Dean Unveils The Democrats’ Six-Point Plan
From the spring meeting of the Democratic National Comittee in New Orleans:
Dean said that Democrats will fight for a six-point plan that includes raising the minimum wage, tax “fairness” for the middle class, “a complete ban on gifts and travel from lobbyists,” the inspection of all cargo coming into U.S. ports, fixing the Medicare drug plan and “transition” in Iraq.
Let’s translate and analyze the list, shall we?
(1) Raising the minimum wage. Want a good plan to raise the minimum wage? Support economic growth and hammer down on illegal immigration. Interfering with the market by imposing a minimum wage from on high does nothing but increase unemployment among those who can least afford to be without work.
(2) Tax ‘fairness’ for the middle class. Hold on to your wallets. Under the guise of ‘fairness’, what Dean is really talking about is tax increases. We can expect the rescission of most, if not all, of Bush’s tax cuts under Democratic leadership because, we will be told, they only benefit the rich unfairly. Forget the fact that large tax hikes will decrease ecomic activity, and, coupled with the minimum wage hike referred to above, result in widespread unemployment – wouldn’t want anyone holding onto productive money, now, would we?
(3) A complete ban on gifts and travel from lobbyists. Sounds like a great idea…why don’t we also, while we’re at it, take away the ability of unions to spend mandatory levees on their membership for politicial causes those members may not support? Then maybe the Democrats will start showing a backbone on issues like school choice.
(4) The inspection of all cargo coming into the United States. So, we’re to increase our inspection rate from 5% to 100%. Sounds expensive. Sounds like another way to cripple economic activity. Sounds like more unemployment and a decisive decrease in trade. Sounds like pandering.
UPDATE 4/23/06 10:32 a.m.: Glenn Greenwald has this to say:
Mark Coffey of Decision 08 says that he is opposed to Howard Dean’s plan to inspect all of the cargo that enters the United States. Why are so many Bush supporters against programs to prevent Al Qaeda from shipping bombs and other dangerous materials into our country? In a Time of War, they want to leave our ports unprotected and help Al Qaeda smuggle bombs — perhaps even dirty bombs — into the U.S. They have a lot to answer for with their actions that impede the War on Terror.
Well, I hope Glenn’s tongue is well in-cheek because them’s fighting words. My reply:
Glenn, I’m not ‘opposed’ to inspecting all cargo. I’m also not opposed to giving every American $10 million in cash every Friday. It’s not realistic – it would take far too much money and time. I’ll put my support for the War on Terror up against anyone’s, save the tooth fairy.
UPDATE 2 4/23/06 10:39 a.m.: AJ points out that the UAE was going to pay for advanced cargo inspection equipment on their own dime in that deal that the Democrats were so quick to oppose for no good reason. I’ll adopt the tone of Glenn Greenwald: why are so many Democrats anxious to avoid a free gift that would keep ‘dirty bombs’ and other al-Qaeda materials out of our ports. Someone has a lot of explaining to do or else I’ll smear them with implications of being traitors…
UPDATE 3 4/23/06 7:02 p.m.: emptywheel at the Next Hurrah has a response that is, well, clueless at a level rarely achieved:
You see, one of the ways our country subsidizes globalization (and therefore the offshoring of American manufacturing jobs) is we do what we can to keep shipping costs low. Someone just dumps those t-shirts or sneakers or auto parts into a container, someone else drops those containers on a ship, they wait a few weeks, and voila, their cheaply produced goods are in Long Beach, all for a remarkably low fee. It’s that remarkably low fee that makes the whole arrangement possible. Because if it cost a lot of money to ship t-shirts from China, then we wouldn’t be buying our t-shirts in China, we’d be buying them in South Carolina. American t-shirt makers would be able to compete, even in spite of the much cheaper wages those Chinese t-shirt workers make.
The policy that says it’s adequate to inspect only 5% of the shipping containers coming into this country is one of the key factors keeping that shipping inexpensive. We know it’s not adequate. People have used shipping containers to smuggle people, nuclear material, and Russian jets. But big business and the right complain that they can’t inspect any more of the containers–if they did, it would be too expensive. (Should I point out the hypocrisy that some of the same people who want to build a fence across the entire border with Mexico refuse to put the equivalent between us and Asia?)
But what they’re really saying when they say that inspecting more of the containers would be too expensive, is that it would raise the cost of shipping. Which would, in turn, make globalized production less competitive. And would, in turn, make it easier for American workers to compete against lower-paid workers on the other side of the world. So when they say inspecting the shipping containers would be too expensive, they’re really saying that it would make it too difficult to offshore American jobs.
Sure, inspecting shipping containers would raise the price of unnecessary plastic items. But it would also give a big boost to American manufacturing.
Which is why I think Dean’s call for 100% inspection is good politics. It’s good politics because it would make us safer from terrorism–as well as a range of other illict smuggling. But it’s also good politics because it’s going to elicit a lot of responses like Coffey’s, making claims that it would be too expensive.
You see, I’d be happy to get into a debate on these terms. The right is basically saying we can’t protect ourselves against terrorism because if we did, we wouldn’t be able to outsource so many jobs. That’s a case I’d like to see them explain to out-of-work laborers in this country.
Really, the lack of economic knowledge that goes into this post is amusing. That’s a great Marxist argument and it would play well in the academy; here in the real world, however, we’re concerned about growing the economy, not shrinking it behind a protectionist wall.
(5) Fixing the Medicare drug plan. Not repealing, you understand, but ‘fixing’. Why fixing? Because the dirty little secret is that Bush’s prescription drug benefit, while prohibitively costly in my view, has become a rare domestic success story for the administration. Enrollment has exceeded expectations, and it appears that politically, it’s here to stay.
(6) “Transition” in Iraq. If you really want transition in Iraq, the Bush administration has been giving it to you. The Iraqi forces increasingly take the fight to the insurgents, and U.S. casualties are way, way down. As Bush often says, as the Iraqis stand up, we’ll stand down. Recent political movement and the long-delayed convening of parliament increase the momentum for positive change. Of course, that’s not what Dean means by ‘transition’; you know and I know that he means withdrawal. Some Americans may be prepared to declare a loss; many won’t be. Dean should be honest about his intentions, though; under the Democratic plan, Iraq is lost for lack of effort.
Quite a plan, then, when you look at it with a discriminating eye; 2006 may yet go the Republican way. For what seems ages now, the kick on the Democrats has been they didn’t have a plan; having seen the plan, their lack of one may have been their greatest advantage…
Your points on the minimum wage are pretty typical rhetoric for free-marketers, but there isn’t a lot of data to support the position. The facts are that a lot of states have a higher minimum wage than the federal government imposes, a lot of people making minimum wage are teenagers, and the market equilibrium wage is probably well above the minimum wage in most fields anyway. I suspect the real effects of a minimum wage increase would be slightly higher teen unemployment in most areas, some improvement in standard of living for a small number of people, and mostly no effect on anything. It’s an attractive thing to promise because the average American doesn’t really get the economics and because it’s virtually costless to the economy.
As for the “tax fairness” part, again I think you’re operating with a lack of data. I don’t think it’s clearly to anyone that repealing Bush’s tax cuts would decrease economic activity or increase unemployment. I’m not saying that’s a good reason to repeal them; I’m just saying I doubt they’ve done all that much economic good (or harm) and I doubt getting rid of them would do much economic harm (or good). The real problem is that, if you stick to the moral argument, you’ll lose every time. The average American just doesn’t agree with the tax-cutting ideology, so we come up with clever explanations about how reducing America’s already minuscule income taxes is going to spur the economy. Oh well.
The budget deficits which were caused in large part by the Bush tax cuts impede economic activity in three ways. First, they lead to increases in interest rates as the government has to compete with private industry for capital. Secondly, they force the treasury to be reliant on foreign central banks to buy government paper, which in turn forces a strong dollar policy which makes American exports less competitive. Finally, both the interest and the principal ultimately have to be repaid, causing a drag in future years.
[...] Good friend Mark Coffey notes that the Democrats, who have been pounded for not providing tangible alternatives to the Republican policies, have finally come out with a plan. Mark is suggesting it may be better to go back to the ‘no plan’ plan. I’ll take issue with one item right off the back – since when did the middle class in this country live of a minimum wage? Is Dean’s plan to go out and say all us middle class need a bigger minimum wage? There’s an insult in there somewhere, I am pretty sure. [...]
Ryan, Bush’s tax cuts have undoubtedly spurred economic activity. Have you looked at the low inflation, high employment macro statistics lately? This is a nice economy we’ve got going here….
peter, I agree the deficit is too high and that impedes economic activity. However, the tax cuts didn’t cause the deficit – the combination of 9/11, the switch to war-time defense spending, and a complete lack of fiscal discipline in Congress led to the deficits.
The tax cuts contributed to the deficit to the extent that they deprived the treasury of tax revenues it would otherwise have collected. I don’t know the exact figure, but I recall reading that had the tax cuts not been implemented, the deficit would be 70% less.
“The switch to war-time defense spending” was, of course, an option that the Bush administration chose. If we had not invaded Iraq, the deficit woult be far less.
Finally, “a complete lack of fiscal discipline in Congress” is a non-starter. It is a GOP controlled Congress which has (at least until recently) marched in lockstep with the administration. The President has never vetoed a budget bill. I saw a report that the Bush administration has borrowed more oney than all previous administrations combined. Although Confress has also been profligate, the truth of the matter is that they have all been drunken sailors.
Sorry, more money. Maybe more honey too, I just don’t know.
peter, you won’t find me defending the record of the Republican Congress on spending; far from it. I don’t think the solution is for more of the same, however.
But the president chose the war-time footing? peter, you’re a good friend of this blog, but I find that unbelievably offensive. Who flew those planes into the World Trade Centers? Even without Iraq, we would have still had Afghanistan. You know better, so I’m going to chalk this up to ill-chosen words that don’t reflect your real sentiments…
Iraq certainly didn’t fly the planes into the World Trade Center — and the cost of the Afghanistan war is far less —
Iraq was a war of choice. Why do you find it offensive if I point this out?
A BS argument that I won’t respond to – I challenge anyone to read my comment and then yours and see if you address my central challenge. Enough…I won’t justify the War on Terror – if you think it’s hunky-dory to sit back and continue the failed policies of the past, you’re welcome to your viewpoint…
Or to put it another way – if you think Iraq was a war of choice, do you also think Saddam Hussein should still be in power, reconstituting his weapons programs under his newfound freedom from sanctions thanks to the corrupt support of France and Russia? You can’t have your cake and eat it, too..
You argue that government should not interfere with market forces and, therefore, not impose a minimum wage. A better plan, according to you, is to hammer down on illegal immigration.
If I may respectfully point out, your argument appears inherently inconsistent. A free market prescribes free flow of capital, free flow of goods, and free flow of labor. You are for the former yet against the latter. Could you kindly clarify this for me?
Sure – have an internally consistent immigration policy. Our current “we’ll make it illegal but allow it anyway” policy distorts the employment market by introducing workers who (a) work for employers who are paying them ‘day laborer’, ‘off the books’ wages that are outside of the legal and regulatory framework of our nation, and (b) work for less money than they’re probably worth because they are, after all, here illegally, and thus can’t find work with employers who are scrupulous about actually obeying the law.
We don’t have a true free market in this country, as you know – nor has any nation ever. It’s a debate for another time whether laissez-faire is preferable to the protections of a system that combines capitalism and socialism in an uneasy mix.
However, what I think is not debatable is that we should not have laws on the books that we don’t intend to enforce. Repeal the law, or enforce it…
Of course I think we should fight a war on terror. However, Iraq was tangential to the war on terror. You fight terrorists by finding bin Laden, dead or alive. You don’t fight terrorists by attacking someone else.
And yes, I do think that it would be preferable to have Hussein in power than to have lost everything we and the Iraqis have lost over the past three years. We are now learning that Hussein was a paranoid and somewhat enfeebled leader, more like King Lear than Joseph Stalin. His sons were unstable and unpredictable. His regime pretended to have WMD but the cupboard was bare. The regime would ultimately have fallen of its own weight. The more we learn about Iraq, the more we realize that the any threat they posed to us was insignificant compared to Al Qaeda, Iran, or North Korea. So to answer your question: I think it would be far preferable to have kept our powder dry so we can protect ourselves against those who have attacked us or those who are developing (or already have) nuclear weapons.
“We don’t have a true free market in this country, as you know – nor has any nation ever.” Not so: Hong Kong has been a truly free market for years.
The deficit is caused by spending that exceeds revenue receipts (in the current case by a Republican Congress and President) not by too few taxes collected. But, then, I’m a Milton Freidman acolyte and libertarian sort who believes taxes are theft. I would, however, foresake my goal of eliminating taxes in return for a perpetual, non-repealable agreement to fix the tax structure (as it is or some other mutually agreed to scheme) and prohibit deficit spending. But it has to be forever or no deal.
The minimum wage is a political issue, not an economic one .
Inspect 100% of the cargo? Sounds a lot like Kyoto – marginal benefit, huge cost.
“[W]hat I think is not debatable is that we should not have laws on the books that we don’t intend to enforce”
I couldn’t agree with you more. Which is why I am very concerned about the Administration’s warrantless eavesdropping in violation of the existing FISA laws — a matter outside the current thread and to be debated another time, but relevant to your laws-on-the-book comment.
Thank you for clarifying for me your argument.
“so I’m going to chalk this up to ill-chosen words that don’t reflect your real sentiments…”
No, those do indeed reflect his sentiments – Peter’s visceral hatred of this President and his administration are all too clear, and makes one wonder why on earth he frequents this blog in the first place.
“Not so: Hong Kong has been a truly free market for years.”
That would certainly come as quite a big surprise to the actual people who have to live under Chinese rule, Peter. Hong Kong has lost a substantial base of business since the takeover became official – witness the many corporations who moved to Vancouver as a result. Are you not aware of this circumstance?
This is a bit dated, but since the Chinese now subsume Hong Kong’s economic data within the mainland now, it’s quite difficult to get an accurate picture of the macro – economics here:
http://www.asiarisk.com/library2.html
too many steves says: “I’m a [...] libertarian sort who believes taxes are theft.”
The corollary: Do you consider yourself a thief when driving on our highways? A burglar when walking on our streets or taking a leisurely walk along our parks? A shoplifter when calling 911 or the police for assistance?
To be sure, I am not for high taxes: I’ll take lower taxes over higher taxes anytime of the day. But at the same time, I do not think taxes are wholly or inherently bad.
I agree with what you imply — overspending is bad. But we must also be intellectually honest: cutting taxes during times of high expenditures (war) is fiscally irresponsible and morally bankrupt.
Alfredo, we appreciate your input – one of the things I like the most about this blog is that we can have a left – right spectrum of opinions in the comments without descending into name-calling (most of the time, anyway). Don’t know if you’re familiar with my work, but we have covered the NSA story extensively – some might surprise you, some would no doubt disappoint you, but there are a lot of posts – just use the search box in the upper left with the term ‘NSA’ and you’ll find more than you ever wanted…
I don’t hate the President, as noted elsewhere, and if I did it would not be relevant. I have fired people from time to time because they were not capable of doing their job. I didn’t hate them — but they could not perform their job and so they were dismissed. Same with Bush: I have no personal animosity to him, but he is clearly incapable of doing his job.
Moreover, as noted elsewhere, whether I hate him or not has no relevance to the validity of what I have written. If you think I am wrong, then tell me where — but dismissing what I say because of purported “visceral hatred” does not refute anything I have said.
As for Hong Kong: it certainly was free market when I lived there. I haven’t been there since 1989 (TienAnMen Square ended my business — I am not a big fan of mainland China). I am sure things have changed quite a bit since then, but my (limited) understanding is that the free market policies are more or less the same. Hong Kong Chinese have been migrating to Vancouver for years (including when I lived there) to get the dual citizenship and to shield assets in the event of a change in China’s policies towards Hong Kong.
I would also consider Singapore, Taiwan, and (to a lesser extent) South Korea to be free market economies.
“what I say because of purported “visceral hatred” does not refute anything I have said.”
Of course – how could I have mistook all of the bile and venting of spleen you’ve been spewing as really just calm reasoning and logic? From now on, we’ll be sure to address you as Mr. Spock.
But you haven’t answered my original question – why do you keep on posting here, when it’s abundantly clear that you not only disagree with most of the views expressed, but vehemently so? Is it a masochistic tendency, or something else we’re missing?
However, the tax cuts didn’t cause the deficit – the combination of 9/11, the switch to war-time defense spending, and a complete lack of fiscal discipline in Congress led to the deficits.
Why, yes! My wife will love that – making less money didn’t harm our income – the combination of having kids and a complete lack of restraint in spending did.
Why do I post here? Well, I enjoy it. It is a generally congenial place to opine about a wide variety of thngs.
I also find it enjoyable to match wits with other people. I also play Internet chess for the same reason.
Moreover, I’m uninterested in posting on sites of like-minded people. What’s the point? I’m not going to gain much from an echo chamber. I am a faithful reader of the Economist and the Wall Street Journal (and an occasional viewer of Brit Hume) because I am far more interested in the opinions of people who think differently than me.
Finally, when I can advance an argument which cannot be credibly refuted, I have a high degree of confidence that I am right. I can’t get that from a left wing website.
[...] It’s a bit perplexing, then, and unexplainable on many levels beyond pure pandering, that Democrats constantly reach for the rhetoric of the minimum wage. We owe the popularity of this old saw to economic illiteracy, no doubt, for the minimum wage is no friend to the poor. [...]
Well, we like having you here, peter (I bet even our friend dmac enjoys the give and take on some level) – it’s good to be exposed to other viewpoints, as you say. I won’t pretend that you don’t infuriate me at times – but then, I’m a politicial person with strong beliefs, and when those beliefs are challenged, particulary when I think that it’s done with unfair arguments, then I get my hackles up, at times.
However, I much prefer a comments section with left and right – my God, when you read the comments on some of the most popular blogs (left and right), it’s enough to make you gag…one big circle je…er, mutual admiration society, that is, at some of these places…
fishbane, of course, in a static model, tax cuts decrease revenue to the government – but in a dynamic model, they often increase revenue. That’s only a paradox if you don’t understand the multiplier effect…
“Finally, when I can advance an argument which cannot be credibly refuted, I have a high degree of confidence that I am right…”
A high degree of confidence? Come now, don’t get bashful on us all of a sudden – how about your metaphysical certainty that all of your points are correct, 24/7? You rarely offer cites for the vast majority of your opinions (except the NYT), so how can anyone refute them (at least in your own mind), since you have no facts to back them up? Also, your responses clearly indicate that you rarely click and actually read other’s cites, thereby rendering your debating skills suspect.
Have you ever admitted, just once here, that you’ve been wrong about anything, anytime, anywhere at all – heck, it could even be about the time of day, the subject matter is irrelevant.
The answer should be quite illuminating.
MarK: thanks for your post, and I am truly grateful that you take the time and effort to run this site. I also realize that I do exasperate you from time to time. However, you gotta admit, I’m good for business: the threads I get involved with typically get a lot more posts than the ones I pass by. (Come one, come all, as Peter takes on all comers).
However, I don’t think that I make unfair arguments. I never attack other posters or question their motivation. It is true that I don’t back down and I don’t give an inch unless I have to — but what would you prefer, a wimpy liberal like Alan Colmes?
dmac: cites are relevant only when there are factual issues which are in dispute. I think that I have been fairly thorough in these instances — and yes, I do think the New York Times reporting is very credible. I don’t think there is a more credible source for news reporting in this country. They get things wrong from time to time, as any medium would, but I challenge anyone to give me a better news organization in the US. The editorial page has a very definite liberal slant — but that is something else.
However, I do not think cites are relevant for most of what I am arguing. Let’s use today’s other thread as an example (Mary McCarthy). When I was a kid, every day after school I watched in black and white as George Reeves as Superman fought for truth, justice, and the American way. I know what the American way is, and it ain’t sending people overseas to be tortured. A statement like this is self-evident, and any cite is superfluous.
I thought I made a mistake here once, but I was wrong. Seriously, folks, there have been instances when I was wrong on the facts and admitted it. The only example which comes to mind was an exchange with Clint, but I forget what the issue was. There were others. However, on the broad themes — Bush is unfit for office, violating FISA laws is wrong, and so forth — I think I’ve been right on the money.
“I’m not going to gain much from an echo chamber…”
But you live in a virtual echo chamber, Peter. SF is the epicenter of radical liberalism, while the cities where yours truly (Chicago) and Mark lives (Austin) are just about to the left of Trotsky at times. We have to defend our beliefs on a daily basis, for the simple reason that there aren’t a lot of fellow travelers where we live.
Believe it or not, I’m a registered Democrat, and have voted more often than not on that side of the ledger (Daley for mayor, Paul Simon for Senator, etc). But I believe that cognitive dissonance is a healthy thing for everyone to experience on a regular basis, and have no problem with the inherent predilections of living in a state that’s gone for the Democratic side (on the national level) for over 15 years at present. I don’t believe you experience a lot of this in your own world, and that tends to color your opinions in a stark black and white viewpoint.
True, but we currently have a Republican governor, and I am just down the road from the Hoover Institute. Most of the people at my office are foreign born, so I’m exposed to a lot of viewpoints which are not of the crunchy granola variety.
Also, I have voted for Republicans (Rudy Giuliani and Jacob Javots) and I would happily vote for Arnold if he runs again. I think he is doing a first rate job, and I also think the Democratic legislature is awful.
Well, there you go – I’m with you, man! Seriously, I do appreciate your participation here. Most of my friends (save for one) are fairly close to anarchists, so you actually come across as reasonable by comparison.
Let’s focus for a moment on the multiplier effect and agree to assume away, for now, the following two issues:
(i) Have Bush’s tax cuts indeed helped the middle class? And,
(ii) Is it prudent to maintain tax-cutting policies in the face of growing government expenditures (even within the context of a dynamic model)?
A key precept of the multiplier effect is the marginal propensity to consume (mpc) — i.e., the induced increase in consumer spending due to an increase in (post-tax) income.
For a variety of structural and behavioral issues, mpc will always be less than one. The question is, how much less than one? Or, in other words, how much larger than zero? (If mpc = 0, then, by defnition, there will be no multiplier effect. Thus, if mpc = 0, the increase in government revenue due to tax cuts will also be zero.)
It would appear to me that there would be a direct relationship between the level of confidence people have in the overall economy and the mpc: the more certain people feel about the future, the more disposed they’d be to spending each marginal dollar. The inverse should also be true, the higher the uncertainty in the future, the lower the mpc.
War, or the threat of war, raises the overall anxiety level and decreases our certainty of the future. The mpc nears zero (or falls to zero in the case of some families or communities). The efficacy of tax cuts as a way of inducing higher government revenue therefore falls considerably and, in many instances, may become null. In the meantime, war spending continues unabated.
The obvious question then becomes: Why is Bush (and his followers) insisting on making his tax cuts permanent in times of war? It appears to me, by looking at the multiplier effect theory, that during extraordinary times (i.e., war) tax cuts are ineffective, at best, and outright damaging, at worst.
Bush and the GOP-controlled Congress have not only failed on this score, but even more troubling, have continued to spend liberally.
Getting back to the topics of the post:
1) is dumb for the reasons Ryan outlined – it won’t do anything. Talking up the minimum wage is the Democrats’ version of Republican obsession with an FMA: a sop to the base that has no chance of alleviating poverty in the first case or even getting passed in the second.
2) is dumb because of the Orwellian use of the word “fair.” Tax policy is specifically designed to be unfair.
3) is dumb because it won’t work. Lobbyists will find a way to funnel goodies to their supporters in Congress. The only way to limit lobbying is to limit the power Congress has to help those lobbies.
4) is dumb because its effect will be to increase prices of imports, and nothing else. If I wanted to smuggle a bomb into the U.S. I wouldn’t do it by having it shipped in anyway.
5) is an assumption on my part, but I assume that it will be dumb because “fixing” means “price controls.”
6) is dumb because it’s not a plan, it’s a hope.
I have to agree with Peter on one point: Bush is not fit for the office. The last three major party nominees for President have defined “empty suit.” Just look at the way these clowns act when surrounded by political handlers vs. when not surrpunded: Bush, your goofy next-door-neighbor who hosts a nice 4th of July BBQ but would burn his own house down if his wife weren’t around; Gore, the college sophomore who thinks that he’s smarter than he is, and acts even more pompous than that; and Kerry, who before being discovered as a potential nominee was basically the Senate mannequin. For this reason alone I’m looking forward to a McCain/Clinton contest; at least the debates will be heavyweight title bouts rather than drunken stong-man slug fests.
I’d like to go back to the multiplier effect argument supporting the rationale for tax cuts, if I may.
A key precept of the multiplier effect is the marginal propensity to consume (mpc) — i.e., the induced increase in consumer spending due to an increase in (post-tax) income.
For a variety of structural and behavioral issues, mpc will always be less than one. The question is, by how much less than one? Or, in other words, how much larger than zero? (If mpc = 0, then, by definition, there will be no multiplier effect. Thus, if mpc = 0, the increase in government revenue due to tax cuts will also be zero.)
It would appear to me that there would be a direct relationship between the level of confidence people have in the overall economy and the mpc: the more certain people feel about the future, the more disposed they’d be to spending each marginal dollar. The inverse should also be true, the higher the uncertainty in the future, the lower the mpc.
War, or the threat of war, raises the overall anxiety level and decreases our certainty of the future. The mpc nears zero (or falls to zero in the case of some families or communities). The efficacy of tax cuts as a way of inducing higher government revenue therefore falls considerably and, in many instances, may become null. In the meantime, war spending continues unabated.
The obvious question then becomes: Why is Bush (and his followers) insisting on making his tax cuts permanent in times of war? It appears to me, by looking at the multiplier effect theory, that during extraordinary times (i.e., war) tax cuts are ineffective, at best, and outright damaging, at worst.
Well, that’s an interesting argument, and I don’t intend to ridicule it by pointing out what I think is a huge flaw – consumer confidence remains quite high, despite the overwhelming unpopularity of the Iraq War. That suggest to me that, rightly or wrongly, people feel the U.S. economy is big enough to absorb these obscene (yes, even for a Bush supporter like myself) deficits we are currently running…
“The last three major party nominees for President have defined “empty suit.”
If you’ve been reading this blog for a few months at this point, you may be aware that many of us (including myself) are quite tired of the Bush/Clinton dynastic impulses currently on display. If McCain is the eventual GOP nominee, then I would fervently hope that someone else but Hillary! would be the opponent. We need new faces and new ideas for the next election, not retreads from the same bloodlines.
Well, dmac, I don’t particularly like Senator Clinton’s politics (McCain’s either, for that matter), but is there another Democrat with a functioning brain and a chance at the nomination? I was only referencing her smarts – and I’d really like to see two competent candidates, even if I do disagree with them.
Alfredo-
Mark makes a good point, and one that people ignore all to often. Theory is fine, but in fact consumer confidence is very high. Of course you don’t even need this indirect evidence. The savings rate is remarkably low, which directly implies that mpc is rather high.
Not that this implies higher tax revenues (and again, who cares about theory? Tax revenues are real world numbers). On the other hand, I don’t consider increasing the government’s gross revenues to be a primary goal of fiscal policy.
It should be interesting to see if the consumer confidence index stays at this level if the price of gasoline hits $3.50/Gal. this summer. Of course, this will bring in extra revenue from the assorted taxes, but at what point does the hockey stick level off here? BTW, my level of economic theory is akin to what I learned in business courses in college – which basically means not very comprehensive.
Perhaps that’s why they call it “the dismal science?”
The tax cuts contributed to the deficit to the extent that they deprived the treasury of tax revenues it would otherwise have collected.
I think the bigger factor in the rise in revenue was the temporary & partial tax holiday on repatriation of foreign-source dividends. This accounts for most of the revenue, and has nothing to do with the Laffer curve (and was easily predicted).
I guess Mr. Wheel (update three, above) has not considered the possibility (likely, I think) that the increase in import prices due to inspections would not be enough to make American labor competitive. The only economic effect would be higher prices for imported goods – but prices still well lower than they would be without trade.
In response to peter’s comment @ 12:07 PM (peter’s comments in quotation marks because I haven’t figured out how to italicize yet):
“Of course I think we should fight a war on terror. However, Iraq was tangential to the war on terror. You fight terrorists by finding bin Laden, dead or alive. You don’t fight terrorists by attacking someone else.”
We know that there were at least two major terrorist training camps in pre-war Iraq (at Salman Pak and in the mountains of NE Iraq, near the Iranian border). We know that major terrorist leaders such as Carlos the Jackel, Abu Abbas, Abu Nidal and Abu Mussab al-Zarqawi were provided with safe haven in Iraq (al-Zarqawi after he was wounded in the fighting in Afghanistan). We know that Saddam was funneling money to the families of Palestinian suicide bombers through Abu Nidal’s organization. And we believed, as everyone else did, that Saddam had chemical and biological weapons and was attempting to aquire nuclear weapons as well. This is tangential?
“And yes, I do think that it would be preferable to have Hussein in power than to have lost everything we and the Iraqis have lost over the past three years.”
What have the Iraqis lost over the last three years? They’ve lost a brutal dictator who was responsible for deaths of tens or even hundreds of thousands of Shi’ites and Kurds. Who diverted funds from the Oil-For-Food program to clandestinely buy weapons from the Russians, Chinese and maybe even the French and Germans and to build more palaces for himself. As for us, we’ve spent a lot of blood and treasure to do what Bush the Elder should have done in 1991. And (hopefully) learned a bitter lesson in the folly of leaving a task half finished
“We are now learning that Hussein was a paranoid and somewhat enfeebled leader, more like King Lear than Joseph Stalin.”
Paranoid I won’t argue with, but enfeebled? I’d seriously like to know what you’re basing that assesment on.
“His sons were unstable and unpredictable.”
You’re right about Uday (sp?), especially after the attempt on his life, but Qusay (sp?) seemed perfectly capable of taking over from his father when the time came, unless you know something I don’t. And even if you’re right, do you really want a couple of psycopaths ruling a country with enough money to buy its way into the nuclear club?
“His regime pretended to have WMD but the cupboard was bare.”
And just how do you know that? We know he HAD chemical weapons; he used them against the Kurds and the Iranians. So what happened to them? Did he move them to Syria? Did he bury them in the desert? Or do you believe he finally got religion (pun intended) and destroyed them?
“The regime would ultimately have fallen of its own weight.”
Again, how do you know that? Between the money diverted from Oil-For-Food and the increasingly ineffective sanctions, it didn’t look to me as if Saddam or his brats were going anywhere anytime soon.
“The more we learn about Iraq, the more we realize that the any threat they posed to us was insignificant compared to Al Qaeda, Iran, or North Korea.”
We apparently didn’t invade Iran at the time because of the belief Iraq was further along in it’s development and stockpiling of WMDs than Iran was (I’ll concede that that’s debatable). We didn’t invade North Korea at the time because they apparently already possessed nuclear weapons and no country in possession of nukes has ever been invaded (three guesses as to why). As for Al Qaeda, you seem to be making the same mistake that a lot of people (both liberal and conservative) make: terrorist=Al Qaeda. Terrorist organizations may work together against a shared enemy, but that doesn’t mean that they all take their marching orders from a single leader. I suspect that it’s far more like the Mafia in the thirties, forties and fifties; each “family” doing it’s own thing and coming together to oppose common enemies, work out territorial disputes, share information, etc. The way to deal with Al Qaeda, Ansar al-Islam or any other terrorist organization is to cut off their funding and bring down the regimes that provide them with safe haven. We’re doing at least one (and I strongly suspect both) of those things now in Iraq.
“So to answer your question: I think it would be far preferable to have kept our powder dry so we can protect ourselves against those who have attacked us or those who are developing (or already have) nuclear weapons.”
In other words, wait until terrorists attack us again and inflict thousands more deaths. Or wait until nations that sponsor terrorism have achieved their goal of developing and manufacturing WMDs and share those weapons with their terrorist clients. Sorry peter, that’s way too late.
Another one who loves the war on terro so long as he doesn’t have to sacrifice a thing..
Go back to jerking your meat while thinking of naked arab men getting sodomized by broomsticks.
Congressional Investigations commense in January ’08. The GOP is screwed. They are all going to jail.
r4d20, that’s just brilliant. Thanks for the nice addition to the debate…
Instead of knocking yourself out by retyping that whole list of talking points Unka Karl faxed you, next time, why not just post a picture of you with Bush’s **** in your mouth? It’ll save you time, and it says the same thing…
Wow! As if one wasn’t enough already, dave further proves that liberals are incapable not only of forming a cohesive argument, but of adhering to polite conversation etiquette altogether.
Dave, I censored you. Listen, you can call me anything you want, but you will keep it clean, or you won’t comment here. Fair warning – maybe you didn’t know we were adults. But come round here with that trash again and you will be banned…