After his GOP majority “shut down” a workable, bipartisan, and tough-on-immigrant border deal simply because Maximus Trump ordered them to do so, Texas congressloon Chip Roy prematurely warned the world of disaster a day before the budget deal was struck, and signed, immediately, by President Biden. Roy has been in the House since 2019, and ought to have known that rarely do these threatened shutdowns occur, although they have done three times, once each, under Clinton (16 days), Obama (21 days), and under Chip Roy’s unprecedented President Trump (the longest shutdown at 33 days).
Roy, by the way, is a prototypical MAGA/Tea Party budget ax man who has never met a budget item he didn’t want to cut, especially social welfare programs and taxes. Hypocritically, he would have applauded a shutdown. Like most of his GOP/MAGA congressloon colleagues (and, sadly, this includes some fifth column Democrats), causing the federal government to shut down is their overriding primary rationale, intimately intertwined with their tax cutting fever. This is why they continually underfund important federal programs: this causes inefficiencies and poor management of these programs, thus proving, to those who don’t make the connection, that the federal government does not work, in general and in particular. They are for decades the quintessential anti-government force in American history.
Oppression is more easily endured than insult. Junius
Indeed. Here’s an example of the GOP’s expertise with the insult as well as its talent for underestimating its country’s anger about its social and economic situation. This example arises from the House bill, HR 3630, the ‘Middle Class Tax Relief and Job Creation Act of 2011’ (the payroll tax holiday being now in combat with its Senate version). Passed by the House on December 13, 2011, it included a proposal that ought to be an unforgettable marker for the topsy turvy times we live in. Among the sneers at the poor and middle class that the GOP has tossed as casually as lint from a sport coat, the provision below may rank among the more craven insults to pass for serious legislative language. Listed, laughably, among “Offsets,” it’s surreal:
SEC. 5301. ENDING UNEMPLOYMENT AND SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM BENEFITS FOR MILLIONAIRES.
(b) Ending Supplemental Nutrition Assistance Program Benefits for Millionaires-
(1) IN GENERAL- Section 6 of the Food and Nutrition Act of 2008 (7 U.S.C. 2015) is amended by adding at the end the following:
`(r) Disqualification for Receipt of Assets of at Least $1,000,000- Any household in which a member receives income or assets with a fair market value of at least $1,000,000 shall, immediately on the receipt of the assets, become ineligible for further participation in the program until the date on which the household meets the income eligibility and allowable financial resources standards under section 5.’.
(2) CONFORMING AMENDMENTS- Section 5(a) of the Food and Nutrition Act of 2008 (7 U.S.C. 2014(a)) is amended in the second sentence by striking `sections 6(b), 6(d)(2), and 6(g)’ and inserting `subsections (b), (d)(2), (g), and (r) of section 6′.
Note, this provision follows section (a) of the new Title 26 (IRS) Section 5395 that would be created if the House had its way in the apparently upcoming House-Senate conference. Section (a) imposes an additional tax on “excess income,” also insulting to working Americans and the unemployed.
Perhaps the GOP ought to be more careful and less arrogantly confident. The American people are more carefully listening now. In reading through quotations related to “insult,” Cordell Hull, FDR’s Secretary of State, said it well:
“Never insult an alligator until after you have crossed the river.”
The American poor and middle class today form a churning river of humanity; a river both deep and wide, approaching flood level.
Senator John Kyl (R-AZ), who adamantly opposes tax hikes, has found one he really wants to help inflate. How? By not extending the 2011 payroll tax holiday, he – and the GOP – would raise the tax by about 50%. And note, most American households pay less in income taxes than they do in payroll taxes dedicated to Social Security, so the reduction from 6.2% to 4.2% of this tax was a healthy boost to this year’s pay. Also, it exclusively benefited the working poor and what’s left of the middle class since, due to a longstanding wage cap on FICA Social Security taxes, it applies only to those earning less than a very middle classy $106,800 in 2011. Employers, by the way, match employee FICA taxes, and notably, the payroll tax holiday does not extend tothem; they pay an excise tax of 6.2% on wages paid (as well as 1.45% that is dedicated to Medicare, which also was not reduced for employees during the holiday). . .
Finally, although a controversial subject, the looming “social security crisis” being chicken-litt nearly everywhere is primarily based on inaccurate understanding of the trust fund and on ideological grounds. Relatively easy fixes exist, short of raising the retirement age or radically slashing benefits, to remedy any crisis that might ever emerge. The trust fund has a still growing $2.4 trillion surplus, and that money is dedicated by law to pay benefits. If there is a crisis, it’s in the Medicare Trust Funds and in high health cost inflation, but, for this article, let’s assume a Social Security “crisis” scenario is valid, paramount, and impending, as Kyl, most of the GOP, and some Democrats believe.
With that in mind, two simple declarative sentences during Senator Kyl’s FOX N*ws interview the other day made the news: “The payroll tax holiday has not stimulated job creation. We do not think that is a great way to do it.” With this, the senator may have unwittingly opened a door for Democrats and progressives to, in one package, lower taxes on most Americans and small businesses, ensure the viability of Social Security, and increase taxes on more highly paid wage earners. How?
Let’s Regress for a Moment. All the above can be accomplished by remaking the FICA tax, moving it from a regressive (or flat tax) system to a progressive system, and doing so in a way that puts the GOP in a policy knot. To mix metaphors as if with a blender, the GOP can be hoist on its own ideological petard.
O.K. then, Senator Job Creation, has not the 2011 FICA holiday put a great deal of money into the pockets of the middle class and working poor? Of course it has. The payroll tax on wage earners was reduced from 6.2% to 4.2%, adding more than $40 billion to working families’ pockets. Although a demand side argument, that $40 billion does have some effect on the country’s producers (“job creators”), does it not, if only to preclude more
layoffs? Moreover, with the FICA taxes on employers for wages paid not reduced for 2011, it stands at 6.2%. A reduction in that rate would have encouraged more “job creation” this year, and would also have been a truly supply side remedy, a GOP favorite. Wha’ happened?
Nonetheless, a fight over extending the wage earner FICA holiday, and its further rate reduction to 3.2%, will become the battle du jour in Congress quite soon, perhaps today in the Senate. Democrats propose funding the 2012 FICA shortfall through a 3.25% surtax on incomes over $1 million. That, of course, with GOP control of the House, and near control of the Senate, will create a battle royal. This might be good for Democrats, though, if, for now, they move off the 3.25% surtax, as worthy as it is, and hide much of it in a FICA tax overhaul proposal that may isolate the GOP in dangerous territory. The appearance of “backing down” again to the GOP on millionaires’ taxes would be mostly sanitized inside a hugely popular Social Security program proposal. In the end, that can put the GOP on the policy defensive, and, if successful, collect increased tax revenue from the upper 10% via a reformed FICA tax system.
Let’s Progress Progressively. The positive effect on personal income of this year’s 2% break was large, especially since the payroll tax is presently regressive (at least at the time it is paid, if not in benefits received later). Therefore, prior to 2011, when the social security tax was 6.2% it more negatively affected lower wage earners than higher wage earners due to the percentage of income that certain goods and services drain from family budgets at differing income
levels. Poor families, for instance, spend a larger percentage of their income on transportation to and from work than do higher income families, even if the dollar value of their subway ticket is the same $40 per week. Known generally as Engel’s law, the same effect, in general, is true for many other items like food, shelter, health care, renters insurance, etc.
Regardless of the helpful economic effect of the 2011 holiday, though, the resulting 2011 FICA tax (4.2%) remained a flat tax, and, as we saw above, flat taxes like FICA are not an “equalizer” as nearly all Congressional Republicans, Herman Cain, Rick Perry, and some Democrats ardently believe. Their FICA arithmetic is linear, however, the distribution of flat taxes and their family budget consequences among families of different incomes is not linear. Engel curves are mostly nonlinear.
Here’s a counter-example of the flat tax that presents it in a different, friendlier light. Overall, the income gain from this year’s payroll tax holiday averaged approximately $1,200 per worker, but that is regressive in the best way, i.e. it boosts lower earner incomes for the basic needs of life (food, shelter, health care, etc.) on a percentage of income basis, and that helps the households in the lower 20% more than those at the $106,800 FICA taxable wage earner ceiling. As a result, lower income earners who receive a $500 FICA break can do more to meet basic needs (and perhaps have some discretionary funds) than a $1,200 FICA holiday for those better off who have already easily met their basic needs. That group, in fact, may actually buy things just for the joy of it, like televisions, row boats, tires, and funny costumes.
Yet, in the end, a flat tax does more proportionate damage than not. As we’ve seen, it especially hurts lower income households’ living standards, and regrettably, that group of working poor has experienced virtually no net income growth for decades. Finally, though mildly debated by economists, the employer portion of the FICA tax system is differentially passed on to employees through wage reductions, benefit cuts, etc. So, as a consequence, where employees experience this they are potentially being assessed up to double their own FICA tax.
Senator Kyl’s inapt – but as you’ll see, helpful – framing of the issue as a “job creation” issue is, of course, the GOP mantra of this era. In effect, that religious belief translates, in practical terms, to five policies: less taxes, lower taxes, no taxes, decapitate business regulation, and “Let’s hang Ben Bernanke.” Kyl’s “job creation” argument against extending the lower payroll tax through 2011 arises out of supply side economics, the granite hard foundation of GOP tax policy. Supply side policies typically stress tax reductions primarily to benefit “job creators,” those well-known 1 to 10%ers. But that’s not all, Republicans, particularly the new crop of Tea Partiers everyone fears, rail around the clock against taxes on anyone for anything at any time.
So, inexplicably, here’s a tax cut – extending the payroll tax holiday – that is disliked by Senator Kyl, an exemplary supply sider. Michele Bachmann and others have this extension in their sights as well. Generally, the GOP loves this tax increase. What are they smoking? Certainly, one would think, unleashing the dollars on a recession-prone economy that would normally go to FICA would help spur production, and thereby create jobs, is the very supply side goal sought by Republicans. Though they deny that jobs are created by a payroll tax reduction, this belief violates their foundational principle that all tax reductions “pay for themselves” by spurring economic growth. To Republicans, all tax reductions, therefore, are supply side in nature. So, what’s the problem here? Why on earth oppose this one?
Here’s where it gets tricky. Understanding the nature of their supply side about face here is a clear path to attacking the GOP on its flank, and subject them to an unwanted limelight for a while, perhaps until the morning of November 7, 2012. The Kyl-GOP position on ending the payroll tax holiday is akin to shooting themselves in the philosophical foot., i.e. effectively taking billions out of consumers’ wallets and giving them back to the federal government’s “entitlement” programs, which they also adamantly oppose. This is a real political bind for them. Certainly, the resulting income transfer to government will affect their 1%ers’ bottom lines, dividends, and incomes adversely when the majority’s discretionary income declines. Without a FICA break, they’ll be paying 2% more salary to Uncle. So, for the GOP to take such a pro tax hike stance over a 2012 FICA holiday is a mystery. And does not Grover Norquist oppose any rescinding of a tax cut or tax expenditure once it’s enacted. And, for Gosh sake, as Romney said about another more personal issue related to the politics of lawn maintenance, “It’s an election year!” Why would the anti-tax, anti-government, anti-“entitlements” pro Social Security privatization party want to be seen pushing a tax increase in an election year? Well, with a reform proposal, the Democrats can ask that on a daily basis. Betcha’ Boehner sheds tears.
And here’s yet another GOP hot spot: Social Security itself. It’s solvency. They’re frightfully concerned about that. They do their arithmetic and discover that Social Security will run out of money any day now. What shall we do? Their preferred choice, privatizing it via the equity markets, given the recent track record of the financial industry, is a non-starter. And that’s really all they have. So, now, how do we shore up the program, this mammoth “Ponzi scheme,” they ask? Well, they suggest raising the retirement age (not so good if you work in the trades where muscles are involved), they suggest cutting benefits (not so good if you’re already destined to live on dog food in emergency rooms), and they suggest everything short of deporting the elderly to Finland (Finnish is a hard language to learn). In Social Security reform, Americans view them like a Republican in a punch bowl. Democrats can keep that pleasant image in the forefront by actively battling them over a FICA tax overhaul that, through its progressive tax basis, and no income cut-off, they will find it hard to respond to in a way that does not make them even more unpopular, particularly, I believe, among independents.
Now Progress to the Proposal. Senator Kyl, by tying the question to supply side economics through his use of the term “job creation,” may has invited an effective Democratic progressive flanking movement along these tactical lines: Democrat/Progressives might say,“Yes, Senator, we share your concern about the payroll tax holiday. But let’s also discuss the demand side, which is opposite the supply side on the macroeconomic coin. Low demand leads to less private sector revenue, less cash flow, less employment, and other things we all can agree need fixing. And, as you say, right now!”
Remember, the average American pays more payroll taxes than income taxes. And, as mentioned above, here’s the most important factor: payroll taxes are regressive, like Herman Cain’s 9-9-9. For just one more example, a poor family pays a higher percentage of its income on food than a middle-class family, even though the middle-class family spends more dollars on food. That’s regressive. Let’s ask Kyl and the GOP, “Can we both admit that such a regressive effect is a bad thing?” Publicly, where it matters, if framed in terms that appeal to the Democratic base and to independents, I’d dare Republicans to disagree without negative polling consequences.
Next, Democrats agree with the GOP (as they always seem to do on this) that Social Security “desperately needs fixing.” Push the GOP regularly with their own beliefs that extending the payroll tax, a tax cut, would be a helpful macroeconomic remedy to move our stagnant economy forward and always mention that you too believe the Republican mantra that “tax cuts create jobs.”
Caught like this, however, in a snit for the Democrats’ attempt to hoist them on their own supply side petard, the GOP will suddenly care about Social Security in its present form, something rarely show-boated. This is where Democrats and progressives can tie them into knots. “Well, yes, we too, as you well know, fear for Social Security’s future. And we support your proposed payroll tax hike, and we applaud your courage in going counter to your tax-free economics. But we, just as you have said over and over, we do not condone tax hikes on the middle class and poor alone, especially in a time of weak economic recovery while others in the top 10% of earners suffer little, if at all.” Spring the trap, and continue: “So, we propose solving both the payroll tax regressivity problem and the Social Security viability problem in one big bipartisan package. We’ll start with your excellent idea of ending the payroll tax holiday as of January 1, 2012. We’ll both frame it as a ‘big solution for some big problems,’ giving you, the GOP, ample accolades for the original concept.”
Then, roll up their flank, and uncover the proposals:
1. To assure Social Security viability for a century or more, we will erase the present payroll tax cutoff point. FICA will now be collected on all wage earners required to pay the tax regardless of income.
2. In addition, we will transform the payroll tax from a regressive flat tax to a progressive tax with lowest rates for the lowest income wage earners, with proportionately higher rates for higher earners;
3. With a progressive FICA system and the wage cut-off point removed, we will make employer FICA taxes on wages paid a progressive tax as well. Progressivity, in turn, greatly benefits small business owners with few employees.
All these things could follow, both arising from demand and supply side features of the FICA overhaul:
a marked decrease in FICA taxes on most of the American public, three quarters of whom pay more in FICA taxes than in income taxes,
a similar decrease in FICA taxes owed by small businesses, freeing up money to invest, thus driving expansion and job growth, and
a mechanism that will sustain Social Security for the long term.
And it is those constituencies who deliver GDP growth and, thereby, happily for all, increase incomes, private sector revenue, corporate profits, and, consequently, add to the wealth of the upper 10%, producing legal ecstasy for Republicans. By golly, it’ll trickle up! Exxxcellent!
If someone runs with this, how can the GOP resist it without alienating more voters than they already have?
From: Meet the Press, October 16, 2011, transcript of a portion of the discussion between David Gregory and Herman Cain, arguably the front runner in the GOP presidential race for the party’s nomination.
MR. GREGORY: You’ve also said that stupid people are ruining America. MR. CAIN: Yes. MR. GREGORY: Who exactly are you talking about? MR. CAIN: People who are uninformed. People who will not look at an alternate idea. People who are so dug in with partisanship and partisan politics. Open-mindedness is what’s going to save this country. The reason that my message is appealing is because it’s simple and people can understand it. You know, a good idea transcends party politics. But there are some people who will not even consider 9-9-9 or any other proposal if it’s coming from someone of the opposite political persuasion.
But this may be a good thing. Will Rogers once said,
If Stupidity got us into this mess, then why can’t it get us out?
Mr. Boehner: “And here in Washington, there’s a fundamental misunderstanding of the economy and it’s led to an awful lot of bad decisions. And the reality is that employers will hire if they’ve got the right incentives, but the incentives have to outweigh the costs.As an example, businesses aren’t going to hire someone because the government’s going to give them a $4,000 tax credit, if the government mandates that are imposed on them cost a lot more than that temporary credit. In our recent years, these mandates have been overwhelming.”
“Government’s threat to job creation has two other components. One is the current tax code which discourages investments and rewards special interest. It strikes me as odd that at a time when it’s clear the tax code needs to be fundamentally reformed, the first instant to come out of Washington is to come up with a new host of tax credits that make the tax code more complex.”
In fact, what he criticizes is actually the ultimate Republican tax-cutting plan: It rewards the private sector for acting in its own best interest. And it gives wary companies that are now just hoarding their profits in cash the confidence that can get them to start expanding again.
And, it’s also the ultimate Democratic jobs-generating plan: It guarantees results before federal tax dollars are spent.
Moreover, it’s the ultimate tea party no-new-taxes/no-new-programs populist plan: It produces the new jobs without government adding more taxation or more reams of red tape.
And it is, by definition, the most shovel-ready plan any economist can conjure: By using job-generating tax credits to prime our economic pumps, not a dollar of taxpayer money would be spent before the private sector has created and filled the jobs.
A side benefit of this is that it is not one of those programs that reward the special interests that have invested in our politicians — presidents, senators and representatives — by giving them campaign money as a down payment for future access and consideration. All employers have a chance at getting this tax credit — all they need to do is hire new employees.
Now it turns out the template for this approach was just created. On Aug. 5, President Barack Obama announced a program to give companies tax credits for hiring unemployed military veterans. Employers hiring unemployed veterans would get a $2,400 maximum credit for every short-term hire and $4,800 for every long-term hire. The plan would give companies a $9,600 maximum credit for every long-term hire of a veteran with service-connected disabilities.
Well, if this works for creating jobs for unemployed military veterans, why not expand it to include all unemployed Americans? That Republican-sounding idea was raised by the former chair of Obama’s Council of Economic Advisers, Christina Romer: “There are 15 million other unemployed people,” Romer said. “Let’s do a big tax cut for any firm that’s willing to hire. Someone, I think, ought to be making the case for swinging for the fences, not small programs.”
GOP mantra, though, “no taxation without representation; no taxation with representation.”
From the newsstand copy of POLITICO that I found in a Starb*cks this a.m., a report about Eric CAN’Tor’s thinking on a portion of the American Jobs Act, i.e. spending $45 billion dollars on rehabilitating schools and homes:“I don’t believe that our members are going to be interested in pursuing that,” House Majority Leader Eric Cantor (R-VA) told reporters Monday. “I certainly am not. There are perhaps laudable goals behind the proposals, [but] the fact is we don’t have the money. And we’ve got to prioritize. And right now, it’s about getting people back to work.”
I wondered, is Mr. CAN’Tor acquainted with how buildings are “rehabilitated”? Without exception, these projects require construction workers and the use of durable goods, two areas where the unemployment rate runs from 9.1% (durables) to 13.5% (construction). That’s a bit more than 2 million people, many out of work for more than two years, and many more doing part-time work only, among the huge numbers of underemployed. In addition, rehab projects require electricians, plumbers, architects, security personnel, inspectors, permitting, and other allied professions. These jobs then cause other services to gear up. Think insurance, food services, etc. The dollar put into the economy “grows” – $45 billion for these projects might then result in $145 billion in carry on spending from the private sector that, now, is sitting on huge piles of cash, literally, cash in money market funds.
The real answer, though, is of course the obvious one: CAN’Tor and his minions are out to remove Keynes from the economics texts, to dismantle governments – don’t kid yourself – of all sizes. Supporting useful fiscal stimulus (they actually do know it’s useful) is, to them, off limits. And all this despite the mischief it spawns in the country. In poker terms, they are all in. They believe, despite all the evidence, that the private sector will leap to the rescue, and rehab those schools and homes! If only they could pay well below the minimum wage; if only they were utterly unregulated; if only they didn’t have to do this; if only they didn’t have to do that; if only; if only. . .
“He’s and idiot.” Now there’s a Democratic Governor for you! In a moment of purest truth, crystallizing the essence of Ron Paul’s recent anti-FEMA rant, no one could do it better, or with more harmony of syntax. “He’s an idiot.” It’s long overdue, this simple dismissal of Ron Paul. And nowhere is it more obvious than here: this tightfisted Mr. Burns envisioning a world without FEMA. Like my post yesterday about Virginia Congressloon Eric Cantor’s observation that his constituents – chide, chide, chide – had not secured earthquake insurance, Mr. Paul is of the same mind. “We should be like 1900; we should be like 1940, 1950, 1960,” Paul said. “I live on the Gulf Coast; we deal with hurricanes all the time. Galveston is in my district.”
Though it’s less discussed, don’t fool yourself, people like Ron Paul are just as committed to defunding state governments as they are to stripping the federal budget. It’s taxes they detest, and, of course, state governments impose taxes of all kinds. Some, like Paul’s Texas, have no income tax. In the end, anti-tax people are anti almost all taxes. Here, in the bluest county in blue Maryland, Montgomery County, a group has fought property taxes for years and years.
Insurance company bankruptcy is more common than people think, especially in difficult financial times. A major disaster can also result in insurance companies going bankrupt: Hurricane Andrew hit Florida and Louisiana in 1992, resulting in no less than 12 insurance company bankruptcies. But Ron Paul isn’t moved by that. FEMA? No. Just buy some insurance which will be unable to pay out to policy holders which the federal government will not be allowed to assist. Recipe for disaster upon disaster. Ron Paul is an idiot.
“I don’t know how much God has to do to get the attention of the politicians. We’ve had an earthquake; we’ve had a hurricane. He said, ‘Are you going to start listening to me here?’ “
Michele Bachmann, August 28, 2011, Sarasota, Florida, relaying God’s growing displeasure with Congress
Ms. Bachmann is correct. Certainly, if I were God, I’d be displeased with the political class. God’s notoriety for biblical-sized temper tantrums is well-earned. Floods. Fire. Brimstone. Brimstone and fire. He’s especially fond of plagues – frogs, locusts, boils, lice, my next-door neighbor. Yes, the Creator is omnipotently equipped to rain down a variety of “hints” when it suits His purpose. The recent eastern seaboard earthquake and hurricane match the Supreme One’s M.O. Agreeing with Bachmann in this case is easy; I too see that God’s sole purpose was to get the attention of politicos of every stripe. Everyone else – whether floating on a rooftop in Vermont’s Winooski River, or trapped in Prattsville, New York with no way out – you may relax. The unpleasantness was not directed at you.
But what, exactly, have our political folks done to get God’s robe in a bunch? Lapses in ethics? Sleeping with anything that moves? Making criminal for others activities they engage in on a daily basis? Permitting David Vitter to remain in the Senate? No. No. No. And No. According to Ms. Bachmann, Yahweh’s press secretary, this wrathful acting out was fiscal in origin, not humanitarian. Last Sunday, the sage of Minnesota explained to her Sarasota Florida audience exactly what God was trying to convey to tone deaf national legislators, and a certain President: “Listen to the American people because the American people are roaring right now. Because they know what has to be done. They know government is on a morbid obesity diet and we’ve got to rein in the spending.”
Nudge, Nudge, Wink, Wink. Congressdwellers, primarily Democrats of course, reverted to their political default setting of touchy-feely whininess urging government funded disaster relief for citizens floating down various rivers. One prominent politician, however, the GOP House Majority Leader Eric Cantor (VA-7), clearly understood a divinely inspired hint. Mr. Cantor, first among all his tightfisted GOP colleagues, apprehends God’s fiscal concerns. Cantor knows that at such an advanced age, God is getting increasingly testy, i.e. Old Testament testy, Old Testament remedy testy. Like many in God’s age group the day’s concerns revolve around making the rent, funding an affordable medi-gap Medicare supplement, stretching that monthly social security check, and finding the car keys at least three times per day. And taxes! Oy! A klog tzu meineh sonim! Or in colloquial English, “Oy! A curse on my enemies!” So, one can see, what God does not need is more federal spending that does not directly benefit. . . G.O.D. And God does not reside in an earthquake or hurricane disaster area. Think. Would an omniscient God smite Himself with His own earthquake and hurricane?
Mr. Cantor gets it. He gets hints. His own congressional district, after all, was the epicenter of the quake. Tanya Somanader at ThinkProgress reports: “While touring the earthquake damage in his district, Cantor surmised, ‘Obviously, the problem is that people in Virginia don’t have earthquake insurance.’ As the Insurance Information Institute notes, ‘earthquakes are not covered under standard U.S. homeowners or business insurance policies, although supplemental coverage is usually available.’ So, for Cantor, the problem here is that Virginians didn’t have the foresight to predict an exceedingly rare natural disaster and pay out of their own pocket in advance.”
Exactly, Ms. Somanader! Fiscally responsible constituents would have purchased earthquake insurance. And flood insurance. And to be safer yet from the pesky acts of a disgruntled Supreme Being, one ought to cowboy up on plague insurance and secure oneself from losses due to frogs, locusts, boils, reality television, Newt Gingrich, teenagers, and golf. I have these forms of insurance. In addition, I purchased glacier insurance and, because I suspect my next-door neighbor, I possess a zombie damage policy. This is what Mr. Cantor would correctly label “responsible.” If a next-door zombie devours my poodles, I will not require government assistance. Will you?
Pay As You Row. As he observed the damage to his Virginia district, Mr. Cantor continued to opine: “The next step will be for Virginia Gov. Bob McDonnell (R) to decide whether to make an appeal for federal aid,” Cantor said. The House Majority Leader would support such an effort but would look to offset the cost elsewhere in the federal budget.“All of us know that the federal government is busy spending money it doesn’t have,” Cantor said in Culpeper, where the quake damaged some buildings along a busy shopping thoroughfare.
And why should he? Certainly, there are many “potential offsets.” Why can’t Medicaid freeloaders contribute to disaster relief? And since Medicare and Social Security are unconstitutional, let’s carve out a few bucks from these Ponzis. Moreover, FEMA is a boondoggle. Let’s close it down! Let Goldman Sachs privatize disaster relief with catastrophe backed securities. With those money saving offsets perhaps we might loan Vermonters a few bucks to buy hurricane and flood insurance from Mr. Cantor’s insurance company contributors who, during his ten year congressional career, have contributed $1.1 million to his campaigns. They’d appreciate some ROI.
The lessons God graces us with during His latest calamity rage out are simple. I’ve put my mind to it and here’s my take:
God is good, but cranky.
“Acts of God” are generally unremitting in unpleasantness.
Disasters are the free market stomping on your private parts.
Insurance makes disasters profitable enterprises for nearly everyone.
Go ahead, kick it again, you know you wanna. Congress will be back from summer camp in a couple of weeks for more warfare over budgets and deficits. All parties are thinking big, thinking long-term – as in ten year plans long-term. . . But the Clinton and Bush eras show that when it comes to budget and deficit projections, and the plans and proposals that come from them, usually it’s much more sensible to just “kick the can down the road,” a few yards at a time rather than a few miles.
“An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.” — Laurence J. Peter
Other Than Rick Perry, What’s Predictable? Unpredictability, that’s predictable. We all project forward based on the past and the status of the present. Individuals, families, and – especially – governments. We all make big commitments to the next few years, or longer. We must, regardless of the sense of it. If we accepted that predictions are almost always wrong, our plans often futile, we’d have to admit we’re buffeted around by a world that is unresponsive to earnest, well-meaning plans. Some do admit this. Most people and all governments, though, push that kind of thinking where it belongs, away. Emotionally, humans need to plan, and for years ahead. We feel safe. In control. So, regardless of the sense of it, we project. We plan. Maybe, in the renewed budget and deficit battle, we need to shorten our horizon.
The Most Common Result Of A Ten Year PlanIs A Ten Week Lifespan. That’s why they call it “projection,” a “plan,” aka “wild ass guess.” What happened to budget projections on September 11, 2001? There’s that amoral random universe thing again . . . We all know that projections are guesses, and the educated ones fare no better than the uneducated ones. My concern is the great passion we have for these long-term, multi-year plans. Obama had a ten-year plan. Boehner had one, then didn’t, then did, then denied he ever had either. The Super Committee aims to produce a drastic long-term deficit and spending diet plan.
Given the poor record of distant horizon projections and the resulting plans why not agree to simply go short-range, a couple of years. Let’s face the galactic truth that we can’t predict the price of beans for the next week, although, admittedly, we usually have a decent shot at it. But the next three to ten years? And the Tea Party control freaks are insisting on rigid benchmarks in whatever multi-year deal that is struck. Hopefully, it’ll be a two-year deal, or less; something we can squirm out of when unexpected events arise. Most times – perhaps always – it’s good and sensible to “kick the can down the road.”
Soon, when the rascals return to Congress for more of the same, we’ll be bombarded like Fort Sumter with plans about plans, guesses posing as certainties, plans to make plans, and committees about planning more committees. Good plans. Lousy plans. Depraved plans. Then there’s Obama’s plan, the GOP plan, the Tea Party plan, Pelosi’s plan, ad infinitum. All plans, they’ll continue to say, are based on addressing a rapidly growing deficit. Democrats and Obama will try, but addressing immediate needs for jobs programs are most likely DOA. But plan for ten years out? That they and almost everyone else will do despite the proven futility of it. And what, in the end, will the plan that emerges be worth in practical terms? For some guidance, let’s have a look at the Clinton era budget surplus, a 1998 CBO 10-year budget projection, and the unpredicted activities of a president from Texas.
Can You Say Budget Surplus with a Straight Face? It’s hard to square it today, but remember how, ten years ago, many were worried about the problems that might come from our rapidly growing surplus.You’re LOL-ing, aren’t you? I laughed too. But it’s true. Clinton left us with a budget surplus. And some economists were as worried about that as much as they worried about the previous deficit. Here’s a good example. Bloomberg Businessweek, February 2001. The dawn of the Bush II era. The article carried the giddy title, The Surplus? Make It a National Savings Account. . . with the private saving rate at record lows, it should be good news that the government is projected to run large budget surpluses over the next decade. Why, then, is Federal Reserve Chairman Alan Greenspan, an outstanding student of economics, concerned about” looming surpluses” and calling for ”surplus-lowering policy initiatives?”
See? People – Alan Greenspan –were worried about surpluses! Who knew? Among other esoteric things, Greenspan’s worried that the federal government would spend the coming surpluses on “private assets,” and thereby be subject to untoward and market disruptive political pressure. Good point. How’d Greenie’s concerns play out? That’s a rhetorical question; we’re now living through that result, that comeuppance to all well-meaning long-range predictors and planners. Boy howdie, are we! Here’s how a Connecticut bumpkin from Texas resided over it with near unanimity of members of his own party, and some support from the other side of the aisle.
Planning On Future Surpluses is ”necessarilysubject to a relatively wide range of error. Alan Greenspan, February 2001. “Relatively.” Gotcha Alan. As we all know, and experienced first-hand, the arrival of Dubya in January 2001 very quickly provided the necessary “range of error” Greenspan spoke of. Quickly, he knocked off any rosy future of any kind. With his infamous – to many – tax cut he quickly put us back into deficit, and beyond, urging us to boldly go where no American deficit has gone since the Civil War or FDR. So now, ten years later, it’s deficits, deficits, deficits. How’s that for a ten-year plan?
1998: A Bold Projection bythe Congressional Budget Office (CBO). In 1998, the government had a $70 billion budget surplus. Head scratching all around. This is the trend, many said. This trend is our friend. The CBO, in its The Economic and Budget Outlook: Fiscal Years 1999-2008, projected continuing surpluses from 1998 to 2008. Surreal, huh? Today, with what seems clinically insane optimism, CBO estimated that from January 1999, the government will have a budget surplus for each fiscal year from 1999 through 2009! Even Candide’s mentor, “the best of all worlds” Pangloss would be dumbfounded.
If it had happened like that perhaps we’d have no Tea Party today, no Cantor, no Bachmann, no Ron Paul, no Rick Perry, no John Boehner (well, no, Boehner would have found a way). But it didn’t happen “according to Hoyle,” and it couldn’t. Here’s what happened instead:
The only predictable about a ten-year projection is its massive instability. A projection is based upon actual economic and political data that is static, it’s already behind us. The variables attached to events both big and small abound – nearing the infinite. If we could identify and list the thousands of variables that would more accurately predict a short-term result, we would not be able to compute them, so many possibilities would emerge. Computational capacities are still relatively weak in cases with even a dozen variables, much less thousands. “Certain” and “projection” don’t play well together at recess. Over ten years?
To me, the 1998 CBO lesson is that whatever long-term plan comes out of the Fall 2011 budget and deficit battle will almost certainly be short-lived, overtaken by events unimagined and utterly beyond our ability to prevent. Old Rummy’s “unknown unknowns.”
Moreover, it’ll be obvious well before November 2012. Do you think the electoral politics from here forward makes agreement on anything substantial, like federal job creation, more or less likely? I tend to think “less likely” simply because the GOP hammer, the Tea Party, sees every problem as a nail. Unless their own constituents change their minds, and pressure them – there are some signs of this – there will be little backing off.
In any event, despite the checkered history of projections, that doesn’t mean we should abandon them for short-term budget planning. And demographic projections and derived longer-term plans are critical for Social Security outlays, Medicare costs, etc. Moreover, planning centers one’s attention on priorities. In the CBO case, though, projections and planning did not predict the economic cost of George W. Bush, 9/11, nor the housing bubble. These were true historical outliers, a gathering of events and trends that are equivalent to 100-year floods. Nobody can reasonably “blame” CBO in the slightest for this. Rather, it’s our overuse of, and overawe about, long-term planning that leads to wasted time, endless delay, sometimes brutal contention over issues expected to arise five, six, or ten years down the road. Worst of all, there’s the opportunity cost – time wasted in futile ten year planning – pushes attention aqay from immediate needs that government could rather quickly address.
So, Congress and President, go ahead, kick that can down the street where we now live, the one with all those out of work folks sitting on the stoops. Concentrate there, plan there, not on the street where we plan to live in ten years. That street will likely not even exist then.
What Texas Miracle . . .? Jobs miracle . . .? Well yes, if you consider that Texas sports among the lower median hourly wage in the country ($11.00/hour) . . . and that wages have grown less that 3/4% in the last four years, as opposed to around 4.5% nationally . . . and that Texas has the highest number of workers in the U.S. making the minimum wage ($7.25/hour) . . . So much of Perry’s miracle employment – the jobs miracle he boasts – results in very low paying jobs.
Check it out: the median Texas wage is $11.00/hour. That means half of all workers make $11.00 or less per hour, and my guess is there are a lot of folks making less than $11.00/hour since Texas, on Rick Perry’s watch, leads the nation in the number of workers making minimum wage. Well, a 40-hour week at $11.00/hr. yields $440/week/pre-Federal taxes (there’s no Texas income tax, that would be socialism). One can eke out a living at $440/week but recall that Texas also boasts the highest percentage of people without health insurance, 25%. So, even with Texas’s somewhat low cost of living and housing expenses, how far does that $440/week go? What jobs miracle is that? There’s a lot of wage slavery, and that’s no miracle.
Rick Perry, now, in what passes for “legitimacy” in the GOP, is a legitimate contender for the GOP nomination. I’ll follow him here like a foxhound on a hunt because I think he’s the front runner. So, the Governor is very proud of his miraculous touch, but the data doesn’t lie. Governor, you should know that in Texas, they say, “You can put your boots in the oven, but that don’t make em biscuits.”
