Dirty politics

Via Seth Masket:

My only question is, what kind of person conceives this image and doesn’t see the, ummmm, subtext:

Chart of the day

Via Ezra:

As you know, I cannot resist this generation gap stuff now.  As Ezra has pointed out, Republicans have a serious problem now: 1) they are undoubtedly the party of old people, yet, as Paul Ryan’s budget shows, 2) they are undoubtedly the party of dismantling Medicare (whether they protect the current oldsters or not, the political “optics” on that surely aren’t good).  That’s a tough set of propositions to resolve.

S&P Threates to downgrade US Debt

So, Ezra argues that S&P is right to suggest that the US may lose its AAA bond status:

I’ve seen some observers react to the S&P’s decision by saying that the rating agency blew the subprime crisis and thus there’s no reason we need to listen to it now. But that seems shortsighted. S&P’s concerns are perfectly reasonable. The company believes “there is a material risk that U.S. policy makers might not reach an agreement on how to address medium-and long-term budgetary challenges by 2013. If you don’t agree with that, you’re not paying enough attention. At this point, the rating agency only puts the chances of a downgrade at one in three — which strikes me as, if anything, a little low.

What’s important to understand here is that the rating agency isn’t saying that America’s debt has grown beyond what our economy can absorb. They’re saying that Democrats and Republicans don’t agree on what to do about it, that the gap is widening rather than narrowing, and that that polarization, when added to the political system’s increasing dysfunction, could conceivably delay or prevent a deal. Our deficit problems are not, in other words, problems of economics so much as problems of politics.

On that, they’re almost certainly right.

All true, but yet… at this point I trust Standard & Poors about as far as I can throw them.  For anybody that actually understands what happened in our economic collapse, S&P has basically zero credibility.   (Short version: you want to create a fund out of mortgages where you sold half million dollar houses to janitors?  Sure, we’ll rate that AAA).  I don’t know how alone I am in this, but it seems to me that S&P has lost the right to make meaningful pronouncements.  Nice take from Yglesias, too (short version: ignore S&P– trust investors).

Tax me

With taxes officially due today, thought I’d start with Walter Mondale’s really nice Op-Ed in yesterday’s Post.  He makes a number of interesting points, that I think suggest that Democrats really need to show more courage on this issue.  So long as Democrats concede ground to the anti-tax theology of the Republican Party, there’s no hope for funding our government at the levels the American people actually demand in services.  Democrats have simply got to start fighting back on this at some point.  Anyway, Mondale:

Taxes reveal who we are as a people and what we value. Polls consistently show that majorities of Americans are willing to pay taxes and even have them increased when the revenues are devoted to their priorities, such as education, health care and deficit reduction. The public’s support is greatest for raising taxes on the affluent, but it extends to hikes tied to popular programs such as Social Security and Medicare.

Moreover, Americans are not fans of tax cuts when pitted against other priorities. Republicans know this: During the battle over President George W. Bush’s 2001 tax cuts, the talking points for then-Treasury Secretary Paul O’Neill leaked out. Revealingly, they warned him to “make clear that there are no trade-offs” because “the public prefers spending on things like health care and education over cutting taxes.” If you watch carefully, you will see some Republicans today practicing the same dance steps, weaving and ducking in the face of unavoidable and cruel trade-offs.

I told the truth in 1984. “The American people will have to pay Mr. Reagan’s bills,” I said in my acceptance speech at the Democratic National Convention in San Francisco. “The budget will be squeezed. Taxes will go up. . . . It must be done. Mr. Reagan will raise taxes, and so will I. He won’t tell you. I just did.”

I lost the election, but I won the debate. Reagan ended up increasing taxes in 1984, 1985, 1986 and 1987 to mend the budget and tax systems…

I am worried about claims by some Republicans — such as Senate Minority Leader Mitch McConnell (Ky.), House Budget Committee Chairman Paul Ryan (Wis.) and the many who echo their words — that taxes are too high. Here are the facts: Tax rates are at their lowest in decades, and revenue has fallen to a 40-year low as a percentage of our gross domestic product, according to the Congressional Budget Office.
Mondale lost to Reagan in 1984 because the economic fundamentals of the time favored Reagan, not because he advocated raising taxes (which, as he points out, Reagan did, in fact raise).   If Democrats want to have a government that provides health care, support for seniors, a reasonable social safety net, etc., (and I think they do), they need to admit that it cannot all be paid for simply by taxing rich people more (though, heck, that’s a start).  Somehow the middle class managed to survive the 1990’s under Bill Clinton’s oh-so-oppressive tax rates.

The Most pernicious analogy in politics

Household budget = government budget gets my vote.  The reason this is so damaging is because it leads ordinary citizens to not just be misinformed, but have attitudes they think are informed that run exactly contrary to smart policy.  Karl Smith, via  Ezra Klein, does a great job spinning this out:

When economic times are good, households should spend and invest more, while government should spend and invest less. When they’re bad, households need to cut back, and the government needs to step in. But as Karl Smith says, that’s not the only place where the analogy breaks down. Another — and one that’s increasingly relevant — is “not realizing your personal control over spending versus revenues is essentially the exact opposite of the governments control over spending versus revenues.” He continues:

Most middle class folks can cut back on their spending with relative ease. They probably won’t get sick, malnourished or injured from exposure as a result of spending cuts. What this means is that if revenues are running higher than spending – a necessary condition for building up debt – the most obvious choice is to cut spending. Therefore, as a rule of thumb people develop the notion that debt comes from living beyond your means…to the government, the exact opposite is true.

It is much easier for the government to raise revenue than to cut spending. Moreover, most of the movement in the deficit is tied to movements in revenue, not movements in spending. Thus the exact same reasoning that leads you to associate debt and spending in your personal life should lead you to associate debt and revenue for the government.

Much like their impressive achievement in convincing Americans that rich people really need to pay less taxes and that we are spending too much on foreign aid, the continued emphasis on this fallacious (yet, seemingly straightforward) analogy helps underlie Republican victories in setting the economic agenda.

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