi-political prayer rally right before he declared his Presidential candidacy. Clearly, he sees no problem with using his public office to promote his faith.

Perry also double checks the boxes on many key conservative issues. As the Governor of Texas, he has presided over more executions than a Chinese official at a pro-democracy rally. Conservatives seem to love that. He is also a huge supporter of gun rights. Notably, he jogs with a pistol at his side and has used it to shoot a coyote that looked at his dog funny.

Rick Perry has frequently used belligerent words to describe Social Security, calling it a “Ponzi scheme.” On this issue, his differences with the rest of the GOP field are probably more fluff than substance. Romney has criticized Perry for calling Social Security a Ponzi scheme, but they both want to seriously scale back or transform the program, so there’s really no difference in substance between the two.

Perry does not have a detailed economic plan, like most of the candidates in the field. He prefers to say that Texas is his economic plan. Perry is trying to say that because Texas did better than many states over the past few years, that shows Perry could improve the US’s economy. Going along with that, he likes to take credit for the fact that half the jobs created in the US over X period of time were created in Texas. While its not clear that Perry had anything to do with his state’s job creation over the past few years, this is an important point in Perry’s campaign and it needs to be honestly assessed.

Ezra Klein breaks down the why and how Texas has been adding jobs over the past few years. Apparently, “almost half of the state’s job growth came in the education, health care, and government sectors. Notice a pattern? These are all sectors that depend, at least in part, on government support.” Another 13 percent of  Texas’ jobs have come from the oil and gas  industries. So is Rick Perry planning to boost government spending and suddenly uncover oil and natural gas deposits across the US when he becomes President? Hell no. The dirty little secret is that Texas had more jobs than other states (in part) because Texas government spending actually increased  from 2008-2012. But Rick Perry has promised to slash spending if made President. For those keeping track so far, Perry either can’t or won’t replicate a solid three-fifths of the “Texas miracle” when/if he becomes President.

So what about the rest of Texas’ job growth? Most of that can be attributed to Texas fast population growth over the past few years. More people in the state=more need for goods and services=more jobs. Another factor is the fact that the housing bubble was much smaller in Texas than it was in the rest of the country, thanks to plentiful land, high property taxes and surprisingly strict regulations on lending. Again, is Rick Perry going to recommend increasing immigration into the US and adopting strict regulations on banks? No. So its unlikely that he will bring these facets of the “Texas miracle” to the national stage.

“But what about business climate??” you scream. I’m sure that Texas’ low taxes and generally light regulations have contributed to growth in that state on the margins. But they have contributed much less than the other factors mentioned above. Strong demand trumps a good business climate any day of the week and there has been comparatively strong demand in Texas for the past few years  which has drawn in jobs.

In short, there’s really no evidence that low taxes and fewer regulations would bring the United  States’ economy any of the relative economic success that Texas has enjoyed. A lot of factors contributed to the “Texas miracle,” the least of which was low taxes and few regulations. When you also take into account that Texas leads the nation in percent of workers with minimum wage jobs, in percent of people without health insurance and is the sixth-most impoverished state in the nation, the Texas miracle starts to look like a Texas tragedy.

On most social issues, like abortion, guns, gays and religion, Perry is a conservative’s conservative. On other issues he has taken some bold stances that are against the norm in conservative politics. He wisely tried to get young girls inoculated against HPV and he has been quite moderate in his treatment of the state’s Hispanic population. Texas has not pursued an Arizona-style anti-immigrant law, while Perry signed a law giving the children of illegal immigrants access to Texas’ universities at the cost of in-state tuition. However, Perry has signed a bill requiring photo IDs to cast a vote, which will limit the poor and elderly’s access to the ballot box, with no apparent positive benefits.

The politics of Rick Perry’s campaign

As I’ve already written, Perry came into the race with a lot of promise and a full head of steam. He was going to be the candidate who could rally the support of both the Tea Party and the Republican establishment, while using Texas’ economic record as a bludgeon against Barack Obama in the general election. After his abysmal performance in the past few debates, Rick Perry is slipping in the polls  and people have raised serious doubts about his preparation and ability to be President. Some commentators have already thrown Perry in with the other “crazy” candidates of this cycle (Bachmann, Newt Gingrich).

Obviously, Perry has to do whatever he can to shake off this characterization, but the damage might already be done. Polls show Perry dropping and there is talk that Chris Christie might enter the race while Herman Cain is rising. People have moved on from Perry and he is now coming off as somewhat of a fad. It will be interesting to see where the campaign goes from here. There’s not another debate scheduled for awhile, so that gives the candidates time to message and spin. No matter what happens in the interim, Perry has to pull off a stunning performance in the next debate to turn his ship around. He has a legendary campaign manager and has never lost a race, so a comeback is within the realm of possibility.

As far as how he stacks up in a potential match-up with Barack Obama, Perry polls worse than Mitt Romney. It seems that the general public isn’t ready for another swaggering, fact-averse Texas governor in the White House, so soon after the last one ended in disaster.

Though he’s made some reasonable decisions, Perry’s economics are more of the same old Republican boilerplate. He didn’t learn a thing from his time in Texas that could help the rest of the country. I’m a fan of secular politics. While Perry’s faith-based grandstanding doesn’t bother me as much as it does many people, it certainly doesn’t endear him to me at all. The last thing this country needs is more culture wars and wedge issues. Rick Perry seem to be all bluster and no substance.

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Reaction to the Sept 7th Republican Presidential debate

We heard lots of information and opinions get thrown out on stage at the Republican Presidential debate last night. Here are my opinions, corrections and commentary on what the aspiring Presidents said.

Job Creation

All three of the former governors (Rick Perry, Jon Huntsman and Mitt Romney) claim that their record shows  they would be the best job creator as President. They have also found ways to trash the job records of  their opponents. How can all of these guys have simultaneously been both one of the best and one of the worst job creators as governor?

Its because these “job creation rankings” are just junk. Depending on how you measure, anyone could be the best job creator in the nation! There are so many different ways to measure “jobs created” that doing so is meaningless. Do you measure net jobs or total jobs created? Do you measure over the entirety of a governor’s tenure or only certain portions? Should you compare a governor to his predecessor or take into account the national picture? You can judge the numbers in any way to make yourself look good. Romney actually made a good point in the debate when he noted that economies states are very different and governors really have little control over how well the economy does under their tenure.

Ben Bernanke

Both Newt Gingrich and Romney took shots at the Chairman of the Fed, Ben Bernanke, saying that he should be fired because (in Gingrich’s words) “I think he’s been the most inflationary, dangerous, and power-centered chairman of the Fed in the history of the Fed,”  and in Romney’s words “I think Ben Bernanke has overinflated the amount of currency he’s created.” (video here) So here’s the question: has inflation even been that bad under Bernanke?

I certainly don’t think so. Sure the price of gas is up, but the Fed doesn’t have much to do with that and most other prices seem to be stable. But let’s look at what the experts have to say. According to the consumer price index (CPI) numbers from the OECD, the US has had less inflation over the past four years than the average industrialized country and less inflation than Europe as an average. We can also compare inflation over the six years of Bernanke’s term to the previous six years under his predecessor, Alan Greenspan. Using data from the St. Louis Fed, (Bernanke started in early 2006), we can see that inflation has been roughly the same over six years of Bernanke as it was over the previous six years of Greenspan.

Then after you think back to the inflation of the 1970s, it is clear that these criticisms of Bernanke are completely false and misleading.

Rick Perry

Perry seemed to be the big story of the night, considering he is now the front-runner for the nomination and this is his first time on the debate stage. Perry got plenty of questions and made many juicy comments. Among them, he again called  Social Security a Ponzi scheme. I really don’t know how that’s a good way for a politician to describe one of the most beloved and useful programs in US history, but there it is.

Perry also stumbled when he said that the science wasn’t settled on global warming, going as far as to say that global warming deniers are like Galileo. I would say that people who deny scientific evidence because it conflicts with their economic views are more like the people who denied Galileo’s scientific evidence because it conflicted with their religious views, than they are like Galileo. That seems to have been a terrible analogy.

Perry probably won a lot of conservative backers with his defense of his state’s use of the death penalty. Texas executes more people than any place this side of Iran, so the moderator, Brian Williams, asked Perry if he was ever kept awake at night wondering if he had sent an innocent man to the execution room. Perry responded he has absolute faith in the system. So Perry has absolute faith in a government bureaucracy to be right 100% of the time when it comes to life and death, but distrusts the government at all other times? The only thing the government can do perfectly is kill people? Talk about a contradiction. O, and here’s an innocent man put to death in Texas in 2004.

Finally, Perry was assaulted by Rep. Ron Paul, former Sen. Rick Santorum and Rep. Michele Bachmann over trying to mandate that young girls in Texas receive the HPV vaccine (there was an opt-out for opposed parents). Laying aside for a second the fact that Perry received a few thousand dollars in campaign contributions from the maker of the vaccine, this was a good idea of Perry’s. The best way to prevent cervical cancer is to get an HPV vaccine and I believe this was a good public health decision by Perry.

Michele Bachmann

And I saved the most laughable for last. Michele Bachmann repeated her assertion that as President she would get gas below $2.00 a gallon. Oil is a freely traded, global commodity and no amount of drilling in the United States is going to significantly lower the price of gasoline, certainly not in the short term. Huntsman called Bachmann out on this at the debate because there is no way a President can seriously make a promise like this.

All in all, it was an entertaining debate. If I had to pick, I’d say that Mitt Romney and Jon Huntsman both looked Presidential on the stage and acquitted themselves the best. They would be formidable opponents for Obama.

GOP Presidential Candidates Series: Tim Pawlenty

Tim Pawlenty is conservative to the core. That’s the message his campaign has been screaming from the rooftops. Every single ad, policy proposal, or public statement seems to be designed to tell the Republican electorate that this former 2-term governor of Minnesota is the “real deal” when it comes to conservative bona fides. But no, his campaign will tell you, Pawlenty is not one of the “crazy” conservatives (like Michele Bachmann or Herman Cain) that make corporate CEOs and Republican party elites very nervous. He is the kind of candidate that is both exceedingly conservative (let me tell you) and also a dependable good ‘ole boy.

Pawlenty has a long record as a fairly successful and mostly uncontroversial politician. He has risen through the ranks of the GOP, rising from the city council to become governor, while notably foregoing a a US Senate run to make the higher-ups in the party happy. He is unremarkable in demeanor, has taken almost no controversial stances (his past support for cap-and-trade, now repudiated, is a notable exception), has picked limited fights with democrats in the past, and has good relations with the party elite.

In short, Pawlenty is an extremely generic and uncontroversial Republican candidate. In many years, the Republican nomination goes by default to such a candidate.

However, the Republican party already has a default heir apparent for their nomination-Mitt Romney. Romney ran for the nomination four years ago, has  a considerable donor base, experience running a national campaign, high name-recognition and a national network of former supporters  to call on. However, he also has a flaw–the health reform he signed into law as governor of Massachusetts is nearly identical to end-of-the-world law Obamacare!

Hence the Pawlenty campaign’s focus on his conservatism. Pawlenty is trying to present himself as a credible alternative to Romney among voters who are concerned about Romney’s past support for an individual mandate, health reform, abortion rights and gay rights. Pawlenty is showcasing his conservatism at every turn so that he becomes the anti-Romney in this campaign among establishment Republicans and party elites.

However, there are also challenges for Pawlenty on the “conservative” front. There are several other candidates in the race who have much stronger conservative  credentials than Pawlenty, among them Bachmann and Cain. If the nomination becomes a race to see who is the most forceful conservative, Pawlenty can’t hold a candle to the charismatic and absolute conservatism of Bachmann and Cain. So, Pawlenty has to present himself as comparable to those Tea Partiers on the conservative front, but much more electable, and with a proven record as a public servant.

If it seems like Pawlenty is defined as a contrast to other candidates, its because that is what his campaign is based on. He is running as everyone’s second-option. He wants to be everything to everyone in the Republican party. Pawlenty’s own story is acceptable, but not compelling, he is conservative, but not unproven and unpredictable. He will be the electable alternative to Bachmann and Cain among conservatives and Tea Partiers and he will be the true conservative for establishment Republicans who may worry about Romney.

Now let’s look at how Pawlenty has tried to showcase his conservatism. He recently released an ad bragging about causing the first-ever government shutdown in Minnesota state history by refusing to sign a budget raising taxes on the richest Minnesotans. Instead, he and the legislature compromised on raising taxes–oops! I mean raising “fees”–on cigarettes (conservatives don’t raise “taxes,”  they increase “fees”). The ad also says he fought unions by causing one of the longest transit strikes in the nation’s history. The ad portrays Pawlenty as a fighter who will harm thousands of innocent people–do anything really– in order to stick it to unions and protect the richest Minnesotans from paying a bit more in tax. I guess the image of a governor who is willing to sacrifice the most vulnerable in order to score cheap ideological points plays well in Republican circles.

Pawlenty was one of the first candidates to urge the government not to increase the debt limit (see? he’s sooooo conservative). Why? He says it will “force hard choices now” and keep America from becoming Greece. Well, doesn’t Pawlenty know that failing to increase the debt limit will mean the government has to discontinue 40% of its spending this year? Does he have a plan to do just that? Absolutely not. No one does. Doing so would be impossible and unthinkable. No one has a plan to do that. Pawlenty says that this “hard  choice” on the debt should involve cutting nothing from defense while “means-testing the cost-of-living increase in Social Security benefits,(this is actually a good idea, but it won’t do anything to keep us from hitting the debt ceiling) capping and block-granting Medicaid payments to states,(cutting Medicaid) and moving Medicare to a more efficient, pay-for-performance model (already being done through Obama’s ACA, and no one knows how well it will work).” Note that the savings from these action would NOT solve our debt ceiling problem or even come close to it. But Pawlenty has released a detailed economic plan, so let’s take a look at that.

Pawlenty’s economic plan is sheer madness. Pawlenty proposes to solve all of our nation’s problems by (you guessed it) LOWERING TAXES! Its a plan so incredibly simple, he can’t believe more people havn’t thought of it! In his plan massively lowering taxes on the rich will both solve our deficit problems and launch us into a period of prosperity unknown in modern American history. It will cause 5 percent growth for a decade. Never mind that America hasn’t seen 5% growth for any 3 consecutive years in modern history, let alone 5% growth for a decade. Pawlenty has found the secret: tax cuts for the rich. So what will these magic tax cuts look like? Let’s compare them to the Bush tax cuts:

No one will ever be able to out-conservative Pawlenty on economics. As Ezra Klein says, Pawlenty makes Bush look like Robin Hood. Pawlenty basically looked at the Bush tax cuts and said “the problem with them was that they didn’t give enough money to the rich, if they would only have shoveled MORE money to the top 1%, we would be in an economic paradise now. O, and these tax cuts will actually raise revenue.” How does cutting taxes raise revenue? I don’t know, but that cognitive dissonance makes about as much sense as anything else in his plan. The right-leaning Economist completely trashes Pawlenty’s plan saying

And no matter what party you belong to, you should find it troubling that Mr Pawlenty’s ridiculous economic plan could ever be considered acceptable by a large portion of the population.

But of course Pawlenty has a response to these reality-based critiques of his plan: anyone who doesn’t think it will work just doesn’t believe in America!

Though he has an interesting political strategy, if any of the things that Pawlenty says he wants to happen actually do happen, America is in trouble. I can’t endorse someone who glorifies shutting government down, wants the US government to default, backs the Republicans’ terrible balanced budget amendment, claims to be a serious candidate while laying out completely unfeasible economic plans, and proposes to balance the budget on the backs of the poor while passing massive tax cuts for the rich.

For past entries in the series, see: Herman Cain.

Why Obama won’t use the “Constitutional Option” for the Debt Ceiling

Talks over increasing the nation’s debt limit have gotten shaky over the past week. Faced with Republican demands for $2 trillion in spending cuts and absolutely no tax increases before Republicans will agree to raise the debt limit, many liberals, law professors, and even a top Democratic senator have begun popularizing the notion that the debt limit is unconstitutional. They argue that President Obama can just ignore this man-made crisis and continue to pay for the US’s fiscal obligations without a raise in the debt ceiling. Their rationale comes from section 4 of the fourteenth amendment, which reads:

 The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. (emphasis mine)

It would seem that they have a good case. Our country has legally incurred a large amount of public debt and by not raising the debt ceiling, Congress would be saying that it never intends to repay its legally incurred debts. That seems to be the exact action this amendment was designed to prevent. Also, it is unlikely that anyone would have the standing to sue the treasury in court for ignoring the debt limit.

This seems to be the easy way for Obama to both get out of dealing with an increasingly implacable and uncompromising GOP and to save the economy from a near-certain economic implosion. So why did he appear to rule it out yesterday?

Any expert who seriously discusses the US  budget agrees: the debt ceiling must absolutely be raised. If not, the economy will go into a tailspin and innocent people will suffer as they lose their jobs, Social Security checks and medical coverage. The only problem is polls show that raising the debt ceiling is unpopular. Even when pollsters include the caveat that failing to raise the debt ceiling would be severely damaging to the economy, a plurality still opposes the increase.

Even if the debt limit is unconstitutional, Obama would pay a huge political price for unilaterally declaring it so. Sure, by doing so he would save the economy from a catastrophic collapse (assuming no agreement on debt is made by Aug 2), but he would pay a large political price for getting rid of the debt limit. His numbers on his handling of the debt are already very low and this would just add fuel to Republicans claims that he is a high-spending politician who is out of touch with the American public.

But what about the fact that getting rid of the debt limit would save the economy from a double-dip recession? Wouldn’t Obama be rewarded for protecting the economy from foolhardy and crazed Republicans who would do anything to prevent a tax increase on the richest Americans? In a word, no.

If there is anything Obama has learned in the past 2 and a half years, its that you can’t campaign on what might have been. Republicans can hammer Obama on the economy and his stimulus bill even though independent experts agree that things would have been much worse without Obama’s actions to prop up the economy. We might have had unemployment at 12% without the stimulus, but might-haves don’t run in elections. The banking system might have completely collapsed without TARP, but the fact that we could be in a full-blown depression right now doesn’t make people feel any better about the bailouts. People vote off their current situation and their current impressions. Might-haves or near misses will rarely impact the electorate’s votes.

So, for Obama to get any credit for saving the economy from ruin, or to pin any blame on the Republicans for leading the economy to the abyss, the country actually has to cross the threshold of a default and begin to feel the pain of a government working with only half of its limbs. Otherwise, Obama will be the bad guy. The Obama team seems to see these dynamics at work, and because they seem to be unwilling to let the country default in order to score political points, Obama has offered the Republicans a deal that’s 83% spending cuts and 17% tax hikes. Or in other words, its a plan that’s 83% what Republicans want and 17%  what Democrats would prefer.

Obama has bent over backwards to give Republicans a dream-like deal because he A) does not want the country to default on its debt and B) knows that he can gain nothing from declaring the debt limit unconstitutional. Obama seems to have decided that it would be better to give  the Republicans almost everything they want, rather than to take either of the other two options open to him.

5 Reasons Why a Balanced Budget Amendment is a Very Bad Idea

Since the talks on the debt ceiling have hit an impasse, Republicans have turned their attention to a particularly destructive way to score some cheap political points. They have proposed solving our current debt problems by putting a “Balanced Budget Amendment” (BBA) in the Constitution which would require (according to the bill proposed on March 31) :

  • Every budget passed by Congress to have expenses less than the revenues for that year
  • Total outlays to be less than 18 percent of the country’s GDP
  • No tax increases
  • The above provisions may only be overruled by a 2/3 vote of both houses of Congress
  • The debt limit can only be raised by a vote of 3/5 of Congress
  • If the US is engaged in a military conflict, 3/5 of Congress can vote to deficit spend on funds for the war.

Though at first glance it may have some appeal, this amendment would be disastrous for the US economy and would further cripple the already weak and dysfunctional US government. Why? Here’s why: Continue reading