NEWS: Bushonomics 101

POLITICS: Bushonomics 101

Economics is a confusing subject, but that doesn't stop untrained people from not only expressing opinions on economic matters, but sometimes deciding their votes based on the supposed economic performance of an incumbent national leader.

Talk to someone considering voting for Bush and they'll say things like the following:

- Bush's tax cuts helped stimulate the economy and get it moving again after the Clinton recession.

- Bush's policies are aimed at ordinary working families, and tax cuts are just the government returning money to the people who earned it in the first place.

- The government may be in debt, but that's true of lots of governments. Maybe it would be good to get spending under control, but there's nothing unusual about a government being in debt.

Let's take stock, shall we?

1. THE TAX CUTS

The tax cuts have been shown to be heavily skewed to wealthier Americans. You can read the CBO's analysis here (PDF).

So what, eh? They earn the most, they pay the most, they should get the most back, right?

Well, let's put aside the issue of fairness, which is a good bit more complicated than that. Let's look at the issue of the effect such tax cuts would have. The cuts are meant (presumably) to help stimulate an economy where the Federal Reserve has run out of room. So how good are such skewed tax cuts at doing this?

Noted economist Brad DeLong says not very -- the tax cuts were badly designed if what you wanted was a short-term boost to the economy.

The problem is, it's the poorer and middle-class workers who will spend a greater share of any tax cuts -- they have a higher marginal propensity to consume. But most of the money returned via the tax cuts has not gone to those who would be most inclined to spend it. (These in fact are not "tax cuts" but tax shifts -- more on this below.)

Hence, the impact on spending, business activity and, finally, jobs, has been muted.

2. JOBS

Job growth in the US has not been impressive lately. The reasons are arguably complicated, as these things usually are, but as we've seen, the Bush Administration took a fairly strange action when the problem first surfaced.

The stranger thing is that the administration wants to keep trying to claim credit when things look like they might be going OK. Let's see what The Economist magazine has to say about this.

Let's hear that again, shall we? The president himself pretends the bad news simply does not exist. Does this sound like the president? Well, yeah, it sounds eerily familiar really.

In summary: Jobs are down, but when they didn't seem so down, that was a sign of the president's effective economic policy. Now they're seriously slow, well, the president just pretends life is rosy, and an enormous amount of people go along with him, hoping he's right.

But one area where Bush has excelled is in accruing public debt.

3. THE DEBT LEGACY

Did you know that the Administration is requesting the government's debt ceiling be raised? I'm not sure how aware people were of that.

Now, what tends not to get understood about the Bush "tax cuts" is that they are not cuts as such, they are SHIFTS of the tax burden. In particular they lower tax burdens on current wealthy Americans and raise tax burdens on ordinary middle Americans in the future. Hence, they have shifted the tax burden into the future, and across earning classes. This is NOT a tax cut, it's a redistribution -- a tax shift.

But the odd thing is, no-one grasps the magnitude of the debt imposition that this imposes on the government, and hence on future taxpayers. It's not getting talked about much in the lead-up to the election. It's the story that gets overlooked.

As DeLong notes:

Nobody talks about this stuff because it's complicated, and worse, it's too scary to contemplate.

Boston University economist Larry Kotlikoff talks about America's menu of pain here (PDF file) -- the grim choices it will face to pay off its current spending binge. Or you can read his book on the coming generational storm that has been greatly exacerbated by the current government.

This is Bushonomics 101 going into the election. The final exam is in November. Students in Florida who didn't receive the proper marks based on work submitted last time, well, let's hope we do our tabulation of results better this time.

Yes, this is all good, but think about Kerry's proposal. He wants to cut 250,000 government contract jobs, further adding to this deficit. You can't blame everything that is happening on the president. It is just easy to, because no body really knows whats going on.

Keep Kerry OUT!

Oh, TFOK, stop using that "fuzzy math!"

I gots me a check fer 300 big ones!!!

yeeehhaaaw, liberal media!(fires imaginary 6shooters into the sky)take that!

TFOK, did you totally rig this post to prove your point about "that doesn't stop untrained people from not only expressing opinions on economic matters, but sometimes deciding their votes based on the supposed economic performance of an incumbent national leader?"

Either that, or someone's in line for the "Impervious to Irony" award.

This is all good and great , but people realize - ALL THE PEOPLE IN GOVERNMENT ARE REGULAR FOLKS LIKE YOU AND ME - they have families , problems , and are failable. G.W has a failing in his lackluster plan for tax cuts and growth. Ok so you get a 300$ check back from the government so what? If that 300$ check that you blow in a weekend means adding to the record deficit , do you really think its such a great thing after all? Would you rather have a balanced budget? After all we have to have one to live right , so why shouldnt the country have one to be healthy. I think the current administrations advisors and planner have done what they are going to do (theyve had 4 years) its time for a new , fresh approach before this country goes downhill anymore <end soapbox>

Hey Lemmonier, don't hand that award out quiiite yet...the nominees are still coming in.

Didn't the Japanese try something similar this past decade with the whole massive increase in government spending thing ?

WOO-HOO ! I got a 300 dollar pissant tax rebate but my job got outsourced to India!

brilliant!

I'm not too worried, The US has assumed much larger debts in the past (like after the Civil War and WWII) and somehow managed to survive. Plus, there's the happy situation that we control the currency that our debt is denominated in What are int'l holders of our debt going to do if we cant pay interest? If the US defaults, the world economy is fucked. Where are they going to go to seek risk-free returns? If lenders sensed something was fucked with the US, wouldn't they be demanding higher interest rates? Yes the Fed is just gradually creeping interest rates up, but to adjust for any inflation created by the recent expansion in the economy.





[Edited on Aug 16, 2004 1:09PM]

*bows to TFOK*

isn't there supposed to be a natural cycle in economics between growth and recession...i always understood that trying to perpetuate growth could lead to a serious economic collapse. like the great depression sorta thing.

hummm... what about 1)outsourcing? what about 2)rural america? what about hoping to use 3)oil?

1)americans starve while chinese are working underpaid
2)midwestern americans are strangled by powerful crop trusts
3)oil is gonna end, maybe not so fast, but is time to change the basis of your economy, or you'll spend all your money to make wars around the world to get the few oil that in 30 years will be remained

and it's CLEAR, I just reported some examples about stupid busheconomics. not saying a word about moral, social, and freedom topics



[Edited on Aug 16, 2004 1:52PM]

I have a theory that the "outsourcing" of jobs is their plan to curb immigration. If all the American jobs move to other countries, the folks there won't want (or have) to move to America for employment.

How about the World Bank forgives all its loans and we call it even?

It would many countries very happy, it would finally allow them to grow (instead their growth being stunted by payments to the World Bank), and it would be a great way to pay THEM back for being such pricks and putting them in no-win situations in the first place.

A novel idea. And one that will never happen.

unless you can prove to me that the administration is responsible for Alias and Carnivale not being back on the air until Jan. 2005, I'm still voting for Bush.

because the president runs the fcc

Woah dude, you should study economics or something!

Heh, no rigging is needed. Post on economic policy and every crackpot theory is bound to get an airing.

I see we've drifted off into World Bank loan forgiveness now. Apropos what, I'm not quite sure.

Here's where I sit back and sigh and rolly-roll my eyes.



Done.

One day, Obi Wan, one day.

Then, you, will be the master?

Yes, take him. Please!

One of my better unconscious wish-fulfilment statements!

a hospital in working class east l.a. just
closed due to lack of funding.......

I'm comforted to see that you do

[Edited on Aug 16, 2004 by BillHaverchuck]