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July 09, 2011 9:00 AM Cantor the Counterintuitive Keynesian

By Steve Benen

House Majority Leader Eric Cantor (R-Va.) told reporters yesterday, “We, as Republicans, are not going to support tax increases. It is counterintuitive to think that you can raise taxes in a sputtering economy.”

The problem with this, as reader F.B. reminded me, is that Cantor may not fully understand what “counterintuitive” means.

Putting that aside, let’s also consider what else Cantor told reporters yesterday.

“Just look at the jobs report today,” Cantor added. “I cannot fathom how anybody, how anyone thinks right now is a good time to raise taxes. Who thinks that raising taxes on individuals and small businesses can help create jobs?”

Now, the natural response to this is to point to the recent examples of policymakers — most notably Ronald Reagan and Bill Clinton — who raised taxes in the midst of weak economies, only to see the tremendous economic results soon after.

But let’s go a step further. The more pressing problem with Cantor’s contention is that it’s largely Keynesian — and Cantor hates Keynesian economics. Jon Chait had a good item on this.

[I]f you think the state of the business cycle should influence your fiscal policy, then you should oppose any spending cuts at all, and the tax cuts you support should be as progressive as possible. Alternatively, if you’re worried about the incentive effects of tax cuts on business and the rich, then you don’t care about whether unemployment is high or low at any particular moment. Cantor’s position, which is the universal Republican position, is pure nonsense by absolutely any standard, including the most conservative standard.

That’s even aside from the fact that nobody is proposing an immediate tax hike. Democrats are perfectly happy to phase in any tax increase slowly. Cantor’s argument is nonsense economics piled on top of a factual misrepresentation.

Most of Cantor’s arguments are.

Regardless, Chait’s point is an important one. Why does Eric Cantor oppose any and all tax increases? Because, as he sees it, the economy is weak, and if there are tax increases, it would take money out of the economy and put into the Treasury. That would be wrong, Cantor believes, because we want that money in consumers’ hands, generating economic activity.

In the next breath, Cantor then argues that he also wants spending cuts, taking money out of the economy and putting it into the Treasury.

Do you see the disconnect? Well, you probably do, but the Majority Leader doesn’t.

Let’s put this another way: the policy reasoning that tells Eric Cantor that tax increases are a bad idea is the same policy reasoning that makes sweeping budget cuts a bad idea, too.

Steve Benen is a contributing writer to the Washington Monthly, joining the publication in August, 2008 as chief blogger for the Washington Monthly blog, Political Animal.

Comments

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  • terraformer on July 09, 2011 9:12 AM:

    Hmm, perhaps someone should point this out. If only there were an outlet, say, a medium through which people (let's call them "journalists") inform the populace about objective fact - maybe this could be a place on that internet thing, or maybe even dead tree material that can be made flat and thin and printed on - thereby supporting the ability to decide fact from fiction.

    Naw, that'd make too much sense, and probably wouldn't generate a profit. Anyway, wasn't someone rich and white kidnapped recently?

  • j on July 09, 2011 9:14 AM:

    Cantor is a vile disgusting human being, NOW he's back spitting out his stupid talking points, when it came down to doing something he ran like a scared rabbit from the Biden talks. Cantor is not ready to play with the big boys.

  • c u n d gulag on July 09, 2011 9:24 AM:

    "Cantor the Counterintuitive Keynesian."

    GREAT title!

    Sounds like a childrens book.
    About a snake that shove itself up its own ass.

    Ok, young adult...

  • Diane Rodriguez on July 09, 2011 9:41 AM:

    "Who thinks that raising taxes on individuals and small businesses can help create jobs?

    Like other Republicans, his obsession in padding the pockets of the top wage earners and corporations in the US is constantly obfuscated by referring to "individuals and small businesses". He's arrogant and dumd. Just about any interviewer could flummox this dweeb by asking him "which group of individuals and small businesses would experience tax increases under a Democratic plan"? Hedge fund managers don't count ( who acccording to the WSJ had a "smokin" June")

    Eric is riding high and thinks he's nipping at Boehner's heels right now. His lust for power will be his undoing and his corporate masters will drop him from a very high cliff. The splat that he will make when he falls will be suitably small.

  • berttheclock on July 09, 2011 9:43 AM:

    Pure Company Line

    Michael Steele, the former head of the RNC, now, a political analyst for MSNBC, was waving his hands and whining the same mantra, yesterday, on Chrissie Poo's show.

  • ceilidth on July 09, 2011 10:03 AM:

    But you are also making a mistake. You're assuming that he can think. Really, all he can do is parrot (and that's an insult to parrots) the words of Wall Street. Unfortunately, we've got a White House that is doing the same thing.

  • Daniel Kim on July 09, 2011 10:15 AM:

    I have nothing against restoring tax rates for individual millionaires and the oil industry's record profits. If anything, there should be a new economic bracket created for the very wealthy. To soften the burden, maybe it should have an appealing name, like the "Platinum Level" or something.

  • Stein on July 09, 2011 10:25 AM:

    Government does not create self sustaining jobs. It's not complex. If I was incorrect on this maybe the stimulus would have worked a little better. It's not working folks.

  • FRP on July 09, 2011 10:26 AM:

    In Angel Heart Robert De Niro employs Mickey Rourke to find himself . A discovery Rourke is comfortably insulated from until he meets Robert De Niro as Louis Cypher . After cutting a swath through all the people who ever knew him , Mickey , as Harry Angel , finally finds himself , right before eternal something or other .
    In the Obama administration the American public hired a bunch of rough and ready free spirits to safeguard their right to wealth , and freedom from governmental confiscatory policy towards that wealth . As German people were free to consume Spanish grown beans that were sprouted with powerful friends in the E coli groups , our dear friends in Arizona are freely engaging in the same concert with German style freedoms . Counterintuitive plays a role in facing the unfaceable , by dramatically pacing the object least expected smack dab in the thick of it . Representative Cantor , with his boy scout scrubbed goodness appealing from every shiny toothy grin , is discovering his employment as rough riding protector of the individual is gaining upon the dawn where it breaks open the notion that to protect the divine individual , one must find allies .
    This jarring juxtaposition wrecks his equanimous disposition , by placing holy shibboleths in jeopardy with , outside several disreputable groups which by common accord are disqualifying by their heresies , persistent unexplainable economic rot .
    Little known amongst the people for whom arcana is a pursuit , these wizards of Individual Strength , from which all blessings flow , must speak more slowly and more loudly . This being the time honored method by which people , barbarians as the Greeks called them , can be made to understand the fundamentals of American concepts of language and of economics , also .
    The poisoned assumptions of e pluribus unum which also share the same disgraced pedigree with other certain groups which by common accord offer nothing of value , are being subject to a rigorous test of patriotism to discover the link to the heresies which are believed to be the fulcrum where by the fault catapults itself into the propaganda , ruining perfect posture and dental beauty in a certain W V Representatives summer plans .

  • Ron on July 09, 2011 10:44 AM:

    The difference between Cantor and yourself is summed by one line: " spending cuts, taking money out of the economy and putting it into the Treasury".

    You can believe this only by not understanding that a spending cut ONLY means not borrowing more. Cantor wants to stop borrowing, you want to borrow money now and sent the bill to our children.

  • BCanuck on July 09, 2011 10:49 AM:

    Mr. Benen makes the mistake in assuming that taking money from people in the form of taxes and having the government spend it is the equivalent of letting people keep THEIR money and let them spend themselves (or save it). Government spending does not create wealth. It is a net wealth destroyer. Government can provide services that wouldn't otherwise be provided by the private (real) economy but it does not add to the economy. Government spending is drag on the economy.

    If you accept that the Obama Administration's guesstimate that 2.4 million jobs were 'created or saved' by the $840 billion stimulus that works out to $350,000 per job. How can that be interpreted as anything other than a complete failure?

    The government can not save or fix the economy. It can back off and allow the economy to repair itself or not.

  • David on July 09, 2011 10:51 AM:

    "In the next breath, Cantor then argues that he also wants spending cuts, taking money out of the economy and putting it into the Treasury."

    Dude - get a clue. you can't spend what you don't have. your analysis would indicate the government is saving. Only in a liberals mind would not spending on a credit card equal putting savings in the bank. As a business owner and employer, I can tell you the uncertainty in the economy and what my bills are going to be next year is a MAJOR factor in me not hiring.

  • Peter on July 09, 2011 10:57 AM:

    "In the next breath, Cantor then argues that he also wants spending cuts, taking money out of the economy and putting it into the Treasury."?

    If I earn $1MM and I borrow a million and spend $2MM and I cut my spending to match my earnings and forgo borrowing I am not putting $1MM in savings I am only reducing the growth of my debt. And Cantor is clueless?

  • Really? on July 09, 2011 10:59 AM:

    So spending cuts take money out of circulation and put it into the treasury? That argument may make sense if the cuts were being made to a balanced budget; not one that we are borrowing to fund (if it were otherwise we would not be debating raising the debt limit). The truth is we are taking money out of thin are and putting it into circulation (either by printing it or borrowing it). We don't want to push this problem down the road to our progeny. Sooner or latter all that is borrowed has to be paid back. What will happen to the economy when it is buried under an even larger debt than the one we are currently facing?

  • Blegoo on July 09, 2011 11:02 AM:

    "In the next breath, Cantor then argues that he also wants spending cuts, taking money out of the economy and putting it into the Treasury."

    What "money"?
    The "money" the FED is creating out of thin air?

  • WD on July 09, 2011 11:11 AM:

    The way I see it the government should just keep spending. Why not 58 trillion or 158 trillion? The more we spend the better the economy. Why should we ever stop spending? More is better!

  • PlanningStudent on July 09, 2011 11:12 AM:

    This poor author really thought he had stumbled across the golden argument or something... Liberals build these giant rhetorical arguments based on false premises but it all falls apart when you pull on just one little thread...

    That being said I don't trust Cantor at all.. He speaks with more platitudes than any other politician alive.

  • Factory Owner on July 09, 2011 11:19 AM:

    Mr cantor is right and the writer of this article is very wrong.

    I manage a factory in NJ. I employee 100 mostly unskilled hourly workeds.
    Raising taxes on me and my partners make it less likely we will e land in the US
    It make it lesslikely we will hire more workers.

    Similarly by cutting government spending and borrowing needs it improves the chances for businesses to get financing. Also by reducing government redtape (EPA and OSHA and etc the cost of adding a worker is lower and easier.
    This is the reason why millions of jobs have moved to china and India .
    If oboma and pelosi get their way - I will be making my products in ch Ina soon also.
    Like nikE and apple do today.

  • Jess Hansen on July 09, 2011 11:23 AM:

    The difference is simple. Lower tax rates and less regulation support the development of self-sustaining jobs in the private sector. Since private businesses work for a profit and operate without government assistance once these jobs are created they continue. Jobs created by spending evaporate as soon as the spending does since the negative business climate is still there (high taxes and regulation).

  • Dex on July 09, 2011 11:31 AM:

    As Kathryn put it yesterday: Cantor is "smug and dumb".

  • JohnBoy on July 09, 2011 11:32 AM:

    Wow - what terrific insight! Yes - in a simple two dimensional world that doesn't exist - both cutting spending and raising taxes are supposed to depress economic activity by some magic factor that economists estimate using a multiplier.

    But - cutting govt spending and clearing out stupid regulations have positive results that intellectuals ignore. Take the example of the guy who is considering the prospect of opening a factory. If Republicans swept the 2012 elections and cut deficits to sane levels, promised that the EPA wasn't going to ban CO2 and rolled back the Obamacare mandates, you don't think that our guy wouldn't have more confidence to invest in US jobs?

    Raising taxes sends the signal that - by damn - we just can't find any more ways to make govt efficient so we need more of your money.

    We don't even how to theorize. Look at the booming economies of North Dakota and Texas compared to Illinois and California.

  • FRP on July 09, 2011 11:36 AM:

    Signing on to Saint Ryan's budget proposal has all the fiscal backbone of an habitual spendthrifts logic . It neither pays down the debt nor addresses the budget . If I am not mistaken this has been something of a epistolatory breakthrough for the mild mannered accountants of the Versailles saving bank and cut .
    The point of taking money out of the economy is that it accomplishes many things rather than two things . Of these two things the rentiers are the main if not only protected Americans . Amongst the many things it does is , unfortunately , according to the Saint Ryan Budget is actually put money anywhere other than upwards , as in , to , or for the wealthy . I don't know about others but I always used to consider wage paid folks as the equal in a democracy to rentiers and other accrued non working capital . With the protection of rentiers guaranteed by tax dollar para military , and military forces , why would taking out the governments money that guarantees the wage earners protections be considered equal to keeping the palace guards at the corporate Versailles now liberally sprinkled throughout the democratic monarchy ?

  • Bob Cooley on July 09, 2011 11:37 AM:

    Funny stuff. "Cantor then argues that he also wants spending cuts, taking money out of the economy and putting it into the Treasury."
    Bulletin: There is no money in the Treasury. And the money Benen suggests that cuts would take out of the Treasury is debt, not cash. Debt we are paying billions of dollars a day (a minute?) to maintain. Cuts remove debt (a drag on the economy). Taxes take actual cash out of the actual economy, and deplete it's value via interest payments and waste. What a bargain.

  • Michael on July 09, 2011 11:38 AM:

    Yeah, another blogger who never took an economics class and understands nothing about the economy opining nonsense and hurling insults.

    The authoritative quotes Benen uses to convice you? Johnathan Chait,perhaps the most-ridiculed bloggers on the economy there is: only a hampered ideologue would quote Chait.

  • Phil on July 09, 2011 11:41 AM:

    Steve ... Your statement "Cantor then argues that he also wants spending cuts, taking money out of the economy and putting it into the Treasury" shows you have no understanding of how the economy works.

    Spending cuts reduce the amount of money private investors use to buy gov't bonds to finance the deficit spending. That money is then available to fund entrepreneurial activities instead. The money, therefore, stays in the economy.

    I bet that never occurred to you, Steve. I often wonder why socialist think the way they do. It may boil down to plain ignorance

  • gmonsen on July 09, 2011 11:43 AM:

    You really have to be one of the faithful to follow the logic of the Journolist crowd... Cantor's position that tax increases would hurt the economy is not because it would take money out of the hands of the consumers, who in the Keynesian view would be spending that money. Its that the tax hikes being discussed by the left are largely if not entirely on the job-creating class. You know, the millionaires and billionaires of hackneyed leftist acclaim.

    If the readers of these kinds of articles are not critical of the logic and do not think the logic through, they can end up believing that it the conservatives are the illogical ones. I can only feel sorry for those so dispossessed of critical thinking that they end up nodding their heads up and down after reading this Orwellian nonsense.

  • FRP on July 09, 2011 11:47 AM:

    It may serve as light entertainment for the aristocrats who fancy themselves connoisseurs of puzzling .
    This the game !
    Part the one
    Y O Y O Y O do the recent attempts to raise taxes by presidents increase economic vitality .
    Part the two
    Y O Y O Y O doo doo the recent attempts to disguise the costs of war by not including them in the budget all the while cutting taxes destroy the economy of the blessed realm where the sacred tax cuts have been enacted ?

    Part the Bonus
    What were the tax rates of the most robust economy in history .

    Part the mystery
    How doo doo Luntz and "university envy" think tanks keep their little 'eads ?

  • Skep41 on July 09, 2011 11:49 AM:

    There was a huge difference in the 'tax hikes' done by Reagan and Clinton. Reagan's was an adjustment of a cut in the upper rates from 70% to 28%...he made a deal with the Demos who controlled Congress which those liars promptly broke. Reagan's tax cuts doubled revenues, Congress tripled spending. Clinton's tax hike was just that but only raised revenues very slightly. The big surge was after BJ signed the budget Gringrich presented to him which included cuts in the capital gains rates. You libs twist yourselves into pretzels trying to make that shabby, lying Clinton look good and to try to make the idiotic case that raising taxes is good for the economy. Read 'Reckless Endangerment' to see how that disbarred, impeached, bribe-taking egotist was a prime cause of the Depression we're in now.

  • Tom on July 09, 2011 11:54 AM:

    This column is moronic, and those who agree with it should revisit their basic economics text. Liberals/progressives have completely misinterpreted JMK and his economic theories. JMK never advocated unrestrained spending which would never be repaid, which seems to be the mantra of all progressives and Dems. Government and its spending policies are overhead to the US economy, and constitute a drag on economic growth not a stimulus to economic growth. Economic growth translates to job creation which appears to be the antithesis of this Administration's economic policies and the Democratic party.

  • Bernd on July 09, 2011 11:59 AM:

    Here is the problem. Keynesian economics in theory said that if government routinely spent less than it collected in taxes and thereby created a "rainy day" fund, and then when a recession occurred spent some of the money in that rainy day fund that this would stimulate the economy.

    Borrowing money to stimulate the economy (as politicians of both parties have tried - although no one to as large an extent as Obama) does not work. It does not work because the cost of borrowing the money (the ongoing interest and the expectation of higher taxes to pay back the loan) outweighs the benefits of spending the money. It is also fair to say that stimulus via spending is temporary - it does not permanently alter the investing and consumption decisions of businesses or individuals.

    The correct tax cuts on the other hand are stimulative. To be correct, the tax cuts must be permanent, and must change investment and consumption decisions at the margin. This means to be stimulative a tax cut must cut taxes on the last dollar earned for labor (to make people want to work harder), or on the last dollar earned on capital (to make people take money out of risk free investments and take risks in order to earn the extra return).

    Only cutting the top income tax rate, the top corporate tax rate, and the rate on capital gains accomplishes these objectives. In order for this to work, these cuts need to be permanent so as to permanently alter investment and consumption decisions.

    Therefore the premise of the article is entirely false. Budget cuts return money to the private sector that is being miss-allocated by the Federal Government (all government spending is harmful). This is good for the private sector. Tax hikes take money out of the private sector and increase the amount of money the government wastes.

  • True Progressive on July 09, 2011 12:03 PM:

    It is known to almost everyone that public sector spending is always spent most noby and efficiently. Money left in the hands of the private sector ends up in the coffers of the plutocrats. Our poor and elderly are starving in the streets while the rich Republicans who make over $100,000 a year enjoy their mansions and yachts.

  • FRP on July 09, 2011 12:05 PM:

    Thanks for playing !
    The little white dot on the Chickens brown Waste is still Chicken Waste !

    Taxes are still a governments way of providing the government of the people and for the people .
    Willie Sutton supposed that banks were where the money was .
    We are supposed to be nonplussed by placing progressive tax rates upon progressive scales of income .
    Apparently when a smallish percentage of the population , say an oligarchy for ease of referencing , possesses the greatest fraction of the nations wealth it is difficult if not impossible to maintain a pacific population along with its endemic economy of rot , just not happening .
    The fractious nature of starvation and crumb handling has found its answer on the Ides of March to Bastille day .
    Good luck F Luntz with your ead !

  • Lance on July 09, 2011 12:08 PM:

    Your reasoning makes sense only if you accept the premise that money in the hands of government is as valuable to the economy as money in the hands of those who earned it. That is, is government spending as valuable to the economy as leaving money in the private sector. The most favorable analyses of the ARRA puts "jobs created" by government spending at about $275,000 per job. With another favorable assumption that those were reasonably good job,s paying say $50,000 per year, that is a return on investment of -81%. I am confident in my assumption that the private sector, (or even a group of monkeys) could do much better than an ROI of -81%. So, Cantor’s core argument, that money taxed and borrowed by the Government and redistributed terribly is less valuable to the economy than leaving the money in the hands of those who actually create revenue and support sustainable jobs, seems reasonable. Given the spectacular failure of the government redistribution strategy that we have seen under this administration, I am willing to entertain a different perspective. When will liberals figure out that the strategy of Ceasar taxing his subjects and then redistributing the money by throwing it off the back of his chariot is not actually investment, but just a dictator trying to buy popularity?

  • Bill Carson on July 09, 2011 12:09 PM:

    This guy loves to attack Cantor, most notably because he thinks Cantor doesn't know the meaning of "counterintuitive." You know someone has a weak argument when his first statement is to sound like a condescending 6th grade teacher.

    Too bad the argument is so weak on his basic argument that vast government spending programs are going to somehow help the economy. They never have. And don't tell me they did for Roosevelt. Unemployment was extremely high 5 years after Roosevelt was in office.
    Only world wide demand for military supplies saved our economy starting in 1939.

    I'll go with common sense. Spending vast amounts of money on make work government jobs and subsidized "green" jobs will never help any economy. As soon as the money runs out (other peoples' money), you're screwed. That is happening now. This writer fails to note that we have to borrow money from the Chinese to pay lifeguards in California $100,000 per year, as was recently reported.

  • Schyler on July 09, 2011 12:19 PM:

    Perhaps a large reason the stimulus was so ineffective by the metric you are using is that such a huge portion of it WAS in tax breaks which have not been creating jobs. Corporate profits are near an all-time high right now, the income disparity is the highest it's ever been, the mega wealthy have flipped the goverments help into massive individual fortune and still are not creating jobs, or hiring people for old ones.

  • ohhenery on July 09, 2011 12:35 PM:

    Mo better fun on the Chattanooga Choo-choo. Converging on track 29.

  • Jon on July 09, 2011 12:47 PM:

    Spending cuts is taking money out of the economy! Hmmm lets see if my 5 year old can under stand this- Son-Government taxes someone(not just rich)=money out of economy. Then spends it= Money back in economy. Sons Resonse- Sounds like you just took water from one side of the pool and poured it in the other. What are you people smoking? Wake up!

  • Bradk77 on July 09, 2011 1:02 PM:

    Allow me to explain what you misguided liberals are missing:

    Government spending is created by taking money (taxes)from the private sector. (If everyone worked for the government, then the tax rate would have to be 100% - simple math says that. Think about it!)

    By cutting government spending we are lowering the parasitic nature of government. If we lose government jobs, it doesn't hurt the economy the same way that losing private jobs hurts.

    On the other side, it should be obvious that raising taxes lowers the disposable income of those whose taxes were raised. That lowers some combination of 3 things; either consumption, savings or investments, depending on whose taxes are raised. (Oh BTW, rich people can defer income or change its taxable nature a lot easier than the middle class - so focusing tax increase on "the rich" is not as easy to collect as it seems on paper.)

  • Will B on July 09, 2011 1:03 PM:

    Cutting spending reduces the amount being spent by the Treasury. The Treasury then needs less revenue through taxes to support its obligations. Lower taxes means people get to keep more of what they produce and use their wealth as they desire.

    If however, as the author believes, the government is a better custodian of wealth than the individuals who created the wealth in the first place, none of this makes any sense.

  • Glidwrith on July 09, 2011 1:20 PM:

    Let's try to establish a basic premise: if you have a job, preferably a good paying job, you can go out and buy things, yes? If you buy things, businesses that you buy from have money to purchase more inventory, pay their employees and grow their business, yes? Now, if you have that job, how can the business tell the difference between a policeman, farmer, secretary, nurse, manufacturer, soldier, teacher, student, engineer or scientist? Answer: you can't; those are a mix of government and private sector jobs, no one in a business cares who bought their stuff.

    Cantor wants to cut spending: this means less money for people that have JOBS who will therefore be fired and have no money to spend. If taxes are raised in the high income brackets two things will happen - either the government gets more money, thus lowering the deficit and keep paying for jobs like policeman, teacher and soldier or businesses will take what would have been profits (and therefore taxed) and seek to look like they are making less profits. In other words, give employees pay raises, invest in equipment and any other means to come in under the new tax cut off. We all still win because now the employees have more money to spend in the economy, people that sold the equipment now have money and can grow their business and since there is a demand for their products they will HIRE people to help meet that demand.

  • ellie on July 09, 2011 1:32 PM:

    Oh, Cantor doesn't know what the hell he is talking about and he doesn't care that he doesn't know. He's a perfect repuke.

  • Rockyspoon on July 09, 2011 1:50 PM:

    This has either got to be satire, abject stupidity, ranting and raving, or a combination of all of these. It certainly doesn't deserve a logical rebuttal.

    What idiot would ever write grabage like that? It's like saying "Well, if the sun doesn't come up, it will be light". What a moran (spelled incorrectly on purpose--It might wake him up).

  • Tom Johnson, Largo, Florida on July 09, 2011 1:57 PM:

    09 July 2011
    Folks,
    Inflation = Theft.
    Inflation may be subtle, but inflation is still theft.
    Inflation is theft of value from those who work and save.
    Inflation can be caused by excess demand for the supply available, shortage of supply, or destruction of the value of the currency, which currency is the medium of exchange of value.
    Unintentional government-generated inflation due to excess artificial demand (e.g.: the Great Society program, the space race, the Vietnam war - regardless of good intentions) = government theft from those on fixed income (e.g.: retired, disabled, poor, unemployed, and disproportionately the minorities). The above programs resulted in the inflation of the 1970s.
    Intentional government-generated inflation due to Quantitative Easing I & II (printing money based on nothing) with the intended goal of low level inflation, has resulted, under the Obama Administration, in the destruction of the value of the currency. Gold has intrinsic value and is a measure of the value of a currency. Gold per ounce, on 9 Oct 2009, was $1,000. Gold Friday was $1540. Simple math: $540/$1,000 = 54.4% price increase, indicative of 54% inflation. Ex-Fed Chairman, Ben Bernanke, said inflation will take 12 quarters (3 years) to permeate the economy. Obama is destroying the currency.
    The Democrats claim to be the party of “the working class”. “The working class” is going to be clobbered, completely destroyed, by inflation.
    I hope this explanation clarifies and educates.
    Respectfully,
    Tom Johnson
    Largo, FL, USA
    God Bless Reagan
    God Bless America
    opinionscribe.blogspot.com

  • SWNID on July 09, 2011 1:59 PM:

    This column is fatuous.

    Purge the mind of Keynes. Fill it with Friedman. Then you'll understand.

    Whether Uncle Sugar taxes a dollar or borrows a dollar, it's a dollar that Uncle Sugar spends that a private citizen can't spend. Private citizens take better care of their stuff than does Uncle Sugar, so in the main private citizens' spending is more economically sound than the political spending that is Uncle Sugar's.

    So for growth in the long term we spend less and tax less. QED.

  • ReConUSMC on July 09, 2011 2:23 PM:

    To you "Obvious " leftist out there that have never ran or owned anything much less made a Pay Roll .
    Your so far off base it is pathetic and sicking .
    That comes from a 36 year Former Owner of a Nationally Brand Name Sofa Furniture Factory .
    Selling my Sofa's in all Obama 57 States rather than 50 states plus My Goods were sold in Canada and the Middle East . $ 499.00 $ 799.00 Price retail range .

    I sugest you read Thomas Sowell's best seller 'Basic Economics" for Starter .
    Then your ridiculous points don't be said .

    Then go look up the countless Mountains of Paper WorkFed , state city and local , CIDA , regulations , EPA rules , Permits ,Bond Insurance before you open the Doors .

    Even the amount of Commodes and Urinals you have per male and female employee .
    The Govt under Obama has before far less business especially to small business .

    Are any of you smart enough to know why small business is sitting still ?
    {ITs called "Uncertainty "caused by the least Business Friendly President ever .
    You have had to notice not one penny of stimulus went to small business that employees 2 out of every 3 working American's .
    Of course he took care of Union , Wall Street , Big Banks ,Green's and his Cronies .
    Who don't hire 1 % of the labor force .. those hired coat us $ 288.000.00 per Job . Moronic !
    Currently taxes are 35 % Fed. 15 Capital gains . State 6 % and local 4 % .
    Obama wants to raise Corp. Tax to 38 % . Capital gains to 20-22 .Ad in State 6 % and Local 4 becomes 50 % plus in taxes . Not counting heavy export taxes .
    Making our Products against Foreign impossible .
    We don't know two years later what the cost of Health will cost us .
    I bet few of you know how we calculate employee cost .
    Fore every $20.00 per hour I pay the help that real cost when 6 other cost are added real cost is $ 54.70 .
    In order works for a Co, to make 7-10 % is being next to impossible .

  • Chilibean on July 09, 2011 2:33 PM:

    The reason you can't get this simple message out to the voters is because your analysis is so parochial, your academic sources so insular, your ideology so in-bred, that you have no idea where Eric Cantor and other Republicans are getting *their* ideas. Chait's dissection of Cantor's reasoning takes no actual free-market theory into consideration. You criticize Cantor for a disconnect which is in fact a failure of your ability to understand how these connections are made; i.e., a failure of your inability to understand his ideology.

    Perhaps Cantor is a fool. Perhaps he is a sage. I don't know. But what I do know is that you're never going to understand what motivates Cantor or the Tea Party or the impending end of Barack Obama's single term as long as you contemptuously remain ignorant of large swaths of intellectual tradition and discipline that do not happen to be yours.

    In other words, you have to be better than the left-wing version of the right-wing rednecks you despise. Then people will start listening again.

  • ohhenery on July 09, 2011 2:42 PM:

    Hi ReConUSMC. My cat had done some severe damage to both ends of my sofa. Paid $1100 for it back about 12 years ago (and am probably still paying for it). My quandry: would it be better to buy a new couch or get it reupholstered. I'm leaning toward reupholstery (maybe just the ends). Would try it myself but I know that there are talented people out there that could probably do it right for maybe third the cost. Weighs heavy on me. New sofa or repair. Somethings gotta be done.

  • bandit on July 09, 2011 3:27 PM:

    It's like a business that is losing business so it raises prices thining it's customers won't go somewhere else. They will. Raise taxes spend more. There will be fewer people to tax. The deficit will spiral even further out of control and you can continue to live in your delusion that things will get better you just need to soak the rich more.

  • Del on July 09, 2011 3:28 PM:

    Jeeze! First of all if you listen like an adult you can see that the use of the word "counter-intuitive" in context is perfectly clear and appropriate. (I added a hyphen in the word so you could write another scathing article about inappropriate use of hyphens)

  • Gene Schwimmer on July 09, 2011 3:29 PM:

    If you cut government spending, you leave money in with the people who earned it and who will make better decisions on when and how to spend it. Even better, they could decide to save it, which would solve the real problem, which is our low savings rate.

    Spending does not mean the government printing currency. It does not mean people making purchases with credit cards and then hoping to be able to earn the money (i.e., create wealth) to pay the debt when it comes due.

    Spending means earning the money (i.e., creating wealth) first, paying off current debts, saving the rest and when you have amassed a substantial amount, spend a portion - and only a portion - of your funds and save the remainder.

    Do not buy a $30,000 car on credit. Save $30,000 and then buy a $15,000 car.

    The 9.2% of the population will not get jobs until the 90.8% who have jobs (1) pay off their debts, (2) accumulate savings and (3) begin to spend only a portion of those savings. In the meantime, the 9.2% unemployed will have to wait.

    And this is where government can help - by cutting taxes and raising interest rates so as to speed up the process of Americans paying off their debt and building their savings.

  • ReConUSMC on July 09, 2011 3:33 PM:

    Shoot the Cat Ohhenry ... Just Kidding .
    Finding the exact Fabric won't be easy with a 12 year old Sofa ,
    If you can find a matching fabric(like a pillow pattern ) that works fine .. Buy it your self not from the Reuph. guy .Solid's offer shading Problems .
    The Two Arms repaired should run around $ 600.00 -700.00.
    You can buy on Specials 700-900 dollar quality Sofa's on the net .
    Depending on where you Live there are good deals to be had .
    VA has a 20 % over cost where Customers come from 20 States to Buy his Furniture .
    The Store in Green Front Furniture ..Located Farmville VA .
    It is a 50 Million dollar operation .You can Google it .
    It is a 40 year ran family business . The Son Dickie my Buddy still Runs it .
    HighPoint and Hickory NC also 20-25 % over cost outlets centers .
    I hope this helps you Ohhenry

  • ohhenery on July 09, 2011 4:21 PM:

    Thanks ReConUSMC. Fabric from unused arm protectors and pillows might be enough to redo. Hate to get rid of it, just getting broke in.

  • dms on July 09, 2011 4:23 PM:

    Maybe we should increase spending - have another stimulus. We could give another $53 million to buy firearms for drug dealers in Mexico? Now how does that help our economy!

    Apparantly, Cantor's wisdom is above Steve's understanding. The point is the economy has been crushed through wasteful spending and nervousness about the resulting debt. Employers aren't hiring and consumers aren't spending because they know more money needs to go into the treasury to pay for the increased spending.

    Increasing taxes won't convince consumers or business owners that taxes won't be increased. Only decreasing spending will restore confidence.

  • Lee Moore on July 09, 2011 4:43 PM:

    I think the problem is that Messrs Benen (and Chait) don't know any microeconomics. The economic case for lower taxes on business is that lower taxes increase the PROFITABILITY of business, and to the extent that your business requires employees, the PROFITABILITY of hiring more employees. If your expected return goes up, you employ more people. If it goes down you employ fewer. It has nothing to do with macroeconomic considerations in general, or Keynesian theories in particular.

    Those who would like more business activity, more and better paid jobs and more economic growth prefer lower taxes and lower government spending at any stage in the economic cycle.

    But why would such people care even more about lower taxes at a time when economic growth is low and jobs are scarce ? Because it is precisely at such times that the PROFITABILITY of expanding your business and employing more people (or hanging on to the business you have and retaining your current employees) is at its most marginal. Hence if the government is to do anything, the best thing it can do is to help increase the PROFITABILITY of businesses, and of employing people, by cutting taxes on business and employment (and cutting regulation) and the worst thing is to reduce the PROFITABILITY of business and employing people by increasing taxes (and regulation.) When there is a boom and jobs are plentiful, then it might be worthwhile to risk reducing the profitability of businesses and employment by increasing taxes, if there is some compelling public benefit from more government spending. Because at such times reducing the profitability of businesses is less likely to throw hundreds of thousands of people out of work, without any hope for getting a new job.

    So if you believe that Keynesian theories are nonsense - as I'm sure Cantor does - it is entirely logical and consistent to support lower taxes and spending at all times, but even more so when the expected return from employing people is low.

    The problem with Obama is that pretty much everything he has done, from his healthcare reform, to putting pro-union extremists on the NLRB, to promising the US's small business owners that their taxes will go up if he gets his way, to madcap greenie regulations - it all reduces the PROFITABILITY of employing people. The only surprising thing about the effect of this relentless coshing of job creators is that he and Messrs Benen and Chait are surprised by the results - a lack of new jobs on offer.

    It's not rocket science. It's elementary microeconomics. Why do liberals always skio that course ?

  • Chuck62 on July 09, 2011 5:00 PM:

    If Keynes were alive and well he would be advising a much different course of action than what people want to constantly call Keynesian. Unlike the people that go around incessantly invoking Keynes name the man himself analyzed each situation on its own merits. First off Keynes would have never supported prolonged, unsustainable spending by the central government.

    Secondly one of the drivers of his government deficit spending concept was that people in his day hoarded money during bad times. Today the converse is true. People are very over leveraged. Keynes would have seen that easy credit would do no good when a large number of people lacked adequate credit to borrow. Likewise government deficit spending would do very little to accelerate individual's deleveraging their personal balance sheets.

    If Keynes were alive today after he weighed these factors he would have recommended a substantial tax rebate to accelerate deleveraging. He would have known government spending would have been too slow and would not impact enough people to jump start the economy. He would have likely recommended a follow on program similar to the FICA holiday we now have.

    If you really read Keynes you understand that he favored a heavy governmental hand in a nation's economy. However, he was not a one dimensional parrot that prescribed deficit spending for every occasion. And yes, he would be recommending substantial spending cuts right now. He would have never favored the government spending such a high percentage of a nation's GDP.

  • Padre Mickey on July 09, 2011 5:15 PM:

    My goodness! Someone certainly sent out the flying monkeys!

  • tyson bam on July 09, 2011 5:15 PM:

    Benen makes the mistake of pretending money thrown into the economy by government is equal to money kept in the hands of earners.

    Money left to businesses can be used to pay people to work. Thus something is produced. Government pays people not to work.

    Our problem is businesses aren't hiring. Why aren't they hiring? Cause they have no idea how much a new employee will cost or how the new financial reform is going to affect them.

    Dems would rather pay people not to work than address the uncertainty they have thrust upon business owners of all sizes. That is the root of the problem.

    It would have been a great piece if the author actually knew what he was talking about.

  • JDComments on July 09, 2011 5:18 PM:

    Wow- an entire column predicated on a Progressive talking point- that cutting government spending is bad for the economy.

    Saying Cantor is essentially a hypocrite for advocating tax cuts as beneficial for the economy but at the same time demanding budget cuts is a ridiculous statement.

    Cutting taxes keeps money in the hands of the private sector which benefits economic growth. Deficit Government spending increases borrowing and taxes and interest rates and is bad for the private sector and the economy. Why is this so hard for Liberals to understand?

    Maybe you think we need more stimulus given the lousy jobs numbers? If so, remember how Einstein defined insanity, because it applies to you.

  • Mad Dog on July 09, 2011 5:20 PM:

    The delusion that liberals live under never ceases to amaze me. Go ahead, tax the rich - you'll run the current government for 3 months. We need an economy of growth that grows the number of tax payers. I know all of you seem to hate the rich and believe that you "deserve" what they have. Taxing and spending isn't the answer. Obama and the democratic Congress has massively increased our debt limit in two short years - and to what benefit??? Of course the Unions and his supporters got paid - but the economy is worse, jobs are dismal. STOP SPENDING - its the only answer.

  • Gary Ingold on July 09, 2011 5:31 PM:

    Mr. Benen states:

    "In the next breath, Cantor then argues that he also wants spending cuts, taking money out of the economy and putting it into the Treasury."

    "Do you see the disconnect? Well, you probably do, but the Majority Leader doesn�t."

    How do spending cuts take money out of the economy? Does the money just magically disappear? Why not rebate the money back to the taxpayers to put the money back into the economy?

    I see a disconnect in Mr. Benen's analysis.

  • Screamin' Demon on July 09, 2011 5:33 PM:

    You know you've touched a nerve when the Redstate wingnuts (none of whom have ever posted here before, and never will again) obey their masters and descend upon a blog posting 'cuz it hurts their delicate li'l fee fee to be told Eric Cantor is full of shit. My cocker spaniel understands more about economics than that slimy little shitheel.

  • Rob Razor on July 09, 2011 5:59 PM:

    OMG Regan raised taxes! Give me a break, taxes were 50% less when he left office. Speaking about increases during his tenure is a pathetic attempt at re-writing history. How stupid do liberal media think people are.

    That said I have to agree, cut spending will not stimulate jobs. Nor will it add to the coffers. The first 1.6 trillion in cuts, will only balance the budget. Which just shows how Royally f'ed we are.

    The way out of this mess is to lower taxes on everyone and reduce deductions to near zero. taxes are completely avoided by large corporations like GE. But they are paid at very high rates by the small businesses who make under 2 million. Which is ass backwards if you want growth.

  • MPK on July 09, 2011 6:21 PM:

    Michigan Republicans (who obviously missed the memo) just raised taxes on pensions. In the state hardest hit by the recession, they found that "shared sacrifice" was important in these hard economic times.

    Of course sharing sacrifice means that they cut corporate taxes by $1.8 billion to "create jobs". Gov. Snyder, when asked to provide evidence that the corporate tax cut would create jobs, could not cite any evidence.

    In Michigan, with the new Republican majorities in the house and senate and with a Republican governor, the losers are the elderly, public employees, and the poor. The winners are the corporations. Now there is a platform for them to run on for re-election!

  • Vic McCarty on July 09, 2011 6:28 PM:

    What a ridiculous piece. If tax hikes are wrong so are budget cuts? This is such a moronic position it makes me wonder why a professional established allowed it to be published.

  • Rocky on July 09, 2011 6:37 PM:

    Two observations...I've noticed how most liberals sink to name calling in their arguments...that says something profound. The second observation is this...liberals seem to believe that taking money out of one pocket and putting it into another (redistribution of wealth) somehow mysteriously generates wealth. Hmm, somehow I suppose these two observations are linked...

    [the preponderance of name calling has weighed heavily in the favor of conservatives by probably an order of 6-1 today. Well over a dozen comments have been deleted over a few threads that called either the blogger or liberals in general "imbeciles" "retards" "stupid" "Marxists" et al. many of these comments had literally no other content, just epithets and blind anger. nothing has changed in this regard since 2003 except the subject matter - which used to prompt epithets such as "traitor" and "terrorist-lover." the self-awareness of most our conservative guests has barely raised an inch over the years - mod.]

  • justme on July 09, 2011 6:38 PM:

    To validate your hypothesis, one must take for fact that there is no wasted, useless spending. Not sure anyone can say that.

  • Lee Moore on July 09, 2011 6:48 PM:

    There are countless studies showing lower taxes on business create jobs. No doubt there are also countless studies showing they don't - the political views of the researcher will have something to do with how the study is constructed and what conclusions are drawn. However, in addition to the countless studies there is also basic theory - taxes on business reduce the profitability of business. Hence people do less of it if taxes go up.

    Meanwhile higher taxes on pensions have much less of an effect on business activity. They will increase the price of labor to some extent because current workers will perceive a higher tax rate on their future pensions, but a lot of the burden will fall on those who are done laboring, and so higher taxes on pensions will have no effect on the quantity or price of current pensioners' labor (which will remain "not much" and "not much" respectively.)

    Whether you regard this as fair is a perfectly legitimate political question, but its fairness is irrelevant to the question of whether it is likely to help or hurt job creation. The short answer is that lower taxes on business and higher taxes on pensions are much more likely to help job creation than lower taxes on pensions and higher taxes on business.

    (The reason, Screamin' Demon, that you're getting comments from people with unfamiliar views, is that this article is linked on RealClearMarkets.)

  • Terraformer on July 09, 2011 7:48 PM:

    Wow, I wonder which right wing site so obviously sent out a decree for its minions to descend here spouting their crazy "logic"? Methinks they doth protest too much.

  • chris on July 09, 2011 7:57 PM:

    I think the difference is clear. The money government spends is taken from the people. The money people spend is made in market. Government takes money from people and spends it, while people earn money by providing a product or service and then they spend it.

  • Lee Moore on July 09, 2011 7:57 PM:

    Terraformer : "Wow, I wonder which right wing site so obviously sent out a decree for its minions to descend here spouting their crazy "logic"?"

    me (in the sentence immediately preceding Terraformer's comment) :

    "The reason, Screamin' Demon, that you're getting comments from people with unfamiliar views, is that this article is linked on RealClearMarkets"

    Methinks thou couldst benefit from turning from transmit to receive occasionally.

  • MRClinton on July 09, 2011 9:28 PM:

    What the author of this post and most responders here fail to understand is that not all jobs are created equal. The reason to cut government spending is that it is largely a waste of money.

    For example, let's say that the government pays one worked to sort paper alphabetically and another to randomize it. At the end of the day they switch stacks of paper and do the same the next day. Clearly nothing productive is being done, and yet there are two jobs created an commensurate GDP. This is precisely the problem with government spending - it artificially boosts a bunch of meaningless numbers without making the country any more prosperous.

    Cantor is right - reduce the influence of government. Government doesn't produce anything useful, private business does. The way to maximize private business is by reducing taxes and regulation - getting the government out of the way. Government spending is a waste of money that degrades our future prosperity (as we will simply print currency to escape our debt trap). Government spending doesn't create meaningful jobs or prosperity - the only solution is to reduce the footprint of government.

  • Johnson on July 09, 2011 9:30 PM:

    This article is pure comedy. Tax hikes hurt the economy, spending cuts prevent us from sending more of our money to China. It's really not that hard...

  • Lee Moore on July 09, 2011 10:57 PM:

    MRClinton : Good point on GDP counting. Counting a dollar of government spending as if it added a dollar to the real value of national output is about 75 cents out. But though as you say government spending is largely a waste of money, the "largely" does need to be emphasised. Government does produce some useful things - like national defense, policing, roads etc - though not very cost efficiently.

    As you say "not all jobs are created equal" but the distinction is not quite "private sector jobs = good, government jobs = bad." Jess Hansen got the distinction spot on, near the top of the comments. Private sector jobs are self sustaining. You don't have to keep propping them up with infusions of taxpayers money. Sure businesses go bust from time to time, but overall the private sector keeps on producing jobs on a self sustaining basis. Whereas government jobs - even useful ones - are always on taxpayer life support. They never sustain themselves. (When the government steps in and tries to save private sector jobs with taxpayers money, they cease to be real private sector jobs.)

    Hence when times are hard, the private sector can support fewer government jobs than when times are good. I'm trying to think of a polite word for parasites, but it escapes me. Government jobs are parasites on the private sector. Some of my best friends are parasites, but there's only so many of them that the private sector can support. Trying to generate a recovery by creating more government jobs (or government subsidised private sector jobs) is pedalling furiously in the wrong direction.

  • valwayne on July 09, 2011 11:28 PM:

    The logic isn't the same at all. Most of Obama's massive spending is just being wasted on massive inefficient government programs that are not creating any jobs. It may be saving some jobs, mostly government jobs that we can do without until the private business economy is better. The taxes on the other hand, and the threat of higher taxes will impact business, and/or scare the heck out of business and cause them to continue to hide their money under their beds rather than expand and hire. Reagan got it right in the early 80s when he cut taxes, and cut back the growth and cost of government. Reagan gave us a generation of prosperity! Obama has done everything wrong and he's given us 9.2% UNEMPLOYMENT and Record Long Term UNEMPLOYMENT, and everything is getting worse! Its gotten to the point that Obama appears to be a Jonah! Can anybody point to anything he's gotten right since he became President? I can't!

  • Voyager on July 10, 2011 1:05 AM:

    Dude, we're spending the stimulus money on things like Project Fast and Furious, where in we spent 10M to sell firearms to the drug cartels, and then don't bother to track them once they leave the country.

    There's a difference between stimulus spending, and lighting it on fire and sticking your head into it. Breaking windows don't increase prosperity; it just increases your broken window content.

  • MostlyRight on July 10, 2011 4:21 AM:

    There are few things sadder than a fool so convinced of his or her brilliance. Author, that's directed at you.

    I was once elected to an HOA board to repair the damage done by the previous HOA President...a crazy old lady with about a dozen cats. She had run the reserves in the community's account bare, and then illegally obtained a $40,000 loan on the Association's behalf to continue her style of "management". When she was so unceremoniously removed from her position, she stated "I've done nothing wrong...I increased our savings by $40,000 with that loan!". The rest of the Board and I just stared for a moment, dumbfounded, and then had her removed from Executive Session and went to work balancing the budget and putting our neighborhood association back on a path to health (without raising HOA dues!).

    Steve Bennen, you are Crazy Cat Lady.

  • Anonymous on July 10, 2011 5:45 AM:

    It would be a lot easier to accept conservative points of view on the economy as credible if the record of the previous administration were stronger on deficit reduction, job and income growth, tax reform, regulation, and basic administration of government (getting rid of the waste, fraud and abuse that everyone hates). These are all core items on the Republican agenda. Before you go blaming the Democrats in Congress, you can limit the discussion to the years Dems were in the minority in Congress. Did things get better for most Americans economically during those years? Did Bush's policies increase or decrease the deficit? Why or why not?

    I'm not looking to stir the pot. These are serious questions. How do conservatives today explain the economic record of the Bush years? Do you consider it a success, a failure, or somewhere in between? No name-calling, please. I am trying to raise legitimate questions, not rhetorical ones. I want serious replies. If your reaction is to say I need to read Econ 101, just skip it. (You have to realize that economists do not speak with one voice about anything. With enough assumptions in the model, I can make crazy cat lady seem like a mogul.)

  • yellowdog on July 10, 2011 5:57 AM:

    Sorry - Post by Anonymous at 5:45 should have come w/ my name on it.
    Also - I meant to add - Steve - you have been called out in many of the 70+ comments I've read as being functionally illiterate in economics, to borrow a phrase you once applied to Speaker Boehner. How do you respond to those charges? Do you need that copy of Econ 101? What credentials do you have to opine with such confidence on economic policy?

  • Mark Seeley on July 10, 2011 6:27 AM:

    What the business community needs right now is certainty. Spending cuts; tax hikes; how much of this or how much of that...the unknown effects of the passage of ObamaCare...oil prices gyrating wildly...now the Federal Government may default on the debt! Amidst this chaos businesses cannot plan, therefore they cannot expand and so it goes

  • Danny Ross on July 10, 2011 6:56 AM:

    Current political dogma on the Left is that all spending during the recession is good, and on the Right the dogma is that all tax increases are bad. Both have some element of truth, but as a prescription for helping the economy recover from they are like giving aspirin for a heart attack: A couple are helpful, but a bottle will kill you.

    IMHO, revenue needs to be raised on the very wealthy - the wealthiest 1% own on the order of 34% of all wealth in the USA, and the wealthiest 20% own on the order of 85% - on the principle that those who own a property should pay for its upkeep. I don't particularly care how the revenue is raised, except that it should not discourage hiring, which the current system does. On the other hand, spending borrowed money to build productive infrastructure in the USA is a good idea, but spending borrowed money for current expenses is not. Having a shortfall of 43% in the current fiscal year - 2011 - is INSANE.

  • PeterfromNH on July 10, 2011 7:28 AM:

    This stupid spin that anything less than a 100% tax is an entitlement is like a bank robber arguing in court that he is actually a hero because he didn't take all the money.

    It is not government money! The money is there because individuals earned it and the government took it. When I grew up taking something that was not yours and you didn't earn was stealing. The last time I checked, spending money that you stole is illegal.

    You must have to go to school for a lot of years to unlearn something so simple.

    I understand some people need a hand but no way 50% of the people take from the other 50%.

  • John Hatfield on July 10, 2011 7:29 AM:

    The Dems will never get it, the tax rate at the upper end is already 38%!! We have a spending problem, not a tax problem, if anyone should paymore in tax it would the 50% of the public that pay no federal tax now, not the ones paying 38%.

  • Gary Ingold on July 10, 2011 7:52 AM:

    To Anonymous:

    You are right; the spending record of the Republicans under the Bush administration was atrocious! This is what the Tea Party is all about - trying to restore some fiscal sanity to our elected officials in Washington, both Republicans and Democrats!

  • Anonymous on July 10, 2011 8:18 AM:

    yellowdog - you're quite right that Bush's performance on government spending was utterly miserable. He left office with an approval rating of about 20%. You don't get down that low on the hatred of your political opponents - you have to piss off a lot of your political allies too. The only reason there is a Tea Party at all is because small government people are so pissed off with the GOP. Bush and the GOP spent far too much when they were in control. When the Dems took control of Congress in 2006 and started churning out even bigger budgets, Bush should have vetoed them. But for some reason he didn't like using his veto. You can;t really call Bush a RINO, but he was certainly the sort of establishment Republican that the Tea Party has had enough of. And the only reason that the Congressional GOP hasn't (yet) caved in the debt and deficit negotiations is that they fear primary challenges from real conservatives.

    So to answer your question - the economic record of the Bush years is mostly failure. Tax cuts good. Spending gone wild bad. Doing nothing about the debt bubble bad. It's easy to see why he did all this - cutting spending and deflating bubbles when there isn't a crisis is pretty much politically impossible. But every mistake Bush made, Obama has doubled down on.

    Mark Seeley : certainty is nice, but seldom available. It's true that arbitrary government is a particularly nasty form of uncertainty for businesses, but I think it's a mistake to say that the reluctance of businesses to hire is primarily about uncertainty. If businesses were uncertain about whether their taxes were going to be cut to 20% or to 10%, tax uncertainty would not hold them back from hiring. The real problem is that pretty much everything Obama has dome has been bad for businesses which might hire new workers - ie making business less profitable. Sure businesses don't know how much Obamacare is going to increase their costs, but the problem is not so much the uncertainty of how much more expensive labor is going to be, but the certainty that it is going to get more expensive.

    Danny Ross ; "IMHO, revenue needs to be raised on the very wealthy - the wealthiest 1% own on the order of 34% of all wealth in the USA, and the wealthiest 20% own on the order of 85% - on the principle that those who own a property should pay for its upkeep"

    Hoover had the same idea, increasing the top tax rate from 25% to 63%. The result was not pretty. In fact the Obama administration seems to be not so much a second Carter administration, but a second Hoover administration. (Hoover also greatly increased federal spending.)

    Incidentally, the (moral) justification for higher taxes on the rich that "those who own a property should pay for its upkeep" doesn't fly. Per unit of property or income, the rich pay much more in tax than the poor. If you want taxes to be a fee for the government's services in protecting your property, you would go for flat taxes, which would involve the rich paying lower rates than they do now. Moreover you'd also have to eschew taxing income and gains from non US property, where the US does not provide any property protection services.

  • john boclar on July 10, 2011 8:27 AM:

    Others have demolished this silly article, with its glaring error about spending cuts putting more money in the treasury. But there is a kernel of truth in the article. It is absolutely true that spending cuts, like tax increases will hurt the economy. They directly funnel into a reduced GDP number. The problem is we are in a predicament where there are no good answers. The question is only: which will hurt the economy less. Our looming debt crisis makes it imperative to reduce spending, or we become Greece. Its not a question of good or bad, as the article so simplistically posits. It is a simple matter of the lesser of two evils, and we need to choose which evil.

  • Mark Timm on July 10, 2011 8:49 AM:

    It's pretty simple, you either believe that socialism, the gov't directed economy, or free markets are the best system to live under. Some like to use he gov't power to live off other people's labor and others prefer to provide for themselves. Serfs or free men? I choose liberty and freedom. The left has no rational arguements supporting their position, so all they can do is demonize those that disagree with them.

  • Legalize on July 10, 2011 9:55 AM:

    The Moderator comments that the conservative posters are the name-callers, not liberals.

    The problem is that liberals consider terms such as "socialist" and "Marxist" to be name calling. These are descriptive terms of economic philosophy.

    He then goes on himself to insult conservatives, snarking that they aren't self-aware. HAHAHAHA!

    P.S. The Moderator basically calls conservatives stupid for not knowing that he is (correctly and appropriately) censoring other conservatives who are posting insults. Nor does it occur to him that the problem is that he does not censor the libs, as in "Eric Cantor is full of shit".

    * * * * *

    "[the preponderance of name calling has weighed heavily in the favor of conservatives by probably an order of 6-1 today. Well over a dozen comments have been deleted over a few threads that called either the blogger or liberals in general "imbeciles" "retards" "stupid" "Marxists" et al. many of these comments had literally no other content, just epithets and blind anger. nothing has changed in this regard since 2003 except the subject matter - which used to prompt epithets such as "traitor" and "terrorist-lover." the self-awareness of most our conservative guests has barely raised an inch over the years - mod.]"

  • AlanP on July 10, 2011 12:46 PM:

    Wrong. There is a major difference between putting money into the treasury through taxes and putting money into the treasury through spending cuts. Taxes take money out of the PRIVATE sector. Spending cuts takes money out of the PUBLIC sector. That's the whole point. As everyone knows, when we trust the public sector with the economy, we end up with disastrous programs like Cash for Clunkers, and subsidies for non-profitable operations. The private sector is what will boost the economy. People spend money more wisely when it is their own money, unlike the government which spends inefficiently, into a massive debt crisis.

    That is why I support Herman Cain for president - he's the candidate that most clearly understands how the economy works.

  • MostlyRight on July 10, 2011 12:59 PM:

    My post at 4:21am did name call and directly call out the author in a way I rarely do (Crazy Cat Lady, fool convinced of his brilliance...harsh,yes). The moderator let that pass, perhaps because of the contextual story. I just woke up to find the IPad on the same comment page, and have enjoyed reading the later comments. With a decent 6 hrs sleep I'm a bit less nasty.

    Yellowdog, your response was fair and I agree...in the classroom I could make Crazy Cat Lady sound like a mogul too. (real C.C.L. happened to be a tenured Arizona State University prof, as an interesting aside). I've spent much of my career in the university (architecture, engineering and business) and understand well the power of theory. The last 20 years I've spent building and managing real businesses, with the attached responsibility of real budgets and real employees jobs and corresponding family financial security at stake. Like the fantastical works of architecture I used to design in graduate studio that I would later learn could never be built in the real world due to physics or economics or material properties, the business plan of spending borrowed money as leverage to multiply dollars is seen in every MBA class but is full of immense risk in the real world. You ask that no one respond with "take Econ 101", but it really is almost that simple. I think some of the anger in the comments (that not derived from pure political postings) comes from an exasperation of those readers who stumbled here from the RealClearPolitics link at the author's fundamentally flawed argument written in such a snidely confident manner. I don't know the author, and maybe the regular readers of this blog have seen better from him, but this article rubbed me the wrong way.

    As for the politics...I am not the guy to defend GWB. I personally wrote in my own candidate's name in each of his elections...mainly because I have a strong aversion to family dynasty candidates...a personal pet peeve. I would only add a few things. One, while Presidents have the megaphone/pulpit/spotlight and veto pen, Congress really does control the purse strings. This is pertinent to understanding the political influence on the economy whether it be Reagan's 8 years battling a Dem Congress, Clinton's policies in his early years (failed HillaryCare) with a Dem Congress vs. his triangulation/welfare reform policies after the Contract with America Rep Congress swept into office, Bush's 6 years of Rep control of Congress vs. 2 final years of the Pelosi/Reid budgets, and the recent Obama plus Pelosi/Reid spending deficits and resulting Tea Party backlash in 2008. As big policies connected to political ideology go, I'd argue positives to the economy include Clinton's welfare reform (which would not have been without Newt Gingrich's Congress) and the net benefit of the Bush tax cuts (not just the cuts for "the rich"). Negatives from an economic perspective would include the attempted HillaryCare and current ObamaCare, Bush's stabs at "compassionate conservatism" (adding a new Medicare entitlement), Bush in Iraq and Obama in Libya (or Clinton in Bosnia for that matter), Obama's Stimulus, Quantitative Easing I and II, GM bailout, Cash for Clunkers/new home buyer credits, and both parties incentivizing an unhealthy lending culture leading to the current real estate crash recession (more of Bush's Compassionate Conservatism through a well intentioned "ownership society" and Barney Frank, Chris Dodd and company's progressive lending mandates to disregard Econ 101 lending practices and removing private bank's resulting risk through the use of Fannie/Freddie.

    Second, regarding Bush's terms specifically, I would add as defense of policies the context that just as Obama "inherited Bush's mess", Bush "inherited" a recession resulting from a crashing Internet bubble fostered during Clinton's two terms and "inherited" 9/11 from Clinton's 8 years of either ignoring or responding weakly to the emergence and threat of Islamic Radicalism. I would task the reader to check the unemployment rate and deficit spending once the Contract with America Republican Congress redirected Clinton's policy path or at the end of year six of Bush's time with a Republican Congress, despite the Internet Bubble recession and 9/11 economic hit vs. the unemployment rate and deficit spending in Bush's last year with the budgets handed him by Pelosi and Reid, or even worse, the unemployment rate and deficit spending of Obama's first two years with a Dem Congress. What I'd give for the unemployment rates and deficits of Bush back in late 2003, when the New York Times was telling us how terrible 4% unemployment was, in an attempt to nudge us towards John Kerry.

    The truth is, we do have a spending problem, and this problem comes from the history of both party's refusal to deal with it, as spending money and promising benefits to prospective voter bases is far more easy than trying to sell voters on the harsh reality of reality and the corresponding pain when uncinate promises must be broken and benefits we have been told are our "Rights" are pulled away. We can't afford the entitlements that have been promised because they are truly unfunded, at numbers that are incomprehensible. The question then is can we somehow fund them? We cannot, as the tax base does not exist unless you are willing to go far, far beyond the "rich" 250K+ earners, and we are at the end of our ability to borrow or print our way out of facing reality. Funding only comes from taxing (which no one likes but is necessary to a reasonable point), borrowing (worse, as you will have to repay plus interest from future funding sources), and with the miracle/wolf in sheep's clothing of the unique American currency situation, simply print more money as funding (the worst, as each dollar printed devalues each previous dollar). Those realists who find ourselves the adults of our moment in history need to shift our attention to what has come of our political/economic situation, take the reins from the ideologues and political children who make their living buying political bases with other people's money, and become the next Great Generation...and Great Generations are defined by the sacrifices they willingly take on. The rich will have to give more, but so will the middle class...and the poor will have to receive less and work harder. Higher expectations of and increased responsibility from all.

  • Lee Moore on July 10, 2011 1:14 PM:

    Legalise : "P.S. The Moderator basically calls conservatives stupid for not knowing that he is (correctly and appropriately) censoring other conservatives who are posting insults. Nor does it occur to him that the problem is that he does not censor the libs, as in "Eric Cantor is full of shit". "

    Yes, it is a rather non self aware comment from the moderator. A quick skim through the comments that did make it past the moderator reveals the following :

    "Cantor is a vile disgusting human being, NOW he's back spitting out his stupid talking points,

    He's arrogant and dumd. Just about any interviewer could flummox this dweeb

    his corporate masters will drop him from a very high cliff. The splat that he will make when he falls will be suitably small

    As Kathryn put it yesterday: Cantor is "smug and dumb".

    Cantor doesn't know what the hell he is talking about and he doesn't care that he doesn't know. He's a perfect repuke

    My goodness! Someone certainly sent out the flying monkeys!


    You know you've touched a nerve when the Redstate wingnuts (none of whom have ever posted here before, and never will again) obey their masters and descend upon a blog posting 'cuz it hurts their delicate li'l fee fee to be told Eric Cantor is full of shit. My cocker spaniel understands more about economics than that slimy little shitheel. "


    Still it is not for us humble visitors to object to how the moderating is done - no proper conservative ought to complain about the private owner of a magazine or blog behaving exactly as he/she pleases on his/her own turf. If a liberal blog doesn't like conservative comments enlivening its pages then it is quite at liberty to remove them, whether they are rude and childish, or polite and learned.

  • yellowdog on July 10, 2011 5:09 PM:

    MostlyRight on July 10, 2011 12:59 PM:

    I appreciate your substantive and fair-minded response. I like the common-sense, hard-headed approach you take, as well as the fact that you understand that serious real-world consequences follow from every decision the country makes about public policy. It is unfortunate that so much of our country's political debate has lost these qualities. We need the guidance of our heritage, our intellect, and our best values in the shaping of policy--yet our 'leaders' seem to cede one or more these things at the first opportunity. It has become a daily exchange of self-satisfied snark. Liberals and conservatives seem to start at very different points, talk past each other, and then take some pride in being misunderstood or villified by the other side. That rules out the possibility of any constructive engagement whatever. It leads to sloppy thinking, repetition of tired, anachronistic arguments, personalization of politics--a need to repeat arguments louder and louder rather than make them substantively better. Does that really do anyone any good? Cheap, cliche-ridden thinking? Inability to consider points of view beyond where you started? Inability to admit internal weakness and inconsistency in one's point of view? Unwillingness to see humility as a virtue? Inability to think through tough problems and reach a solution? We have come to the point of celebrating insularity--whether it is the insularity of crazy-cat-lady professors or right-wing zealots.

    I am greatly heartened by your response. I do not agree with a lot of what you said. I see things with a different slant than you do, but I am not closed-minded enough to think I have all the answers or that I need only the wisdom of people who already think like I do. I am very glad that, in 2011, it is still possible for people who disagree to do it in a fair-minded, informed way--and in fact, to have a real conversation.

    I have not tossed out my Econ 101 books--but I am mindful that all the answers are not there. As soon as you can get Warren Buffett, Alan Greenspan, and Paul Krugman to agree on the 'basics' of macroeconomics, I'll have a rethink about it.

  • Doug on July 10, 2011 9:39 PM:

    Sorry guys, you can TRY to sound reasonable and all, even pretending that GWB's spending was upsetting to your "conservative" sensibilities, but it won't wash.
    Not ONE mention by any of you "serious" conservatives about increasing taxes reduces your credibility to nil. The failure to grasp Keynesian economics just adds to the embarassment.
    One poster referred to the large number of unemployed still around FIVE years after the New Deal had commenced. He failed to note that number was still a vast DECREASE from 1932, nor was it mentioned that there was increase in the unemployment rate directly AFTER stimulus spending was cut in 1937. Cut, I might add, for the same reasons many are so fanatic about cutting spending now, to balance the budget.
    Just as a household might rely on the intelligent usage of credit card debt during a short period of economic hardship, the nation can, and should, rely on deficit spending during economic downturns, especially one as long or severe as the current one.
    True, GWB DID run up an incredible amount on the national charge card - two wars, two tax cuts mostly benefiting the rich and Medicare Part D, quite an amount. Amazingly enough, the number of Republicans who OPPOSED such profligacy at the time can be counted on the fingers of both hands.
    In other words, you people are nothing but a bunch of hypocrites. You said absolutely nothing while all the bills were being run up; you were, in fact, only too willing to countenance accounting practices illegal in business by not including items in the regular budget.
    Of course, there WAS a Republican in the White House, maybe THAT was the difference?

  • Lee Moore on July 10, 2011 11:43 PM:

    Doug : Not ONE mention by any of you "serious" conservatives about increasing taxes reduces your credibility to nil.

    Huh ? There have been lots of comments from conservatives about increasing taxes - to the effect that it would be a bad idea. Do you mean that in order to be credible you have to think increasing taxes is a good idea ? Wouldn't that just make you a liberal rather than a credible conservative ?

    The failure to grasp Keynesian economics just adds to the embarassment

    Huh again. The point of the original article was that Mr Cantor was allegedly confused - if he supported tax cuts now, he must be a Keynesian. But if he was a Keynesian he should oppose spending cuts. Since he wants lower taxes and lower spending, and is - allegedly - a secret Keynesian, he must be an idiot.

    But as lots of people have pointed out there is an alternative theory that is entirely consistent with the known facts. Mr Cantor is not a Keynesian and supports lower taxes for non Keynesian reasons. Indeed most conservatives do not subscribe to Keynes's theories. Not because they don't understand them, but because they don't agree with them.

    In the same way, you may disagree with classical economic views, but if you do, that doesn't automatically mean you don't understand them. But whether you understand them or not, the reason why you have read a lot of comments from conservatives on this thread is that the journalist who wrote the article genuinely did leave the impression that he disagrees with classical economic views, without appearing to understand them.

    By the way, if you want to go back to the 1930s for lessons, a good one would be to compare the record of the US which tried Keynesianism big time and got a long slow Depression, and the UK which stuck to boring classical policies of thrift and retrenchment and got a much quicker recovery.

  • MostlyRight on July 11, 2011 1:15 AM:

    Thanks yellowdog. As my name suggests, I'd never consider myself to be right about everything...just most things ;-)

    I'd love to hear your opinion of the author's statement that spending cuts would remove money from the economy and put it in the Treasury, when the budget in each of Obama's first three years have over one trillion in deficit vs. actual tax revenues. Also, your thoughts on a real, common sense, no loopholes balanced budget amendment? If you are for one, I know the Conservative side has wanted one since it failed twice in Congress by one vote decades ago. Maybe a beer summit would be in order, we could start a movement, and force the hands of our public servants from both sides of the political spectrum. We'd have them surrounded and at our mercy! A man can dream...

  • yellowdog on July 11, 2011 1:55 AM:

    One thing we ought to understand about Hoover and his advisers and the conventional wisdom of September 1929 is that neither they, nor anyone else, had any idea how to understand or explain what hit them in October 1929. Nobody did. It was not supposed to happen. There were lots of theories from very learned and business-savvy people, plenty of assurances that the problems were temporary and the economy would soon correct. They had legitimate reason to believe it would; they clung to the economic-policy path that had served them well for a decade or so--balanced budgets mainly--years when Hoover and Treasury Secretary Mellon ranked as two of the most admired people in the world for their understanding of economic matters.

    You might think that FDR roared into office with Keynes in his pocket and everything was clear as day for him. No - quite the opposite. FDR had a long time to think about it before he took office, but he didn't have a lot of sure-fire new answers to revive the economy either--except that he had to try something. You might say he tried Keynesianism 'big time' - but he tried a lot of things before Keynes, and during Keynes. He improvised. He started and stopped. He was torn between conventional explanations and more novel ones, from Keynes and others. FDR kept talking balanced budgets in much the same way Hoover had, but then he backed off and ripped into Hoover anew for loving economic royalists. Nothing seemed clear. The old rules of the economy (balanced budgets and the like; self-correction of markets) were supposed to keep rockslides like 1929-1933 from happening. Why didn't they?

    Ever since, there have been great arguments about this period. Was FDR 'right' or 'wrong'? Did he make things better or worse? All fair questions - but I make the observation that there is perhaps a great deal more grey in matters economic than most people realize. Every decision is a decision with substantial uncertainty. Models and theories, however fine, go only so far when they have to be applied to real-world situations.

    How many times in history have we had cause to realize how little we really know? We flatter ourselves when we think we've got it all figured out. Just when we think we do, Bang! It's that end-of-6th-Sense kind of moment that makes you feel like a total moron for not seeing the obvious. God help us - we need to be caught up short like that more often. We're not quite as smart as we like to think we are. Confidence is the least reliable of indicators.

  • Lee Moore on July 11, 2011 10:49 AM:

    Morning yellowdog

    I agree that the economic conditions of 1929 onwards would have seemed unfamiliar to Hoover, and that he was feeling his way. As indeed Roosevelt did later. But there was much more of a continuation of macroeconomic policy from Hoover to Roosevelt than is usually appreciated. Hoover certainly didn't stick to traditional balanced budget policies :

    http://www.theatlantic.com/business/archive/2011/07/hoover-was-no-budget-cutter/241665/

    According to the historical tables of the Office of Management and Budget, spending in 1929 was $3.1 billion, up from $2.9 billion the year before. In 1930 it was $3.3 billion. In 1931, Hoover raised spending to $3.6 billion. And in 1932, he opened the taps to $4.7 billion, where it basically stayed into 1933 (most of which was a Hoover budget). As a percentage of GDP, spending rose from 3.4% in 1930 to 8% in 1933

    So federal spending up nearly 50% in nominal money terms in four years, much more than that in real inflation adjusted terms (as inflation was negative) and spending more than doubled as a proportion of GDP.

    He also increased the top income tax rate from 25% to 63%. (Roosevelt increased it again to 79% in 1936.)

    See

    http://www.cato.org/pubs/tbb/tbb-0303-14.pdf

    This is hardly clinging to the economic path that Republican Presidents had pursued in the 1920s. Coolidge would have been spinning in his grave at Hoover's policies. Moreover Coolidge would not have agreed that 1929 et seq was completely virgin economic territory. There had been depressions before which had been seen off by conventional laissez faire policies.

    It is possible however to get over hung up on macroeconomic policy. A lot of the more serious problems with Roosevelt's policies were to do with microeconomics - regulations, trying to hold up the price of labor, sudden and capricious changes in policy, protection, high tax rates and so on. And some of those policies had been started or foreshadowed by Hoover.

    Hoover was not a laissez faire President. (See Coolidge for a real one.) Hoover was a successful businessman who went into government as a "man of action." And that was the philosophy he brought to government. The very last thing on his mind was to leave things alone and let them sort themselves out.

    I think Coolidge would have dealt with 1929 much better than Hoover. But we'll never know. More troubling for those who think like me, however, is how Obama's policies seem to echo the microeconomic mistakes of the Hoover and Roosevelt administrations. We really don't want this to go on for a decade or more.

  • m peeler on July 11, 2011 10:51 AM:

    Where exactly is Mr Cantor's district? I have a bridge in the middle of the desert that i need to get rid of. Oughtta be easy pickin in that part of the world, i'll just tell them i'm a Republican and they'll believe anything i say after that :)

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