May 16, 2003

Denial Is Not a River in Egypt

But whatever denial is, Jane Galt is over her head and swimming in it. The "Clinton was worse!" reflex is priceless:

Asymmetrical Information: : Jacob Levy calls the Senate tax cut proposal the worst tax cut ever. I'm not sure that's fair. It's certainly a dreadful one, but let's not forget all Clinton's "targeted tax cuts"...

:-)

Posted by DeLong at May 16, 2003 12:43 PM | TrackBack

Comments

It's an odd criticism, too. I assume she's referring to targeted tax cuts on personal income. But, I rarely hear people complaining about the seemingly infinite targeted business tax cuts.


All tax cuts are targeted, either by design or result. Clinton added a few lines to the 1040 form, which hardly seems to be that big of a deal. Yearly changes in endless business deductions are usually just me with "the more the better!"

Both distort incentives, as does the relative degree to which capital and labor are taxed more generally.

Posted by: Atrios on May 16, 2003 12:56 PM

Of course, the Clinton fiscal policy helped America to years of wonderful economic growth and working class income gains as well as a budget surplus. The Bush fiscal policy has cost us 2.4 million jobs, an economy that is growing too slowly to maintain working class gains, and a deficit that will grow steadily worse and threaten Social Security and Medicare. We should be ever so happy, compassionate conservatism is at last among us.

Posted by: lise on May 16, 2003 12:58 PM

I'm guessing she's talking about ineffectiveness, or somesuch. If you throw in sheer scale and add a dish of irrelevancy considering the current economy, it's pretty tough to beat Dubya's entry.

Posted by: Jonathan on May 16, 2003 01:21 PM

lise,

let's be honest here: the measure of a president's performance is not as simple as the uneployment and gdp growth numbers in each year of their term. Does anyone really know exactly how much of a lag each type of economic policy has before its effects are felt? Maybe the success of the Clinton years was due to Reagan's or Bush 41's policies. Maybe this recession is due to Clinton, Bush 41, Reagan, or Carter! Or a combination of all!

I liked Clinton's policies a LOT better than I like Bush 43's, but blaming the current job losses on Bush and the gains of the 90's on Clinton is kind of a cheap shot. If Gore were president, he would have had wiser stimulus ideas about this economic downturn, but we would still have had a recession, and you can bet your bottom dollar that the Repubs would be saying that it was Gore's fault.

I dislike Bush's tax cuts, etc. as much as the next progressive, but let's score points with the right kind of arguments, because credibility is impmortant.

Posted by: A-ro on May 16, 2003 01:24 PM

If you can't defend what your side is doing, then the only argument left is to point at the other side and say, 'They do it worse'.

However Jane deserves credit for at least admitting that Bush’s cuts are dreadful. If only there were more Republicans in the Senate willing to say the same thing....

Posted by: RC on May 16, 2003 01:38 PM

Greg Mankiw et al. might challenge lise's assertion about how much of the 90's growth was due to fiscal stimulus. Mankiw could put to the fact that national savings as a share of income did not rise that much. But then Mankiw noted that the Reagan fiscal stimulus lowered national savings in the 80's. And the national savings rate is now 1% with Mankiw endorsing more fiscal stimulus.

Posted by: Hal McClure on May 16, 2003 01:44 PM

Some useful resources:

"Long and Variable Lags" by Paul Krugman:
http://www.wws.princeton.edu/~pkrugman/lags.html

"SQUANDERED: CBO Figures Show How the Surplus of 2001 Became a Deficit in 2003" by Center on Budget and Policy Priorities:
http://www.cbpp.org/1-6-03bud.htm

"New CBO Data Show Deficit Will Be Higher Than Earlier Forecast As Revenues Fall To Their Lowest Level In Decades, As A Share Of GDP" by Center on Budget and Policy Priorities:
http://www.cbpp.org/5-12-03bud.pdf

Posted by: hume on May 16, 2003 01:58 PM

The budget is created using last year's numbers and doesn't take affect until the next year. When I look at historical data I always keep that in mind such that I don't consider Reagan's record to begin until 1982, though more reliably 1983.

Monetary policy happens right away. If the Feds change the interest rate it will change the price of a home this week.

Posted by: Saam Barrager on May 16, 2003 02:38 PM

For the life of me I will never understand why right wingers hate Clinton so much...

Posted by: Chad on May 16, 2003 08:48 PM

I agree that it is wrong to blame the recession of 2001 on Mr. Bush. However his response has been pathetic. The buzz on this blog and throughout the economic community is "Why won't Mr. Bush listen to his own economic advisors? Why is he pursuing policies that no sane economist would recommend?" Is it cowboy anti-intellectuallism? Is it a misguided belief system? A hidden political agenda? We assume he wants to be re-elected. However, that will depend greatly on the employment picture of late 2004. There is little time to turn that around? What gives? Fiddle while the economy tanks and blame the Dems? I don't think the public will buy that bridge.

Posted by: bakho on May 16, 2003 10:39 PM

Uh, were not many of the Clinton tax cuts done in compromise with the GOP Congress? Those of us who liked Clinton as President admired his ability to listen and incorporate ideas coming from a variety of sources. This is one of the attributes that drove the GOP crazy- Clinton picking off the best of their ideas and modifying them and making them his own. Clinton was not about winners and losers. Clinton was about finding win win solutions to problems. The EITC was increased under Clinton, but the capital gains tax was also reduced.

Personally I feel that Clinton could have done better than run up $1.2 trillion in new debt. However, that 8 year record pales in comparison to $1.6 trillion by Bush in 4 years and $1.8 tillion by Reagan in his 8. Admittedly, the Clinton administration had its weaknesses and faults. However, fiscal policy under Clinton was always sound and well reasoned. Clinton listened to his economist and to Mr. Greenspan. Clinton listened to Mr. Rubin. Clinton did not assume he knew it all. Clinton listened to the experts and learned from them. Today we are operating under a different model. Our president cannot be criticized. Our president knows best. Damn the economists, full tax cuts ahead.

Posted by: bakho on May 16, 2003 10:52 PM

I agree with Jane that targeted tax cuts are silly, but it's not like anyone particularly likes ithem...its just that you sometimes have to settle for them because while its impossible to pass bills that involve increased redistributive spending schemes through congress, congress always loves taxes!

To the extent that the economic growth in our country, stemming largely from the increased investment (an investment impulse that got TOO strong for our own good) was linked to confidence in the President's devotion to sound economic management and fiscal policies, Clinton was very much responsible for the economic boom of the 1990s.

By the same token, when considering the Bush Administration's terribly irresponsible policies, combined with its deception, it is not something that would instill confidence in the shaky economy. Thus, bush has prolonged the economic downturn and made a recovery less likely.
The slight (if any) stimulus of Bush's tax cuts is more than outweighted by the fact that expectations about the future are dwindling. In this world of globalized capital, it is especially important that our President has the confidence of U.S. and global investors; he clearly does not and, based on his policies, should not.

Moreover, it seems to me that the U.S., if it were not for the Bush administration's incompetent economic policy and destabilizing foreign policy, should be in the position to exploit insecurity about the economies of the rest of the world. But, unfortunately, Bush's policies make investments in the U.S. look like a losing proposition.

Posted by: Sean on May 17, 2003 01:40 AM

Perhaps I'm mistaken, Brad, but wasn't Jane Galt the person who once posted that a certain Berkeley econ professor named Brad DeLong was basically broken in the witness chair by the sheer power of Chicago?

And when challenged by Jeff Hauser for the name of the witness, didn't come through?

And didn't she deny knowing what a 2x4 was, after expressing a desire to use one on the faces of anti-war protestors?

And didn't she fanatically defend the propriety of Bush's very favorable Texas Ranger deal?

And didn't she defend Lott all the way down?


Brad, why do you credit her with any credibility?

As far as I'm concerned, she's just a mini-instapundit. With (to her credit) far more original posts that Mr. Insta-link-to-articl-and-add-snide-comment-pundit.

Posted by: Barry on May 17, 2003 08:44 AM

Barry:

Someone actually reads Jeff Hauser?

Posted by: Chris on May 17, 2003 09:47 AM

Chad,

Theories abound. However, bakho's second post here contains one strong contender. I suspect, however, that running the other team's plays against them is a well-known enough part of politics that it needs some precursor. Early in Clinton's term, one explanation I heard was that the "Reagan revolutionaries" were so convinced of their own popularity, the inevitability of their views, that Clinton tore their world apart. Their (smug) view of the world could not allow that a "liberal" like Clinton could be elected, much less twice, much less with the sort of approval numbers he got. With that background, Clinton's ability to run the other team's play really successfully could be downright maddening. Answer? Do whatever you can, spend whatever it takes, say whatever you think will work to dirty the guy up.

Posted by: K Harris on May 19, 2003 09:03 AM

a wonderful term has surfaced for this phenomenon over at Atrios's blog:

Clenis(TM)

- Everything bad today is a result of Clenis(TM)
- If things are bad today, they were far worse because of Clenis(TM)
- If things are better today, it is because we have finally broken free from Clenis(TM)

Posted by: Suresh Krishnamoorthy on May 19, 2003 10:20 AM

Barry wrote:

"And didn't she deny knowing what a 2x4 was, after expressing a desire to use one on the faces of anti-war protestors?"

I'm not sure about this denial of knowledge business, but its not quite accurate to say that Jane Galt expressed a desire to do violence to anti-war protestors.

What she did was put up a blog post before the big NYC anti-war rally that said, in essence, that if any of the protestors got violent themselves by destroying property or putting the police in physical danger, then the good people of New York would be justified in putting the beat down on them.

She most emphatically did NOT say that it was appropriate or acceptable to use violence against anti-war protestors who were peacfully demonstrating. In fact, she pointed out at great length that she advocated no such thing. Rather, she said that NYC, which had suffered immeasurable direct (buildings falling down) and indirect (economy collapsing) harm from Sept. 11 didn't need any more damage from out-of-control college students who think its cool to toss a rock through the window of Starbucks or branch bank simply because they are pissed off about the war in Iraq.

If I was a New Yorker, and saw my city reeling, and remembered the news coverage of what happened at the anti-globalization protests in Seattle a couple years ago, I'd be quite sympathetic to Ms. Galt's thinking on this matter. Is it an admirable impulse? Probably not. But understandable, and in the grand scheme of things, not that out of line.

Posted by: sd on May 19, 2003 10:40 AM

I've always felt that Clinton did several things right, and that he also got lucky on several fronts, and between the two you can find the explanation for the 1990s boom.

On the Clinton Skill front:

* He was steadfast and courageous in expanding free trade, including most notably NAFTA but also through a long program of breaking down trade barriers on a smaller scale. This had beneficial direct effects (as lowering trade barriers always does), but perhaps more importantly, indirect effects, as it signalled to the business community that Clinton "got it" on matters commercial.

* He championed the idea that the most important "emerging market" for U.S. business was the inner city. I live in Chicago, and the revitalization of this city (partly due to Clinton's work) over the last decade is astounding. Revitalized cities contribute to the national wealth, rather than leeching off of it.

* He had an economic team that skillfully managed the Mexican and Southeast Asian meltdowns, either of which could have derailed the U.S. economy if poorly handled.

* He went along with the Republicans in congress to cut capital gains taxes and to reform welfare, both of which drastically transformed, for the better, the incentives of lots of Americans (At the low end of the wealth scale it encouraged people to get productive jobs; at the high end it encouraged people to re-deploy their capital in the most productive way possible).

* He was able to control domestic spending, which allowed economic growth to slowly do away with the budget deficit.

On the Clinton Luck front:

* He happened to be in office when 30 years of IT R&D finally came to fruition and we started to see real productivity gains from the tech revolution.

* He enjoyed relative global peace and prosperity (partly his doing, but largely luck-of-the-draw), which made it easier to focus on domestic matters. The good times in the rest of the world also led to expanded markets for U.S. exports.

* His first term started right after the corporate restructuring revolution of the early 1990s. The same sea change in corporate management thinking that led to so much pain in the last two years of the Bush I presidency (downsizings, divestures etc.) allowed big U.S. companies to emerge leaner, more disciplined, and ready to generate huge profits. Also, lots of laid-off baby boomers from the 1990-1992 wave of downsizings finally gave up trying to find another corporate job and went out and started entrepreneurial ventures, which flourished, generating massive wealth.


All in all I'd give Clinton an "A." That's not to mean though that I have faith that Gore would have done well on the economic front.

Claim that Bush's policies are bad all you want. That's a legitimate argument. But its hardly fair to blame him exclusively for our current woes. The geo-political situation is much less friendly right now (and would have been even if we hadn't gone to war in Iraq), and there's still a massive over-capacity problem in U.S. industry, the legacy of (yes) the late 1990s boom when capital was cheap and businesses expanded more than was wise, expecting the boom years to go one forever.

Posted by: sd on May 19, 2003 10:58 AM

More Clinton luck was the relatively low energy prices until the very end of his term.

He really did listen to his advisors and lost a lot of good will when he reneged on his middle class tax cut, a politically bad but fiscally wise move.

On the welfare reform, Mr. Clinton added a lot of incentives for people to work such as child care, EITC increases, etc.

A stroke of luck/brilliance was finally getting Bob Rubin to be Treasury Secretary. The GOP has long used CEOs or politicians Regan/Baker/IONeill/Snow and they practically need interpreters to understand the conversations over international finance. By putting an expert at Treasury, the business community was reassured and so were other governments.

My brother in law works in Amsterdam and he constantly rails about the stupidity of US Treasury Secretaries. Interestingly, Rubin and Summers were not on his knucklehead list. Europeans are often dumbfounded at the lack of skill in finance that our Treasury Secretaries have demonstrated.

Posted by: bakho on May 19, 2003 02:27 PM

bakho,

Has you brother-in-law revealed a standard for making his judgement about US Treasury Secretaries? My impression is that Europeans (heck, just about everybody outside North America) have a set of expectations of economic policy-making in general, and international economic policy-making in particular, that is somewhat removed from those that most of us in the US expect. What doesn't he like?

Posted by: K Harris on May 20, 2003 08:13 AM
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