A Fight They Can Win

Washington Post

This post from Ezra Klein of the Washington Post says that the Republican assault on Medicare was beaten back by public opinion, with heavy losses sustained by the GOP for its effrontery. Now attention will be turned to Medicaid, a much bigger target. Some 67 percent of recipients are elderly or disabled, a majority without a lot of pull, so Republicans are salivating…

It doesn’t matter whether Eric Cantor says he’s bargaining for the Ryan budget or not. The GOP cannot privatize and voucherize Medicare. They can’t even get close. It’s too easy an issue for Democrats, too dangerous an issue with seniors, and too slipshod a policy even for Michele Bachmann. The attack on Medicaid, however, is another story. That one might actually work. And if it does, it’ll actually be worse….

There are two reasons Medicaid is more vulnerable than Medicare. The first is who it serves. Medicaid goes to two groups of people: the poor and the disabled. Most of the program’s enrollees are kids from poor families, though most of the program’s money is spent on the small fraction of beneficiaries who are disabled and/or elderly. These groups have one thing in common, however: They’re politically powerless.

The second is who pays. Medicare is a federal program. Medicaid is a state-federal match, and it kills states during recessions, as unlike the federal government, states can’t run deficits, and so they find themselves with increased costs because they have more people in need but decreased revenues. So there are a lot of governors — particularly GOP governors — straining under overstretched state budgets who’d like a way out of their fiscal crisis that doesn’t include raising taxes, and there are a lot of federal legislators who’d like to save money without having seniors mounting protest marches outside their office, and Medicaid begins to look like an answer to everyone’s problem. “You can shift costs to states so they can be the bad guys while the federal policymakers pretend they didn’t hurt anybody,” says Bob Greenstein, president of the Center on Budget and Policy Priorities.

Expect to see attacks on the state level, particularly where Tea Party Republicans hold sway — the basest of Social Darwinism from a party that wears the Bible on its sleeve and spouts all kind of sanctimonious spew in justifying its mean-spirited actions.

San Francisco Chronicle

Speaking of statewide attacks, this post on sfgate.com, “Wisconsin Republicans rush agenda before recalls,” details how embattled Republicans faced with a recall election are quickly acting to do the bidding of the puppet masters (as noted here in a post that’s a must-read):

Wisconsin Republican Gov. Scott Walker and GOP leaders have launched a push to ram several years’ worth of conservative agenda items through the Legislature this spring before recall elections threaten to end the party’s control of state government.

Republicans, in a rapid sequence of votes over the next eight weeks, plan to legalize concealed weapons, deregulate the telephone industry, require voters to show photo identification at the polls, expand school vouchers and undo an early release for prisoners.

Lawmakers may also act again on Walker’s controversial plan stripping public employee unions of their collective bargaining rights. An earlier version, which led to massive protest demonstrations at the Capitol, has been left in limbo by legal challenges.

“Everything’s been accelerated,” said Republican Rep. Gary Tauchen, who is working on the photo ID bill. “We’ve got a lot of big bills we’re trying to get done.”

Three comments following accurately describe how this is being received:

Just like bank robbers cleaning out the cash drawers before the police show up.

Hurry! Hurry! GOPrs! Work as quickly as possible to ruin Wisconsin and do as much damage as you can!!!

The question is: What is the Koch Brothers dangling in front of these “legislators” for after they lose in the recall election? What “consultant” jobs will they received due to big money corrupting this system. Also, how disgusting can you get?

Wall Street Journal

Think that pension plan — and your future — is secure? This post, “When Benefits Bite Back,” from the Wall Street Journal will make you think twice. Even if you’ve got a pension from a big company like Xerox, you’re possibly shit outa luck when the time comes… The Supremes once again rule in favor of the big guys, even when their moves are deemed unsavory in every other court.

May 8, 2011

From the LUV Newsletter:

by Robert E. Prasch

Supply-side economics is a hearty perennial, one that closely follows the election cycle. Every four years ambitious Republican politicians (and not a few ‘centrist’ Democrats) rediscover that the wealthy would like to pay less in taxes. But the rhetoric of politics does inhibit the wealthy, their kept intellectuals, and paid spokesmen from arguing their case directly. In democracies, even those resembling plutocracies, the rich must present their own interests as coinciding with the general good.

With this in mind, and yet still aspiring to a tax cut, the wealthy have lavishly supported ‘astroturf’ political organizations and ‘think tanks’ which, in turn, hire photogenic and eloquent spokespersons to present their case to the public. In its best form, the argument is that tax cuts for the rich will: (1) increase the national savings rate because the wealthy save a larger percentage of their incomes than others. This increased quantity of savings will (2) provide the funds required to spur business investment in plant and equipment. From this it follows that (3) supply-side tax cuts will have the effect of providing strong economic growth, which will “trickle down” to the “regular guy.” We are assured that not only are these propositions true, but that they were proven decisively during the Reagan Administration.

Let’s look up the figures. The key to this theory is in steps 1 & 2, describing a causal relationship between lower tax rates and increased private investment. Our starting point, or baseline, will be the average of what is called “net private domestic investment” over President Jimmy Carter’s four years (1977-1980), which we will compare to the average across the four years of President Ronald Reagan’s second term (1985-1988). The reason to select the former years is that they are widely recalled as having been dismal. Indeed, we have been repeatedly told that they were so bad that voters granted Reagan a mandate to pursue supply-side economic policies. Likewise, the latter years are selected as the effects of the enormous tax cuts enacted during Reagan’s first term should have had their strongest effect during his second term. Selecting data from Reagan’s second term allows us to set aside the economy’s abysmal performance during his first term with its devastating recession — the worst that occurred between the Great Depression and the Crash of 2008. In addition, by Reagan’s second term the wealthy should have had ample opportunity to adjust to their lower tax rates.

When we look up the figures on the official National Income and Product Accounts, we find that “net private domestic investment” did not increase. On the contrary, it declined from an average of 7.0% of total Gross Domestic Product during Carter’s four years to an average of 5.7% during Reagan’s second term. More shockingly, if we factor out inflation, we find that the real dollar amount of investment fell slightly despite the fact that the American economy of the late 1980s was over 17% larger than the late 1970s. To put it mildly, this is a powerful refutation of the supply-side story.

But, proponents might respond, surely overall savings rose as a consequence of the lower tax rates? Let us check. Comparing the averages over these same two four-year periods, consumption as a share of total National Income increased from 64.8% to 67.2%. Because the median American income for a full time year-round employee declined between 1980 and 1988 (from $34,483 to $34,253 in constant 1994 dollars according to the Bureau of the Census), this increase in the nation’s consumption was most likely undertaken by persons in the upper echelons of the income distribution.

In light of facts presented in the previous two paragraphs, we are ready to sum up. President Ronald Reagan’s supply-side economic policies left us with more consumption on the part of the wealthy, a lower savings rate, less net private sector investment, and a lower median income for a full-time year-round worker. These who lived through those years will not be surprised by these numbers, as conspicuous consumption on the part of the wealthy was a dominant and widely-noted theme of that era.

The ‘moral of the story’ is that proponents of more tax cuts for the rich will have to argue that its beneficial effects are very gradual, occurring only after an orgy of increased expenditure on the part of the policy’s immediate beneficiaries. Alternatively, they could argue that the National Income and Product Accounts put together by the Bureau of Economic Analysis at the Department of Commerce are profoundly flawed. Finally, they could drop the pretense that the Reagan years are an affirmation of their favored theory. The numbers presented above and the conclusions they point to simply cannot be sidestepped. If tax cuts for the wealthy are good for savings, investment, and the incomes of “regular guys” (that is to say the median earner), then some precedent other than the Reagan years will have to be invoked.

http://www.commondreams.org/view/2011/05/07-7

Robert E. Prasch is Professor of Economics at Middlebury College where he teaches courses on Monetary Theory and Policy, Macroeconomics, American Economic History, and the History of Economic Thought. His latest book is How Markets Work: Supply, Demand and the ‘Real World’ (Edward Elgar, 2008).