The Voodoo We Do

voodoo_economics_by_moeromaru

“Voodoo Economics” by Moeromaru

 

By Judge Steve Russell

How about some macroeconomics for breakfast?

We should have increased taxes a long time ago to pay for those wars. Obama, at least, put the Afghanistan and Iraq wars back on the books.

The US has never had a war before in which we did not make any effort to pay as we fought. Even WWII, in which budget balancing was simply not possible, so we ran up the tab. Even then we made every reasonable effort to pay.

One way macroeconomics differs from micro is that, while you and I have to balance our budgets by at least the year and more prudently by the month, balancing the budget of a nation is not a goal worth much sacrifice to reach. In any given year, it simply does not matter. The number that tells us whether we are better or worse is the relationship of the increase in the national debt to the GDP. Even that is not an absolute cap when there’s an emergency.

Let’s say we go with the Obama method, which makes the deficit look way worse than the Bush method Obama inherited. Regardless of the political optics, it’s a more honest way to keep score.

We only talk about cutting the discretionary part of the budget. Foreign aid, food stamps, medical research.

Look at the numbers for yourself. Cutting the ENTIRE discretionary part of the budget would not make it balance. It would also cut off most of our access to “soft power,” leaving only the military option on the table.

If you want to balance the budget, you have to:

1. Raise taxes because we put two wars on the cuff.

2. Cut the “defense” budget substantially OR cut the entitlement programs.

I want to cut defense and I know exactly where to cut. We are building weapons systems our own generals don’t want and can’t use.

I do not think cutting the entitlement programs is necessary or desirable.

Medicare and Medicaid can cost less simply by repealing the Stupid Tax, imposed on us for letting the private insurance hogs in the creek and failing to negotiate with Big Pharma or allow Canadian drugs to compete.

Social Security is a big deal in more ways than one. Both candidates for POTUS promise not to cut benefits and there’s not only no need to cut benefits, the benefits need to be raised and expanded.

As an aside, the only reason the SS trust fund looks pretty safe right now is that those undocumented workers Mr. Trump wants to deport are putting in enough money they will never get back. You do realize, I hope, that if Social Security would share the fake numbers and the dead people that appear to be working with ICE, it would be really easy to go pick up those people who are paying for our benefits? There’s a big incentive for SS not to do that.

Anyway, the benefits need to be raised and expanded because:

1. A shocking percentage of Americans have no 401K, no IRA, no Roth. I have seen to it that all four of my kids do, but it was not easy to get them on the bus and most people’s kids are not doing it.

2. The rise of the gig economy means the fixed retirement benefit is a thing of the past.

3. You don’t deal with the problem of systemic unemployment by claiming it’s temporary or by making workers stay full time longer.

So, I say you lower the retirement age for partial benefits. Here in Sun City lots of people are still earning (and therefore paying into Social Security) while getting SS retirement. I have even had a couple of years when my earnings exceeded the lowest years of my SS earnings (when I was in school for seven years) and as a result my retirement benefit was raised!

How do you pay for it? Uncap the payroll tax. The first year I exceeded my cap was the year the Texas Legislature hitched the pay of County Court at Law judges to the pay of District Judges and allowed us to start hearing District Court cases. It was a big raise at the first of the year. Then, around September, I suddenly got another raise that really surprised me. I called human resources to ask where the money came from and was informed that I had exceeded the payroll tax cap and so there was no deduction for Social Security/Medicare. I was gobsmacked. I had not known there was a cap because I had never made enough money to hit it. (I hit the cap again in my second career when I moved from a third tier university to a first tier university and got a big raise.)

I’ve had plenty of time to think about the cap, and I understand the logic of it. It represents the limit on Social Security retirement benefits. If the cap were higher, guys like me would be paying in money that the actuarial odds say we would never get back out. You know what? That’s fine with me. The whole point of the SS program was that during the Depression there were people who had worked all their lives homeless and hungry. Avoiding that is a big value and having the benefits high enough to encourage geezers like me to go part time and make way for younger folks to be tenured is also a big value. (Not very many people get tenured at the level I was tenured. I was the only one in my hiring cohort who made tenure. That is because there are fewer positions as universities rely on more adjuncts and graduate students.)

Nobody who busts out the top of the cap right now is a likely candidate for living under the bridge but in return for having the top end of their income taxed these folks get the maximum benefit on retirement and—as important if not more so—they are protected by Social Security disability insurance.

This is not a poor country, but our infrastructure has begun to look like we are a poor country.

The economic downturn under Carter combined with the Iran hostage crisis brought us the Reagan Revolution and since then we’ve been going farther and farther in the hole. It’s a choice to have wars without paying for them. It’s a choice to allow private insurance to skim a profit off health care—a choice made by only one other industrialized country in the world, Switzerland, under greatly different circumstances.

Our debt problem is entirely self-inflicted by our disastrous experiment with what the first President Bush correctly called “voodoo economics.” The discredited dogma of supply side economics remains in the GOP platform and every budget their alleged policy wonk, Paul Ryan, has produced.

Ronald Reagan:
Took office January 1981. Total debt: $848 billion
Left office January 1989. Total debt: $2,698 billion
Percent change in total debt: +218%
GDP:
1981 +9.69%
1982 +3.79%
1983 +11.39%
1984 +9.26%
1985 +7.37%
1986 +4.86%
1987 +7.57%
1988 +7.76%

George H.W. Bush:
Took office January 1989. Total debt: $2,698 billion
Left office 20 January 1993. Total debt: $4,188 billion
Percent change in total debt: +55%
GDP:
1989 +6.48%
1990 +4.51%
1991 +4.25%
1992 +6.66%

Bill Clinton:
Took office 20 January 1993. Total debt: $4,188 billion
Left office 20 January 2001. Total debt: $5,728 billion
Percent change in total debt: +37%
GDP:
1993 +5%
1994 +6.31%
1995 +4.32%
1996 +6.25%
1997 +6.05%
1998 +6.11%
1999 +6.44%
2000 +5.50%

George W. Bush:
Took office 20 January 2001. Total debt: $5,728 billion
Left office 20 January 2009. Total debt: $10,627 billion
Percent change in total debt: +86%
2001 +2.19 %
2002 +3.76%
2003 +6.42%
2004 +6.31%
2005 +6.52%
2006 +5.12%
2007 +4.40%
2008 -0.92%

Barack Obama:
Took office 20 January 2009. Total debt: $10,627 billion
Total debt (as of the end of April 2011): $14,288 billion
Percent change in total debt: +34%
2009 +0.11%
2010 +4.56%
2011 +3.64%
This is as far as the debt figures go, but I’ll continue with GDP just so we’ll have a clue:
2012 +3.24
2013 +4.05%
2014 +3.88%
2015 +3.12%
to May 2016=+3.29

I’m aware that for apples to apples I should break out the debt by year but there are time limitations.

Note the anemic recovery and understand those numbers could be very robust if Congress could see fit to fix our roads and bridges and electrical grid. We would be borrowing money from ourselves to do it, but at a time when interest rates are at historic lows.

As it is, we still have to fix that stuff and the economy is not likely to have a major power up because the Great Recession was worldwide and our recovery has been much more robust than the rest of the world because we have the reserve currency and it’s a money magnet. We are doing better than the rest of the world, so there’s no basis to think there’s a turbocharger coming.

By fixing our infrastructure, we turbocharge ourselves. Those GDP numbers go up along with the debt numbers, but the with a tax increase it would be easy to keep the debt rise under the GDP rise.

THEN, the next time we have a budget surplus and the choices are a tax cut (Bush) or pay down the debt (Gore) THAT’S when we pay down the debt.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s