Economics and the upcoming election

As the primary season has proceeded, we are beginning to see into the future. The picture is not entirely negative. On the Republican side, the likely winner is John McCain, a man with innumerable drawbacks and unpleasantnesses but one pretty solid virtue: he appears to be more fiscally responsible than the incumbent, harking back beyond the supply-side showboating of the 1980s (which was always to some extent smoke and mirrors as far as fiscal balance was concerned) to the successful budget-trimming Presidency of Gerald Ford. McCain’s solution to soaring medical costs is to reduce them through increased competition; his solution to expanding the military is to reduce the gold-plating and log-rolling in the Pentagon. Faced with a trillion dollar deficit, his likely solution would be to cut back spending sharply and impose a swingeing tax increase; faced with inflation rocketing into double digits his likely solution would be to fire Ben Bernanke. One can live with such an approach, uncomfortable though it would be.On the Democrat side, the picture is less clear.
Hillary Clinton, the front-runner, appears to have her husband’s vice of sharp practice without his virtue of fiscal prudence. While she might save some money in Iraq she would spend all of it and more on social programs. Faced with a trillion dollar deficit, her twin solutions would doubtless be to impose a tax increase that was as redistributive as possible, albeit with loopholes for her campaign donors, and to hire Wall Street to push the envelope of deficit financing techniques through securitizing the Washington Monument. Double digit inflation would be pushed into the future and blamed on others, as it was from 1973-79.
Then there’s Barack Obama. On the surface, his policies are almost as expensive as Clinton’s, though he might be more determined in reining back overseas military adventurism, thus achieving a larger saving there. On the other hand, his principal economic advisor Austan Goolsbee is a senior business professor at the University of Chicago, so presumably has a good economic grasp. Interestingly, Obama has now been endorsed by Paul Volcker, in 1979-87 the only really useful Fed Chairman ever, who killed (but alas not permanently, thanks to his feckless successors) the double digit inflation of the 1970s. Assuming Obama listens to his advisors and the most eminent of his supporters one can thus have some confidence that his solutions to a trillion dollar deficit and double digit inflation would be intelligent, but not what they would be.Looks like a two out of three chance for a decent solution, or thereabouts. But even minimally competent and forward-thinking economic management, in both the administration and the Fed, would have avoided the problems in the first place.

Ah McCain, you've done it again!

So it looks like McCain will get the nomination for the GOP, although it's not surprising with alternatives like Donny Osmond, Gomer Pyle, Don Corleone, and Ayn Rand - sorry, Ron Paul. Although it looks like the Don has dropped out.

Two things: we're looking at the possibility of McCain going against Clinton. That sounds too retro to me. The US needs a change and it would be a pity to have the same old pollys going for it.

Two: McCain always seems to project an image of integrity. I would never vote for him but I find myself respecting him. He has a reputation as a maverick within the GOP. I don't know what the substance behind this image is though. I mean, what's he actually done that's so great. I know he sponsored campaign finance reform, but that was only after he got busted. Plus now he's sucking up to Karl Rove and other Bush insiders after they slandered him in the 2000 primaries. The latter sounds like a man who's prepared to sell out.

Experience or character. What's better?

By NICHOLAS D. KRISTOF

Published: January 20, 2008

With all the sniping from the Clinton camp about whether Barack Obama has enough experience to make a strong president, consider another presidential candidate who was far more of a novice. He had the gall to run for president even though he had served a single undistinguished term in the House of Representatives, before being hounded back to his district.

On the GroundShare Your Comments About This ColumnNicholas Kristof addresses reader feedback and posts short takes from his travels.

That was Abraham Lincoln.

Another successful president scorned any need for years of apprenticeship in Washington, declaring, “The same old experience is not relevant.” He suggested that the most useful training comes not from hanging around the White House and Congress but rather from experience “rooted in the real lives of real people” so that “it will bring real results if we have the courage to change.”

That was Bill Clinton running in 1992 against George H. W. Bush, who was then trumpeting his own experience over the callow youth of Mr. Clinton. That year Mr. Bush aired a television commercial urging voters to keep America “in the hands of experience.”

It might seem obvious that long service in Washington is the best preparation for the White House, but on the contrary, one lesson of American history is that length of experience in national politics is an extremely poor predictor of presidential success.

Looking at the 19 presidents since 1900, three of the greatest were among those with the fewest years in electoral politics. Teddy Roosevelt had been a governor for two years and vice president for six months; Woodrow Wilson, a governor for just two years; and Franklin Roosevelt, a governor for four years. None ever served in Congress.

They all did have executive experience (as did Mr. Clinton), actually running something larger than a Senate office. Maybe that’s something voters should think about more: governors have often made better presidents than senators. But that’s not a good Democratic talking point, because the candidates with the greatest administrative experience by far are Mitt Romney, Rudy Giuliani and Mike Huckabee.

Alternatively, look at the five presidents since 1900 with perhaps the most political experience when taking office: William McKinley, Lyndon Johnson, Richard Nixon, Gerald Ford and George H. W. Bush. They had great technical skills — but not one was among our very greatest presidents.

The point is not that experience is pointless but that it needn’t be in politics to be useful. John McCain’s years as a P.O.W. gave him an understanding of torture and a moral authority to discuss it that no amount of Senate hearings ever could have conferred.

In the same way, Mr. Obama’s years as an antipoverty organizer give him insights into one of our greatest challenges: how to end cycles of poverty. That front-line experience is one reason Mr. Obama not only favors government spending programs, like early-childhood education, but also cultural initiatives like promoting responsible fatherhood.

Then there’s Mr. Obama’s grade-school years in Indonesia. Our most serious mistakes in foreign policy, from Vietnam to Iraq, have been a blindness to other people’s nationalism and an inability to see ourselves as others see us. Mr. Obama seems to have absorbed an intuitive sensitivity to that problem. For starters, he understood back in 2002 that American troops would not be greeted in Iraq with flowers.

In politics, Mr. Obama’s preparation is indeed thin, though it’s more than Hillary Rodham Clinton acknowledges. His seven years in the Illinois State Senate aren’t heavily scrutinized, but he scored significant achievements there: a law to videotape police interrogations in capital cases; an earned income tax credit to fight poverty; an expansion of early-childhood education.

Mrs. Clinton’s strength is her mastery of the details of domestic and foreign policy, unrivaled among the candidates; she speaks fluently about what to do in Pakistan, Iraq, Darfur. Mr. Obama’s strength is his vision and charisma and the possibility that his election would heal divisions at home and around the world. John Edwards’s strength is his common touch and his leadership among the candidates in establishing detailed positions on health care, poverty and foreign aid.

Those are the meaningful distinctions in the Democratic field, not Mrs. Clinton’s spurious claim to “35 years of experience.” The Democrats with the greatest Washington expertise — Joe Biden, Chris Dodd and Bill Richardson — have already been driven from the race. And the presidential candidate left standing with the greatest experience by far is Mr. McCain; if Mrs. Clinton believes that’s the criterion for selecting the next president, she might consider backing him.

To put it another way, think which politician is most experienced today in the classic sense, and thus — according to the “experience” camp — best qualified to become the next president.
That’s Dick Cheney. And I rest my case.


And my choice of a Democrat Presidential ticket is..............................Obama and Clinton

Frank Rich on Sunday

Ronald Reagan Is Still Dead

By FRANK RICH



Contemplating the Clinton-Obama racial war, some Republicans were so excited you’d have thought Ronald Reagan had risen from the dead to slap around a welfare deadbeat.


Never mind that the G.O.P. is running on empty, with no ideas beyond the incessant repetition of Reagan’s name. A battle over race-and-gender identity politics among the Democrats, with its acrid scent from the 1960s, might be just the spark for a Republican comeback. (As long as the G.O.P.’s own identity politics, over religion, don’t flare up.)



Check out (if you can) Frank Rich in the NYTimes.



If not, here's some bits 'n pieces of his usual Sunday blast.



" The playing of the race card by Hillary Clinton’s surrogates to diminish Barack Obama was sinister. But the Clintons are hardly bigots, and the Democratic candidates all have a history of fighting strenuously for inclusiveness. By contrast, the Romney victory in Michigan is another reminder of how Republicans aren’t even playing in the same multiracial American sandbox.



(and )



To voters who do remember Iraq, the supposed military success of the “surge” does not accrue to the Republicans’ favor either. Quite the contrary. As every poll shows, most Americans still want the troops home ASAP. Republican declarations that we are “winning” merely leads many voters to a logical conclusion: Why not let the Iraqis take over the remaining triage so we can retrieve the $10 billion a month in taxpayers’ money that might benefit us at home? This is why even the poll-driven Mrs. Clinton, who has been the most cautious and ambiguous of the Democratic candidates about a withdrawal timetable, dramatically changed course to expedite her Iraq exit strategy in Tuesday night’s debate."



And money, kiddies, is where it's at or will be for the VAST majority of American voters by this November.

Candidates, taxes and the middle class

Mike Huckabee.

His espousal of the Fair Tax demonstrates his lack of understanding of reality and economics.

Basically, Fair Tax proponents want a 23% sales tax to replace every type of government tax.

No more income, corporate, social security, or Medicare taxes. And everyone gets a $5,000 or so "prebate" which covers the taxes up to the poverty level. What could be simpler or more fair? Sounds great..........right?

No one would like to get rid of the IRS more than Ron Paul and I. But this is not the way to do it.

First of all, the 23% they talk about is really 30%. Under the proposal, if an item sells for $100, then $23 of that would go to the government (said to be tax-inclusive). That means the item really costs $77 and the tax is an additional $23 or about 30% (said to be the tax-exclusive rate). Add an average 7% for state sales tax and we are now up to 37%. But wait, it gets worse.

That 23% number simply won't produce the revenues they suggest. That assumes the government will pay the tax, so the budget has to go up. It also assumes that there is 100% compliance and everyone pays that 37% (yeah, right - just like they do the income tax). Bruce Bartlett writes this week in the Wall Street Journal:
"A 2000 estimate by Congress's Joint Committee on Taxation found the tax-inclusive rate would have to be 36% and the tax-exclusive rate would be 57%. In 2005, the U.S. Treasury Department calculated that a tax-exclusive rate of 34% would be needed just to replace the income tax, leaving the payroll tax in place. But if evasion were high then the rate might have to rise to 49%. If the Fair Tax were only able to cover the limited sales tax base of a typical state, then a rate of 64% would be required (89% with high evasion)."

44 states have income taxes. They would have to repeal their income taxes and raise their sales taxes in order for individuals not to have to file annual income tax returns.

Do you really want to add 30% to the cost of a new home? And pay an extra 30% in interest on the borrowing price? 30-40% more for your legal services? Do you want your rents to go up 30%? Do you really think that massive evasion would not follow? We would move back to a black market cash economy so fast it would take all of Ben Bernanke's printing presses working overtime to create enough cash for the black market economy.

Yes, in theory it would mean that exports would be priced more competitively, as corporate taxes are removed. The idea as theory is not entirely without merit, but every independent study I have read suggests the number for the tax when combined with state taxes would be north of 40% and maybe more like 50%.

Further, this is a tax hike on the middle class. If you make less than $15,000 you win. If you make more than $200,000 you win, because you actually save more and spend less of your income. This is a nice populist proposal which sounds good but is economically challenged. It only works on someone who has not read about the problems.

And by the way.

A repeal of the Bush tax cuts would raise taxes on the bottom 75% of the country, and cut taxes for the rich, as a percentage of total taxes paid.

Lest anyone dare think I'm a Republican, DON'T. I am a registered Democrat and cannot wait to de-throne our current Commander-in-Chief in November.

How come I never noticed before?

Tuesday night, New York. I open my email and see an alert from the Washington Post.

Romney the Victor in Michigan.

Not that I know much about Romney. Only that he looks more like a president than the other Republican runners. Isn't he the Mormon? And what's with his first name, "Mitt"?

So I went to his website. Doesn't seem so bad in terms of education and health care. A but more enlightened than Mike Huckabee and a bit younger than John McCain...

Looking at how the other candidates rated, I was suddenly struck by the fact that they are all white and all men!

Personally, my money is on Hillary.

Watch this space!

Econ 101 and the U.S. election 2008

Paul Krugman (who is usually a Barack Obama supporter) today had some harsh words to say for ALL the presidential candidates:

"Take, for example, John McCain’s admission that economics isn’t his thing. "The issue of economics is not something I’ve understood as well as I should," he says. "I’ve got Greenspan’s book."

His (McCain's) self-deprecating humor is attractive, as always. But shouldn’t we worry about a candidate who’s so out of touch that he regards Mr. Bubble, (Alan Greenspan) the man who refused to regulate subprime lending and assured us that there was at most some "froth" in the housing market, as a source of sage advice?"

Then,

"For example, the Obama plan appears to contain none of the alternative energy initiatives that are in both the Edwards and Clinton proposals, and emphasizes across-the-board tax cuts over both aid to the hardest-hit families and help for state and local governments. I know that Mr. Obama’s supporters hate to hear this, but he really is less progressive than his rivals on matters of domestic policy."

But, he offers faint praise for Hillary Clinton,

"And you have to say that Mrs. Clinton seems comfortable with and knowledgeable about economic policy. I’m sure the Hillary-haters will find some reason that’s a bad thing, but there’s something to be said for presidents who know what they’re talking about."

And Milt Romney draws this comment,

"But Mr. Romney, who really needs to take chances at this point, apparently can’t break the habit of telling Republicans only what he thinks they want to hear. He’s still offering nothing but standard-issue G.O.P. pablum about low taxes and a pro-business environment."

As for my opinion, at this point I would welcome Ron Paul's economic advice, but never the rest of his clap-trap.