Category Archives: Public Policy and Governance

Correcting My Goof

A few days ago, I reported that the deficit and debt had steadily declined during Obama’s tenure. A reader pointed out that although we have seen the deficit dramatically reduced, so long as there is any deficit at all, the debt continues to grow.

He was absolutely right, of course–my mind was evidently elsewhere when I wrote that particular sentence. (It is a bit worrisome that, as I grow older, my mind increasingly takes these small trips to…somewhere.) The question that naturally arises, then, is: as the Obama Administration increasingly tames the deficithow worried should we be about the debt?

Paul Krugman has the answer to that question.

About those projections: The budget office predicts that this year’s federal deficit will be just 2.8 percent of G.D.P., down from 9.8 percent in 2009. It’s true that the fact that we’re still running a deficit means federal debt in dollar terms continues to grow — but the economy is growing too, so the budget office expects the crucial ratio of debt to G.D.P. to remain more or less flat for the next decade.

Things are expected to deteriorate after that, mainly because of the impact of an aging population on Medicare and Social Security. But there has been a dramatic slowdown in the growth of health care costs, which used to play a big role in frightening budget scenarios. As a result, despite aging, debt in 2039 — a quarter-century from now! — is projected to be no higher, as a percentage of G.D.P., than the debt America had at the end of World War II, or that Britain had for much of the 20th century.

So perhaps we need not freak out about the debt, but still, it would be nice to eliminate it entirely. (Had W. left Clinton’s tax rates in place and not taken us into a costly and unnecessary war of choice, the debt was on track to disappear…but that was then and this is now…). So how much pain would we need to endure now in order to at least stabilize the debt–to keep it at its current ratio to GDP? Krugman has that information also:

Still, rising debt isn’t good. So what would it take to avoid any rise in the debt ratio? Surprisingly little. The budget office estimates that stabilizing the ratio of debt to G.D.P. at its current level would require spending cuts and/or tax hikes of 1.2 percent of G.D.P. if we started now, or 1.5 percent of G.D.P. if we waited until 2020. Politically, that would be hard given total Republican opposition to anything a Democratic president might propose, but in economic terms it would be no big deal, and wouldn’t require any fundamental change in our major social programs.

These facts would be comforting–if the people screaming bloody murder over the terrible, horrible, menacing debt were genuinely concerned about fiscal policy–and not motivated by partisan rancor or personal gain.

 

Fiscal Responsibility Doesn’t Look Like This

The White House recently announced that the federal budget deficit will fall to 583 billion this year. That’s the smallest deficit since Obama became President, and it continues a widely-ignored trend of falling deficits during his tenure.

If you listened to the Republicans, you’d never know that the debt and deficit have both been declining (if you listened to Faux News, you wouldn’t know the difference between them), and you’d certainly get the impression that the GOP is the party watching out for the public purse. That impression would be wrong.

Very wrong.

The Washington Monthly notes that

The Republican House just voted for an inexcusable $287 billion supply-side corporate tax giveaway:

The GOP-led House of Representatives embraced a former stimulus measure Friday, voting to make it and another related tax cut permanent, adding $287 billion to the deficit over the next 10 years.

The largest part of the cut, worth more than $263 billion, is making permanent so-called bonus depreciation, which allows businesses to write off the cost of capital investments and improvements much more quickly.

It was enacted twice during the administration of President George W. Bush, and the most recent version expired last year. The idea behind it is that if lawmakers give businesses a break during tough economic times, they will speed up major equipment purchases and stimulate economic activity.

Those who support making such a stimulus measure permanent argue that it would give businesses the certainty to be able to plan their investments. But opponents — primarily Democrats — mocked the idea, pointing to Congressional Research Service reports that found the break was a weak stimulus to begin with, and that the stimulative effect is likely to fall even further if the break becomes permanent.

Not only is the GOP not party of fiscal responsibility, it has become the pro-redistribution party–a reverse Robin Hood cabal intent upon taking from the poor to give more and more to the rich. (Except, of course, when there is an advantage to doing otherwise.)

Welfare for the well-off. Bupkis for the poor. Welcome to dystopia.

 


 

Look Who’s Taxing the Rich!

If today’s GOP has one unshakable article of faith, it is that taxing the rich retards economic growth; that even the most modest tax increase will dissuade the “makers” from, well, making –hiring, expanding, or working harder.

So–how to explain why the Indiana General Assembly, which is lopsidedly and unequivocally Republican, piles taxes on the state’s rich counties and redistributes that money to the poor ones?

As a friend of mine whose research is focused upon the Indiana economy recently noted, Indiana heavily taxes its “rich” metropolitan counties–Marion County prominently among them–for the benefit of rural counties with dramatically dwindling populations. A study by the Indiana Fiscal Policy Institute found that the 10 counties that make up the Indianapolis metropolitan area were major donors to rural Indiana;  residents here paid 33.5 percent, or $4.6 billion, of total state taxes and received 28 percent, or $3.8 billion, back.

I guess a welfare state is in the eye of the beholder. The (rural) home counties of so many state lawmakers couldn’t explain this very un-Republican impulse for redistribution…could it? Surely this deviation from such a core belief–or the “core belief” itself–couldn’t be based upon self-interest.

Ah, irony. Thy name is Indiana.

 

 

 

Original Intent

Can you stand one more post on Hobby Lobby?

Over at Forbes Magazine, Rick Unger has challenged the basis of the decision–and the fiction that Scalia, et al, are “originalists”– by pointing to the Founders’ original conceptions of corporate identity.

After the nation’s founding, corporations were, as they are today, the result of charters granted by the state. However, unlike today, they were limited in how long they were permitted to exist (typically 20 or 30 years), only permitted to deal in one commodity, not permitted to own shares in other corporations, and their property holdings were expressly limited to what they needed to accomplish their specific, corporate business goals.

Put another way, every single investment bank on Wall Street, as we know it today, would have been illegal in the days of our founding.

And here is the big one —in the early days of the nation, most states had rules on the books making any political contribution by a corporation a criminal offence.

Indeed, so restrictive was the corporate entity, many of early America’s greatest entities were set up to avoid the corporate restrictions. Andrew Carnegie formed his steel operation as a limited partnership and John D. Rockefeller set up Standard Oil as a trust in order to avoid the restrictions placed on corporations. Yet, it is now apparently too much to ask that those holding strong religious views, such as the Green family who hold the stock of Hobby Lobby, do the same.

Of course, Scalia’s version of originalism has always been exceptionally malleable–one to be invoked or ignored depending upon the need to twist the matter at hand into ideological conformance with his preferred beliefs.

With respect to this “matter at hand,” however, I am increasingly of the opinion that Hobby Lobby will come back to bite the authoritarian derrieres of the male members of this court.  As Tim Peacock recently wrote at Peacock Panache:

[S]everal law experts believe the Supreme Court may have dealt a devastating blow to the corporate veil. Alex Park at Mother Jones reported on the new gaping hole in the corporate veil today stating in part:

“Now, thanks to the Hobby Lobby case, it’s in question. By letting Hobby Lobby’s owners assert their personal religious rights over an entire corporation, the Supreme Court has poked a major hole in the veil. In other words, if a company is not truly separate from its owners, the owners could be made responsible for its debts and other burdens.

‘If religious shareholders can do it, why can’t creditors and government regulators pierce the corporate veil in the other direction?’ Burt Neuborne, a law professor at New York University, asked in an email. That’s a question raised by 44 other law professors, who filed a friends-of-the-court brief that implored the Court to reject Hobby Lobby’s argument and hold the veil in place.”

In the above-mentioned friend-of-the-court brief, those law professors stated in part:
“Allowing a corporation, through either shareholder vote or board resolution, to take on and assert the religious beliefs of its shareholders in order to avoid having to comply with a generally-applicable law with a secular purpose is fundamentally at odds with the entire concept of incorporation. Creating such an unprecedented and idiosyncratic tear in the corporate veil would also carry with it unintended consequences, many of which are not easily foreseen.”

If one Court can pierce the corporate veil in order to protect a (highly selective exercise of) religiosity, a different Court can pierce it to obtain justice for litigants who might otherwise go uncompensated.

That’s the problem with outcome oriented judicial reasoning.

 

The New Feudalism

Yesterday, my son observed that the continued confusion of corporations with actual people in order to grant them human rights was part of a broader move back to a feudal social structure.

I thought about his analogy, and after I wrote the post about Hobby Lobby-- the latest manifestation of this phenomenon, after Citizens United and its progeny–I googled feudalism and found the following definition:“Classical feudalism” (before the rise of strong feudal monarchies in which kings claimed the role of liege lords) is characterized by the fragmentation of political authority and the passage of public power into many different private hands.

The Supreme Court’s corporatism is anything but market friendly capitalism; it’s all about privatizing power and eviscerating government’s authority to create a level playing field. It’s about making government (the monarch) more responsive to the oligarchs and less attentive to the polity. It’s about undercutting democratic decision-making and further empowering the wealthy and well-connected.

And then I found a visual…. 

http://i0.wp.com/www.amendmentgazette.com/wp-content/uploads/2013/08/feudalism_then_now.jpg