Can Trump Turn The Fed Into A Bastion Of Trumpnomics-- Enough To Make The Coming Recession Into A Depression?

When Trump nominated crackpot Stephen Moore for a spot on the Fed, I was shocked. That's even a crazy move for Trump. What was I missing? I asked the smartest economist I know, Stephanie Kelton. All she would say is that "It’s not an inspired choice, to say the least. Paul McCulley would have been an inspired choice." Conservative economist Greg Mankiw was considerably more forthcoming on his thoughts about the nomination.

Mankiw isn't famous because he teaches economics at Harvard, though he does. He's famous because he worked for both Bush-- for whom he served as chairman of the Council of Economic Advisors-- and for Mitt Romney. In 2011, while he was advising Romney and teaching at Harvard, dozens of students walked out of his lecture and went to a Occupy Wall Street demonstration, handing him an open letter on the way out:

Today, we are walking out of your class, Economics 10, in order to express our discontent with the bias inherent in this introductory economics course. We are deeply concerned about the way that this bias affects students, the University, and our greater society.

As Harvard undergraduates, we enrolled in Economics 10 hoping to gain a broad and introductory foundation of economic theory that would assist us in our various intellectual pursuits and diverse disciplines, which range from Economics, to Government, to Environmental Sciences and Public Policy, and beyond. Instead, we found a course that espouses a specific-- and limited-- view of economics that we believe perpetuates problematic and inefficient systems of economic inequality in our society today.

A legitimate academic study of economics must include a critical discussion of both the benefits and flaws of different economic simplifying models. As your class does not include primary sources and rarely features articles from academic journals, we have very little access to alternative approaches to economics. There is no justification for presenting Adam Smith’s economic theories as more fundamental or basic than, for example, Keynesian theory.

Care in presenting an unbiased perspective on economics is particularly important for an introductory course of 700 students that nominally provides a sound foundation for further study in economics. Many Harvard students do not have the ability to opt out of Economics 10. This class is required for Economics and Environmental Science and Public Policy concentrators, while Social Studies concentrators must take an introductory economics course-- and the only other eligible class, Professor Steven Margolin’s class Critical Perspectives on Economics, is only offered every other year (and not this year). Many other students simply desire an analytic understanding of economics as part of a quality liberal arts education. Furthermore, Economics 10 makes it difficult for subsequent economics courses to teach effectively as it offers only one heavily skewed perspective rather than a solid grounding on which other courses can expand. Students should not be expected to avoid this class-- or the whole discipline of economics-- as a method of expressing discontent.

Harvard graduates play major roles in the financial institutions and in shaping public policy around the world. If Harvard fails to equip its students with a broad and critical understanding of economics, their actions are likely to harm the global financial system. The last five years of economic turmoil have been proof enough of this.

We are walking out today to join a Boston-wide march protesting the corporatization of higher education as part of the global Occupy movement. Since the biased nature of Economics 10 contributes to and symbolizes the increasing economic inequality in America, we are walking out of your class today both to protest your inadequate discussion of basic economic theory and to lend our support to a movement that is changing American discourse on economic injustice. Professor Mankiw, we ask that you take our concerns and our walk-out seriously.

His fame increased when he announced on CNBC that he wouldn't vote for Trump in 2016. On his blog he explained in more detail why he wouldn't vote for the Republican candidate for president:

I have Republican friends who think that things couldn't be worse than doubling down on Obama policies under Hillary Clinton. And, like them, I am no fan of the left's agenda of large government and high taxes. But they are wrong: Things could be worse. And I fear they would be under Mr. Trump.

Mr. Trump has not laid out a coherent economic worldview, but one recurrent theme is hostility to a free and open system of international trade. From my perspective as an economics policy wonk, that by itself is disqualifying.

And then there are issues of temperament. I am not a psychologist, so I cannot figure out what Mr. Trump's personal demons are. But he does not show the admirable disposition that I saw in previous presidents and presidential candidates I have had the honor to work for.

I don't get the feeling he intends to vote for Trump in 2020 either. On Friday he wrote that the only good thing he credited Trump with, in his opinion, "making good appointments to the Fed.... Jay Powell, Rich Clarida, and Randy Quarles. Then today the president nominates Stephen Moore to be a Fed governor. Steve is a perfectly amiable guy, but he does not have the intellectual gravitas for this important job. If you doubt it, read his latest book Trumponomics (or my review of it). It is time for Senators to do their job. Mr. Moore should not be confirmed."

Moore wrote the universally panned book with Arthur Laffer and Mankiw's review for Foreign Affairs was titled Snake-Oil Economics-- The Bad Math Behind Trump’s Policies. Moore and Laffer, he wrote, presented their findings in the voice of "rah-rah partisans... who do not build their analysis on the foundation of professional consensus or serious studies from peer-reviewed journals. They deny that people who disagree with them may have some logical points and that there may be weaknesses in their own arguments. In their view, the world is simple, and the opposition is just wrong, wrong, wrong. Rah-rah partisans do not aim to persuade the undecided. They aim to rally the faithful." He feels that their "over-the-top enthusiasm" for Señor Trumpanzee's "sketchy economic agenda is not likely to convince anyone not already sporting a 'Make America Great Again' hat." 

Moore and Laffer served as economic advisers to Trump during his campaign and after he was elected president (along with Larry Kudlow, the current director of the National Economic Council, who wrote the book’s foreword). From this experience, Moore and Laffer apparently learned the importance of flattering the boss. In the first chapter alone, they tell us that Trump is a “gifted orator” who is always “dressed immaculately.” He is “shrewd,” “open-minded,” “no-nonsense,” and “bigger than life.” He is a “commonsense conservative” who welcomes “honest and fair-minded policy debates.” He is the “Mick Jagger of politics” with a contagious “enthusiasm and can-doism.”

The authors’ approach to policy is similarly bereft of nuance. In Chapter 3, they sum it up by proudly recounting what Moore told Trump about U.S. President Barack Obama during the campaign: “Donald, just look at all the things that Obama has done on the economy over the past eight years, and then do just the opposite.”

It is hard to imagine more simplistic, misguided advice. To be sure, Moore and Laffer can reasonably hold policy positions and political values to the right of those of Obama. (As someone who chaired the White House Council of Economic Advisers during the George W. Bush administration, so do I.) But the Obama administration was filled with prominent economic advisers who were well within the bounds of mainstream economics: Jason Furman, Austan Goolsbee, Alan Krueger, Christina Romer, and Lawrence Summers, to name but a few. It is not tenable to suggest that with all this talent, the administration made only wrong decisions, and that they were wrong simply because those who made them were Democrats.

The tribalism of Moore and Laffer’s approach stems primarily from their devotion to a single issue: the level of taxation. Obama pursued higher taxes, especially on higher-income households. His goal was to fund a federal government that was larger and more active than many Republicans would prefer and to use the tax system to “spread the wealth around,” as he famously told Joe Wurzelbacher, known as Joe the Plumber, a man he encountered at a campaign stop in Ohio in 2008. By contrast, Moore and Laffer want lower taxes, especially on businesses, which in their view would promote faster economic growth.

The debate over taxes reflects a classic, ongoing disagreement between the left and the right. In 1975, Arthur Okun, a Brookings economist and former adviser to President Lyndon Johnson, wrote a short book called Equality and Efficiency: The Big Tradeoff. Okun argued that by using taxes and transfers of wealth to equalize economic outcomes, the government distorts incentives-- or that, to put it metaphorically, the harder the government tries to ensure that the economic pie is cut into slices of a similar size, the smaller the pie becomes. Based on this argument, the main priority of the Democratic Party is to equalize the slices, whereas the main priority of the Republican Party is to grow the pie.

Yet Moore and Laffer aren’t willing to admit that making policy requires confronting such difficult tradeoffs. Laffer is famous for his eponymous curve, which shows that tax rates can reach levels high enough that cutting them would yield enough growth to actually increase tax revenue. In that scenario, the tradeoff between equality and efficiency vanishes. The government can cut taxes, increase growth, and use the greater tax revenue to help the less fortunate. Everyone is better off.

The Laffer curve is undeniable as a matter of economic theory. There is certainly some level of taxation at which cutting tax rates would be win-win. But few economists believe that tax rates in the United States have reached such heights in recent years; to the contrary, they are likely below the revenue-maximizing level. In practice, the big tradeoff between equality and efficiency just won’t go away.

Trumponomics is full of exhortations about the importance of economic growth. Why, Moore and Laffer ask, should Americans settle for the two percent growth that many economists have been projecting? Wouldn’t every problem be easier to solve with a more rapidly expanding economy? The book quotes Trump as claiming, when announcing his tax plan in December 2017, that it would not increase the budget deficit because it would raise growth rates to “three, or four, five, or even six percent.”

The authors offer no credible evidence that the tax changes passed will lead to such high growth. Most studies yield far more modest projections. The Congressional Budget Office estimates that the Trump tax cuts will increase growth rates by 0.2 percentage points per year over the first five years. A study by Robert Barro (a conservative economist at Harvard) and Furman (a liberal economist at Harvard) published in 2018 estimates that the tax bill will increase annual growth by 0.13 percentage points over a decade. And that is if the changes are made permanent. Barro and Furman estimate that as the legislation is written, with many of the provisions set to expire in 2025, it will increase annual growth by a mere 0.04 percentage points over ten years.

It is conceivable that standard economic models underestimate the impact of tax cuts on growth. A research paper by the economists Christina Romer and David Romer published in 2010 examined historical tax changes and found that they had larger effects on economic activity than standard models suggest. (It is worth noting that these two authors’ political leanings are left of center, so their findings are not the result of ideological taint.) One might reasonably argue that Trump’s tax cuts will increase growth over the next decade by as much as half a percentage point per year. But that is a long way from the one- to four-percentage-point boost that the president and his associates have bragged of, and that Moore and Laffer quote without explanation, caveat, or apology.

...Perhaps the most disappointing aspect of Trumponomics is the long list of crucial issues on which the authors are largely silent. They offer no cogent plans to deal with global climate change, the long-term fiscal imbalance from growing entitlement spending, or the increase in economic inequality that has occurred over the past half century. Many reasonable Republicans would support a tax on carbon emissions, for example. Such a policy would slow climate change by incentivizing the movement toward cleaner energy, as well as provide revenue that could be used to close the fiscal gap or to help those struggling at the bottom of the economic ladder.

Rather than suggesting coherent policies, Moore and Laffer seem to hope that a much more rapidly growing economy will provide the resources to address all these problems, and they seem to believe that this growth will follow ineluctably from the lower taxes and deregulation that lie at the heart of Trump’s agenda. It would be wonderful if that were possible. Maybe rah-rah partisans really believe it is. But more likely, it is just wishful thinking. Trump appears eager to avoid most of the economic problems facing the nation. By banking on so much growth from cutting taxes, Moore and Laffer are, in effect, giving him a pass and kicking the can down the road to a future leader more interested in confronting hard policy choices.

Are there enough Republicans in the Senate with enough good sense and courage to deny Moore his confirmation? I doubt it. In fact, it's probably more likely that Kyrsten Sinema and Joe Manchin vote to confirm that it is that more than one or two Republicans vote not to, even though some Republicans have been grumbling about Moore's column advocating that Trump fire Fed Chair Jay Powell (a Trump appointee who, like so many, Trump quickly soured on).

Midnight Meme Of The Day

-by Noah

What! You haven't had enough of the Republican Party's "Trickle Down Economics?" Well, as Repug icon Ronald Reagan would say, "there you go again." Now that Paul Ryan and his House of Lunatics are back in session, they are planning on what they cynically refer to as "tax reform." Why? Because pirates like Trump and Ryan stand to personally gain, both in income and campaign contributions (bribes). The better deal that Ryan, the psychotic Ted Bundy of politicians, can get on changing our tax code to benefit his benefactors, the more he stands to get from his masters at Koch Industries.

It was a senile Reagan who gave us the "trickle down" and his now Trump-led party wants more of the same, and, you know Trump gets excited when he hears those words because pissing on the bottom 99% is what "Trickle Down Economics" is all about. Ryan talks about liberal takers but the biggest takers in our country are not the blue states. The biggest takers of federal tax monies are the red states, and that's where you'll find some of the worst poverty you could ever imagine this country having. I remember an interview with Magic Johnson that shows up on TV sports channels from time to time. In it, he talks about how he thought no one grew up poorer than he and his neighbors in LA's South Central, until he went to visit with his good friend Larry Bird who showed him a tour of rural Indiana. My, my, where does the money go?

The saddest thing about it is that the people who were most hurt by Reagan's crackpot or voodoo economics and tax "theories" are the ones who voted for con artists like Trump and Ryan. Those voters are so masochistic that they will just keep on doing it until they starve to death for lack of money to even buy food or bullets to hunt it.

Republican politicians and their media mouthpieces love to talk about growing the economy by reducing taxes. The naive think they are talking about the national economy and not the personal economy of the proponents of the trickle down. They've been brainwashed by all sorts of trash about how lower taxes for the wealthy and corporations will result in more investment. Yes. It does lead to more investment, in off shore bank accounts, not in investments that grow the economy. Reagan started the trickle down con 37 years ago. To paraphrase him; ask yourself if you are better off after "Trickle Down Economics" now than you were 37 years ago.

So, the coming weeks will give us an onslaught of greedy sleazebag pols and so-called experts, who are really in the employ of those who will gain the most, monopolizing whatever TV time isn't devoted to hurricanes and floods that we'll already have to pay for from what funds the U.S. Treasury has left. No doubt Trump will hold a rally about it somewhere that's been pre-approved by the Koch Brothers or worse. That's the one thing you will actually be able to bank on. Besides The Whore Of Slovenia will be needing some new pairs of Fuck-Me Stilettos.

Unless A Supine GOP Stops Him, Trump Will Do To America What Brownback Did To Kansas

You know how states are supposed to be petri dishes for new ideas? Long before the federal government was looking into protecting consumers from predatory mortgage banksters, Assemblyman (and then state Senator) Ted Lieu was hammering out and passing controversial legislation that did just that in California. Today California Assemblyman Jimmy Gomez's revamped paid family leave plan-- revamped so that the benefits go to working class families, not just the upper middle class-- is a model for state legislatures across the country and will eventually become the foundation for a national law. But this same kind of thing happens when Republicans gain control of states-- or at least the mirror imagine happens. Last week Dominic Rushe, writing for The Guardian from Kansas, wrote about how Trump is using that state as a model for his tax cut plans. The problem, of course, is that, after years as a radical right petri dish under Gov. Sam Brownback, Kansas is a fiscal basket-case.

Details like that seem to escape Trump and he's bringing the widely despised Brownback into his Regime and bringing Brownback's failed ideological point of view into his tax agenda. "Kansas is broke," wrote Rushe, "but you wouldn’t guess it looking at its shining state capitol in Topeka. The imposing limestone monument, crowned by a shiny copper dome and limned with John Steuart Curry’s luminous murals, has just undergone a $325m facelift. What’s happening inside the state house is a lot less pretty, and may well foreshadow the far uglier battle looming over the future of taxation in the United States."

Kansas is one of the reddest states in America. The entire delegation to Washington is Republican, as are the state wide constitutional officers. The state Senate has 32 Republicans and 8 Democrats and the state House contains 97 Republicans and just 28 Democrats. And Kansas hasn't awarded a Democratic presidential candidate its electoral votes since LBJ in 1964. Trump beat Hillary 671,018 (56.6%) to 427,005 (36.0%), winning 103 of Kansas' 105 counties. Nevertheless, the underfunded Democratic candidate for the special election to replace Mike Pompeo in April, James Thompson, stunned Republicans by closing the gap by over 20 points and winning the biggest county in the district despite having been massively outspent by Republican state Treasurer Ron Estes. In the end Estes won with 63,505 votes (52.5%) to Thompson's 55,310 (45.7%). 5 months earlier Trump had won the district 60.2% to 33.0% and in 2014 Pompeo had been re-elected 60.7% to 29.6%. Two years before that Pompeo had taken 67%. Thompson will be running against Estes again in 2018. Democrats sense a change in the air in their battered state. Trump doesn't. Trump's chief economic advisor Gary Cohn and his Treasury Secretary Stephen Mnuchin-- a couple of swamp-dwelling Goldman Sachs banksters-- have used Kansas' failed model for a national model.

The plan’s similarity to the one that has left Kansas in crisis is “unbelievable,” according to Duane Goossen, the former Kansas secretary of administration.

The economic spirit behind Trump’s plan is Arthur Laffer-- the go-to guru of “supply-side economics” since the Reagan era, and one of the architects of Kansas governor Sam Brownback’s original tax plan.

The former member of Reagan’s economic policy advisory board is best known for the “Laffer curve,” an illustration of the theory (not his own) that economic activity is tied to taxation, and that lower taxes, up to a point, mean more revenues.

That curve was famously scribbled by Laffer on a napkin over cocktails with Dick Cheney and Donald Rumsfeld in 1974, and helped underpin Reagan’s so-called trickle-down economics-- as well as launching Laffer’s career as one of the most influential economists in Republican circles.

The curve is his calling card, but he also collects and publishes a vast trove of economic data on state revenues and taxes that seems to-- handily-- point to one conclusion: taxes bad, tax cuts good.

Fairly or not, “Laffernomics” is being blamed for a plan that has left the state in crisis and Brownback’s ratings in the Kansas dust. And Kansas, it seems, is about to act as the model for the biggest US tax cuts since the Gipper was in office.

Thanks to Kansas’s budget woes, Brownback regularly polls as the least popular governor in the union. Nor is there much love for Laffer. “How does he sleep at night?” one parent asked.

“Politics is politics, and I have been the object of political attack and praise. I have gotten both,” Laffer told the Guardian. “What can I tell you? If you climb up the pole, your ass sticks out pretty far, and I climb up. I’m not afraid of taking a position on things.”

Sitting in the capitol’s vaulted lobby, Goossen, now a senior fellow at the Kansas Center for Economic Growth, has little time for Laffer’s arguments, and says that the Trump administration’s recent presentation gave him the shivers.

When Brownback outlined his plan in 2012, he, too, said the tax cuts would pay for themselves. “He too said the tax cuts would benefit everybody, [that] they would be be ‘a shot of adrenaline to the heart’ of the Kansan economy,” said Goossen.

Instead, Goossen claims, the money has gone to a small group of wealthy Kansans while the state’s budget has been left with a roughly $1bn shortfall. Its school system, once its crown jewel, has suffered year after year of cuts, and its savings are gone. The non-partisan Tax Policy Center calculates Trump’s tax plan would cost $6.2tn over the first decade.

“We are a cautionary tale. It sounds great, everybody gets a tax cut and it’ll balance-- but it just doesn’t work,” said Goossen.

Campaigning for re-election in 2014, Brownback pledged his tax plans would add 100,000 new jobs over four years. By March this year, the state had added just 12,400 private-sector jobs. Kansas isn’t even keeping up with its neighbors. Hiring in Kansas increased by 0.3% in the last year; Missouri’s growth rate over that same period was 1.4%, according to the US Bureau of Labor Statistics.

The prop of the Brownback plan, as with Trump’s, was a huge cut to taxes paid by limited liability companies (LLCs)-- and so-called “pass-through” businesses-- which meant independent business owners would pay no state tax on the bulk, if not all, of their income. Those businesses would then go out and invest and create new jobs, or so the argument went.

At the time, Kansas had about 190,000 LLCs. Now it has about 300,000, but so far they have not spurred a new hiring drive in the state. “There is no evidence whatsoever that suggests this plan worked,” said Goossen.

Upstairs, the state senate is arguing over the budget for the 2018 fiscal year. Estimated revenues are $5.7bn for the year; expenses are $6.4bn – and that’s before you add in $500m-$750m the schools are owed. As Charles Dickens once wrote: “Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.”

Goossen said: “The bigger problem is that now all the energy of the state is focused on how we scrape by and make do when we ought to be focused on the future.”

...Brownback has told the Kansas City Star he’s “heartened” by Trump’s tax plans, saying they would spur business growth. Meanwhile, Democrats and Republicans are seeking to kill off his business tax breaks as the state struggles to balance it books.

Yesterday's NY Times reported that congressional Republicans-- at least some of them-- are cautiously distancing themselves from Trump. But only because he's probably going to be impeached over the ballooning Putin-Gate scandals. "Republicans on Sunday inched away from President Trump amid mounting evidence that he may have sought to interfere in the federal investigation into Russian meddling in the 2016 election. In a sign of growing anxiety, several important Republicans expressed discomfort with Mr. Trump’s firing of the F.B.I. director, James B. Comey, who had been leading the agency’s inquiry into whether Mr. Trump’s associates colluded with Russian officials. But the Republicans stopped short of explicitly criticizing Mr. Trump." But when it comes to his deadly tax agenda... that's something they all love and are all complicit in.

But even with something as fundamental to Republicanism-- tax breaks for the rich coupled with big cuts in services to the middle and working class-- there are problems that shouldn't exist for a party that controls the White House and both Houses of Congress. The combination of Paul Ryan + Mike Pence and Señor Trumpanzee and the Goldman Sachs crew are proving deadly to the GOP's efforts. Over the weekend, Fox Business reported that the Republican tax effort "is still in a precarious state, weighed down by internal policy disagreements and external political turbulence... Business groups and Senate Republicans have been pouring buckets of cold water on the ideas that make the House plan add up." The Regime, Fox reports, "has released only a vague, one-page outline of tax goals, leaving it to Congress to work out the details. Optimistic talk of committee votes this spring have given way to discussion of action this year. And if a tax bill emerges, it will land amid a storm of investigations into Russian interference in the 2016 presidential campaign, which have swept up the Trump administration and distracted lawmakers."

"Members will lose their nerve to do controversial things as they instead focus on distancing themselves from the president and scrambling for their own political life," Jon Lieber of the Eurasia Group consulting firm wrote to clients this week. "A tax bill could be completely derailed by this, but either way can't come together until early next year."

...Even with Republicans controlling Congress and the White House, a major tax bill was never certain. Republicans agree on cutting tax rates and lightening the tax burden on U.S. companies' foreign earnings, but they split over whether they want a net reduction in tax revenue and they divide along regional and ideological lines on crucial details.

Still, they entered the year optimistic. House members worked from a detailed outline, the "Better Way" blueprint House Speaker Paul Ryan (R-WI) unveiled in June 2016. And they still sound positive about reshaping the tax system in 2017.

"President Trump is leading the charge for bold tax reform that will unleash the growth of jobs and paychecks nationwide," Rep. Kevin Brady (R-TX), chairman of the House Ways and Means Committee, said Thursday. "Our committee is ready to answer that call."

To lower tax rates without adding to budget deficits, Republicans plan to bank on revenue created by economic growth and three big money-raising ideas: introducing a so-called border-adjustment tax proposal, scrapping deductions for business interest and repealing the state and local tax deduction for individuals.

Each of these measures faces sustained attacks from interest groups and fellow Republicans. None is sure to survive in the final bill, and there are no obvious revenue-raising alternatives in reserve.

Adding a border adjustment to the corporate tax-- taxing imports while exempting exports-- drew fierce blowback from retailers and Koch Industries Inc., the conglomerate run by billionaires influential in GOP politics.

Senate Majority Leader Mitch McConnell (R-KY) said this week the border-adjustment tax plan probably couldn't pass the Senate.

The same could be true for repealing the business interest deduction, an idea opposed by debt-dependent industries such as real estate, private equity and agriculture. Sen. John Thune (R-SD) said this week that the proposal would face an uphill fight in a Senate sensitive to rural interests. He is exploring a cap instead.

The House plan to repeal the individual deduction for state and local taxes has buy-in from the White House. But many House Republicans are objecting and there are enough of them to block the plan.

Such forces would have slowed the GOP tax plan under the best possible circumstances.

"Tax reformers may have to lower their ambitions," J.P. Morgan Chase economist Michael Feroli wrote this week. "Absent a backup plan, the slow demise of Ryan's Better Way program is revealing the tough road ahead to getting anything big done on corporate tax reform."

...Republicans plan to pursue tax legislation after passing a health-care overhaul. While the House has passed a health bill, the Senate is just starting on its version.

Lawmakers also can't complete the tax bill until they adopt a budget, a process that will force them to confront deep divisions within the GOP over spending priorities and deficits.

The Russia investigations-- and related probes into Mr. Trump's campaign and his firing of FBI Director James Comey-- could bog down a tax bill as well. The more time and political capital Republicans spend on Russia, the less they have for tax policy.

"Raising an umbrella in a light rain might keep you dry and not impede your travels," said Sage Eastman, a former GOP Ways and Means aide. "But in a full-fledged tropical storm-- well-- you're going to get a little wet."

Why Do Catastrophically Failed Economists Keep Getting Recycled By Establishment Politicians?

I was happy for the U.K. last week when I read that the newly elected leader of the Labour Party, Jeremy Corbyn, had selected two of the world's most brilliant economists as advisers, Thomas Piketty and Joseph Stiglitz. Corbyn's comment to the media on his selections: "I was elected on a clear mandate to oppose austerity and to set out an economic strategy based on investment in skills, jobs and infrastructure. Our economy must deliver security for all, not just riches for a few."

How different from that are the grotesquely failed economic advisers most of the U.S. presidential candidates are recycling, self-serving garbage like Glenn Hubbard, Robert Rubin, Lawrence Summers, Kevin Warsh, Tim Geithner, Alan Greenspan, Ben Bernanke (oh, this is convenient), Arthur Laffer, Stephen Moore...?

I have no doubt Jeb, Rubio, Trump and Fiorina would try to bring back Andrew Mellon, clueless Treasury secretary from 1921 to 1932 under Warren G. Harding and Calvin Coolidge, if they could. Cruz, on the other hand, might opt to resuscitate Roger Taney, who was Treasury Secretary-- also the first nominee to any Cabinet position to be rejected by the Senate when his recess appointment failed-- before becoming the worst Chief Justice of the Supreme Court in 1836.

Let's start with an excerpt from NY Times economics columnist Jeff Madrick's book Seven Bad Ideas: How Mainstream Economists Have Damaged America and the World:

Economists were indeed set back on their heels by the financial crisis of 2008 and by the depth of the recession and the levels of unemployment that followed. Though not well implemented, the aggressive financial rescue efforts of the government in 2008 nevertheless kept matters from getting far worse that year. Were it not for the social programs started in the New Deal of the 1930s and expanded in the 1960s, including Social Security, unemployment insurance, and Medicare, and those adopted later, including the earned income tax credit and food stamps—the great embrace of government, not its denigration—the nation would likely have entered a full-fledged depression by 2009. For all the criticism, President Obama’s roughly $800 billion stimulus package of government spending and tax cuts was also a vital contributor to a softer landing for the economy in 2009. Non-laissez-faire economics saved the day.

... In 2001, after the Clinton administration had left office, Lawrence Summers, a Harvard professor and Bill Clinton’s third Treasury secretary, endorsed this new faith in free markets and opposition to government intervention as a victory of new ideas. By contrast, in the 1930s John Maynard Keynes had advocated aggressive government spending—outright budget deficits—to stop recessions and support vigorous recoveries. “The political debates take place within a universe that is shaped by the development of new ideas,” Summers told an interviewer, attributing the change to good, fresh thinking, not merely the return of an old laissez-faire ideology in a more politically conservative time. “Of those new ideas, none is more important than the rediscovery of Adam Smith and the idea that a decentralized system relying on price signals collects information and provides much more insurance than any kind of centrally planned or directed type of system.” Summers, a onetime Keynesian, had for the moment changed his tune, and in this he represented economists generally.

Economists basically discarded Keynesian policy and relied on a narrow version of monetary policy: the manipulation of interest rates by the Federal Reserve, the nation’s central banking system. “We thought of monetary policy as having one target, inflation, and one instrument, the policy rate,” conceded Blanchard. “So long as inflation was stable, the output gap [the difference between potential and actual GDP] was likely to be small and stable and monetary policy did its job.” He noted that “old-style Keynesian stimulus,” by which he meant more government spending, was now “secondary.”

During this period, Clinton, the first Democratic president since 1981, chose to act on the advice of Summers and Robert Rubin, his second Treasury secretary and a former head of Goldman Sachs, and pay down the nation’s debt before seriously raising public investment. The federal deficit was widely thought to deter growth, limiting the money available to private businesses to distribute the nation’s savings. In Clinton’s last year in office, the level of federal public investment as a proportion of GDP was lower than in Ronald Reagan’s last year in office, especially for physical infrastructure and education spending. It was also substantially lower for research and development. The policy was part and parcel of the laissez-faire revolution.

Had economists been fully dedicated to their free-market views, they would also have been up in arms over the glaring lack of regulation of the new and deliberately opaque derivatives market on Wall Street. Based on securities that could be bought and traded with little down payment, these derivatives were at the heart of the financial crisis. If someone is selling a good or a security, competitors cannot offer it for less if they do not know the price asked. Yet the Clinton administration, following the new economic thinking, prevented regulators from setting federal standards of openness in this market.

The most damaging of the new financial derivatives were credit default swaps, a technical name for insurance sold by financial firms to protect investors against price declines of securities. The insurance to protect against losses on mortgage securities became especially popular as the housing boom progressed-- particularly insurance for securities based on subprime mortgages. Because the prices of these insurance-like derivatives were traded secretly, however, there was not adequate competition to keep prices sensible. Economists should have rallied in opposition to the lack of rules, but I could find no research papers done on the phenomenon until it was too late. Some investors and professional traders bought the insurance at high prices, some sold at low prices. Moreover, there were no legal requirements to hold a reserve to ensure that someone selling insurance could pay off—as is done with traditional life and property insurance. When the value of mortgages collapsed as the housing bubble burst, those who sold such insurance-- notably the insurance giant AIG-- could not pay off, making the crisis far worse. Investors who thought they were protected against falling mortgage securities were now losing fortunes, forcing them to sell other securities to meet their liabilities. This drove the prices of other securities still lower, and market prices fell further in a vicious spiral.

Economists also said little when they should have proverbially shouted about the obvious conflicts between those who issued securities and the agencies they hired to rate the securities they sold. These agencies, Standard & Poor’s and Moody’s, were inclined to make their clients happy and gave their securities high ratings, even those based on subprime mortgages. Giving unjustifiably high ratings to the securities of clients who were paying for them seems, well, almost inevitable. After the collapse, the agencies sharply, and with at least temporary embarrassment, reduced their ratings for the large majority of securities they had previously given their highest ratings, the value of which had often fallen to zero.

“Get the incentives right” had become a cliché for economic reform, especially in poorer developing nations. But financial incentives were awry on Wall Street. Traders were paid lavishly when they were correct but were not penalized commensurately when they were wrong, thereby incentivizing them to take risks. Much of the profits earned on trading the new derivatives were kept secret from buyers and sellers so that customers could not seek a better deal elsewhere. It was said that the very high compensation of bankers and traders reflected their unusual talents and that high profits for financial institutions meant they were contributing ever more to the nation’s prosperity. Economists were barely disturbed by such implausible nonsense. Meanwhile, by contrast, laws to set higher minimum wages, it was argued by many economists, would only distort labor markets and result in lost jobs.

Wall Street itself exhibited the characteristics of a monopoly. Commissions were fixed at abnormally high levels for most financial transactions, suggesting the lack of true competition. Fees earned by bankers on transactions were always high but did not fall as a percentage of the soaring value of financial assets, which under normal competitive conditions should likely have been the case. Blanchard, looking back, wrote: “We thought of financial regulation as mostly outside the macroeconomic policy framework.” The silence of so many economists when even their most bedrock conservative principles were violated was disturbing. They had spoken up as a group before, sometimes vociferously, about the benefits of free trade, for example. Their current views on laissez-faire economics, including financial deregulation, were now markedly sympathetic to big business and Wall Street.

In the 1980s, 1990s, and 2000s, the prices of stocks, bonds, and housing rose to untenable levels on the watch of free-market economists who preached deregulation. During this period, over-speculation led to serious financial crises at home and abroad as free-market advocates successfully reduced controls on lending and investing around the world. A series of major financial crises affecting America began with a 1982 Mexican financing debacle involving U.S. banks and climaxed with the 2008 crisis. Mexico had borrowed significantly from U.S. banks in the 1970s and early 1980s, the careless banks essentially speculating on the future strength of the Mexican economy with loans to the government and for spurious industrial projects. With no guidelines from government or international institutions, the banks had recycled petrodollars through loans especially to Latin America; a favorite recipient was Mexico. When interest rates were pushed up sharply by Paul Volcker’s Federal Reserve in order to stanch U.S. inflation, interest rates on Mexican debt also rose sharply. At the same time, a resulting worldwide recession undercut Mexico’s oil exports. The nation declared that it could not pay its debts to American banks. The Fed and the International Monetary Fund, a world lending organization, helped bail out the banks.

Ensuing financial crises were variations on this theme. The investors in equity incurred huge losses because of overly optimistic speculative investments that initially earned a lot of money and then went bad, but banks were often bailed out. Economies typically slid into recessions when inflation rose and the prices of these financial assets fell. The 1982 recession in the United States, for example, was the worst since the Great Depression-- until the recession of 2008. Despite wide-eyed assertions by well-schooled economists that Americans were now enjoying the Great Moderation, the financial collapses and ensuing recessions had, as noted, cost Americans trillions of dollars in lost wealth and jobs, diminished investment, and failed companies. The U.S. housing crash that began in 2006, along with the accompanying collapse in stock prices, reduced the wealth of Americans by roughly $8 trillion by the time it hit bottom. This crash was also of course the result of overspeculation fueled by borrowing-- homebuyers and investors in complex and hard-to-understand mortgage securities kept buying at ever-higher and less sensible prices. While average wealth rose again in the years after the crash, the money essentially went to the wealthy. Banks had been rescued, stock prices came back, and the well-off held the large majority of stocks; housing prices rebounded only partially. The high-technology stock plunge that occurred in the early 2000s resulted in comparable losses for most Americans. Most high-technology stocks did not recover. Many economists insisted such speculation was necessary to encourage risk taking.

...The free-market economics that had been in vogue were now failing badly. The old remedy advocated by John Maynard Keynes to cure recession—federal spending that would lead to a temporary budget deficit-- had been accepted momentarily but was again soon disdained by many. Since the inflationary 1970s, a federal budget deficit was increasingly seen as the culprit, even among Democratic economists, and this view has been hard to shake completely even after the major recession. The thinking was that a deficit often, even usually, created too much demand for goods and services, thus pushing up prices. It created more demand than the wages and profits the economy itself was generating, requiring borrowing to do so. Once slack was taken up, it was believed, a deficit resulted in an overheated economy. Keynesians typically argued with the new free-market orthodoxy over whether full employment had been reached and whether the capacity of the economy was fully utilized. It was said that the debt financing that pushed up interest rates also left less room for businesses to borrow.

To call economists overconfident during the modern laissez-faire experiment understates their hubris. The susceptibility of economists to new fashions in thinking, their opportunistic catering to powerful interests, and their walking in lockstep with the rightward political drift of America are disturbing for a discipline that claims to be a science.

Larry Kudlow- renowned economist (and deranged drug addict)

The kind of advice Corbyn-- and presumably President Bernie-- will get from Stiglitz is entirely different and from an entirely different, people-oriented perspective. Friday Stieglitz and Adam Hersh, senior economist at the Roosevelt Institute, published a decidedly non-establishment piece on the TPP-- which is nearly negotiated now-- and "free trade" in general. Details are being ironed out in Atlanta. "The biggest regional trade and investment agreement in history," they wrote, "is not what it seems."

You will hear much about the importance of the TPP for “free trade.” The reality is that this is an agreement to manage its members’ trade and investment relations-- and to do so on behalf of each country’s most powerful business lobbies. Make no mistake: It is evident from the main outstanding issues, over which negotiators are still haggling, that the TPP is not about “free” trade.

New Zealand has threatened to walk away from the agreement over the way Canada and the US manage trade in dairy products. Australia is not happy with how the US and Mexico manage trade in sugar. And the US is not happy with how Japan manages trade in rice. These industries are backed by significant voting blocs in their respective countries. And they represent just the tip of the iceberg in terms of how the TPP would advance an agenda that actually runs counter to free trade.

For starters, consider what the agreement would do to expand intellectual property rights for big pharmaceutical companies, as we learned from leaked versions of the negotiating text. Economic research clearly shows the argument that such intellectual property rights promote research to be weak at best. In fact, there is evidence to the contrary: When the Supreme Court invalidated Myriad’s patent on the BRCA gene, it led to a burst of innovation that resulted in better tests at lower costs. Indeed, provisions in the TPP would restrain open competition and raise prices for consumers in the US and around the world – anathema to free trade.

The TPP would manage trade in pharmaceuticals through a variety of seemingly arcane rule changes on issues such as “patent linkage,” “data exclusivity,” and “biologics.” The upshot is that pharmaceutical companies would effectively be allowed to extend-- sometimes almost indefinitely-- their monopolies on patented medicines, keep cheaper generics off the market, and block “biosimilar” competitors from introducing new medicines for years. That is how the TPP will manage trade for the pharmaceutical industry if the US gets its way.

Similarly, consider how the US hopes to use the TPP to manage trade for the tobacco industry. For decades, US-based tobacco companies have used foreign investor adjudication mechanisms created by agreements like the TPP to fight regulations intended to curb the public-health scourge of smoking. Under these investor-state dispute settlement (ISDS) systems, foreign investors gain new rights to sue national governments in binding private arbitration for regulations they see as diminishing the expected profitability of their investments.

International corporate interests tout ISDS as necessary to protect property rights where the rule of law and credible courts are lacking. But that argument is nonsense. The US is seeking the same mechanism in a similar mega-deal with the European Union, the Transatlantic Trade and Investment Partnership, even though there is little question about the quality of Europe’s legal and judicial systems.

To be sure, investors-- wherever they call home-- deserve protection from expropriation or discriminatory regulations. But ISDS goes much further: The obligation to compensate investors for losses of expected profits can and has been applied even where rules are nondiscriminatory and profits are made from causing public harm.

Philip Morris International is currently prosecuting such cases against Australia and Uruguay (not a TPP partner) for requiring cigarettes to carry warning labels. Canada, under threat of a similar suit, backed down from introducing a similarly effective warning label a few years back.

Given the veil of secrecy surrounding the TPP negotiations, it is not clear whether tobacco will be excluded from some aspects of ISDS. Either way, the broader issue remains: Such provisions make it hard for governments to conduct their basic functions-- protecting their citizens’ health and safety, ensuring economic stability, and safeguarding the environment.

Imagine what would have happened if these provisions had been in place when the lethal effects of asbestos were discovered. Rather than shutting down manufacturers and forcing them to compensate those who had been harmed, under ISDS, governments would have had to pay the manufacturers not to kill their citizens. Taxpayers would have been hit twice-- first to pay for the health damage caused by asbestos, and then to compensate manufacturers for their lost profits when the government stepped in to regulate a dangerous product.

It should surprise no one that America’s international agreements produce managed rather than free trade. That is what happens when the policymaking process is closed to non-business stakeholders-- not to mention the people’s elected representatives in Congress.

But how could we do a post about economists and leave Paul Krugman out-- or Republican voodoo economics? On Friday, Krugman looked at the Trump-Jeb-Rubio tax plans in terms of Republican voodoo orthodoxy. They all passed with flying colors: "lavish huge cuts on the wealthy while blowing up the deficit."

[T]here’s the recent state-level evidence. Kansas slashed taxes, in what its right-wing governor described as a 'real live experiment' in economic policy; the state’s growth has lagged ever since. California moved in the opposite direction, raising taxes; it has recently led the nation in job growth.
True, you can find self-proclaimed economic experts claiming to find overall evidence that low tax rates spur economic growth, but such experts invariably turn out to be on the payroll of right-wing pressure groups (and have an interesting habit of getting their numbers wrong). Independent studies of the correlation between tax rates and economic growth, for example by the Congressional Research Service, consistently find no relationship at all. There is no serious economic case for the tax-cut obsession.

Except one:

Republicans support big tax cuts for the wealthy because that’s what wealthy donors want. No doubt most of those donors have managed to convince themselves that what’s good for them is good for America. But at root it’s about rich people supporting politicians who will make them richer. Everything else is just rationalization.

... [N]ever forget that what it’s really about is top-down class warfare. That may sound simplistic, but it’s the way the world works.

Beware: Republicans Reprise That Old Black Magic To Deal With The Budget

The wealthy have never allowed the idea of democracy-- stuff like majority rule-- stand in the way of their greed and power. There were times when politicians have been brave enough to stand up to them-- but not since FDR, at least not on a presidential level. It's part of what Elizabeth Warren means when she says the system is rigged against us. And it's what Bernie Sanders' campaign for president is all about. And it's what a true true believers in Congress-- like Alan Grayson, Mark Pocan, Donna Edwards, Barabara Lee, Raul Grijalva-- are always talking about. But one of the problems with the wealthy is that their power allows them to change the rules when the rules threaten them, even a tiny bit. Gerrymandering is part of that. Michigan Republicans' plans to count their electoral votes in such a way to help GOP presidential candidates is another. Sunday, Robert Reich wrote about another one, the 1% has their political party doing for them-- firing Doug Elmendorf.

You may not have ever heard of Elmendorf. His the director of the strictly non-partisan Congressional Budget Office, the CBO. Elmendorf is an economist who worked closely with Reagan's director of the Council of Economic Advisers, Martin Feldstein, at Harvard. He first went to work at the CBO is 1993 and his economic analysis of Clinton's health reform bill is what killed it. He left soon after that it work for Alan Greenspan at the Fed and then for Larry Summers at Treasury. He became the director of the CBO in 2009 soon after Peter Orszag left. He was appointed by John Boehner and Daniel Inouye, then president pro tempore of the Senate, on the recommendation of the two Budget Committees.

In his column, Reich explains the issue as GOP demands to further rig the system for the 1% by the use of trickle down theory-- "dynamic scoring"-- in economic projections.

It’s based on the belief that cutting taxes unleashes economic growth and thereby produces additional government revenue. Supposedly the added revenue more than makes up for what’s lost when Congress hands out the tax cuts.

Dynamic scoring would make it easier to enact tax cuts for the wealthy and corporations, because the tax cuts wouldn’t look as if they increased the budget deficit.

Incoming House Ways and Means Chairman Paul Ryan (R-Wis.) calls it “reality-based scoring,” but it’s actually fantasy-based scoring-- which is why Elmendorf, as well as all previous CBO directors have rejected it.

Few economic theories have been as thoroughly tested in the real world as the asserted revenue effects of supply-side economics, and so notoriously failed.

Ronald Reagan cut the top income tax rate from 70 percent to 28 percent and ended up nearly doubling the national debt. His first budget director, David Stockman, later confessed he dealt with embarrassing questions about future deficits with “magic asterisks” in the budgets submitted to Congress. The Congressional Budget Office didn’t buy them.

George W. Bush inherited a budget surplus from Bill Clinton but then slashed taxes, mostly on the rich. The CBO found that the Bush tax cuts reduced revenues by $3 trillion.

Yet Republicans don’t want to admit supply-side economics is hokum. As a result, they’ve never had much love for the truth-tellers at the Congressional Budget Office.

...The budget plan Paul Ryan came up with in 2012-- likely to be a harbinger of what’s to come from the Republican congress-- slashed Medicaid, cut taxes on the rich and on corporations, and replaced Medicare with a less well-funded voucher plan.

Ryan claimed these measures would reduce the deficit. The Congressional Budget Office disagreed.

Ryan persevered. His 2013 and 2014 budget proposals were similarly filled with magic asterisks. The CBO still wasn’t impressed.

It’s one thing to cling to magical thinking when you have only one house of Congress. It’s another when you’re running the whole shebang.

Now that Elmendorf is on the way out, presumably to be replaced by someone willing to tell Ryan and other Republicans what they’d like to hear, the way has been cleared for all the magic they can muster.

In this as in other domains of public policy, Republicans have not shown a particular affinity for facts.

Climate change? It’s not happening, they say. Even if it’s happening, humans aren’t responsible. Even though almost all scientists studying the issue find that humans are the major cause, such findings are “controversial,” says the GOP, and should be given no greater weight than findings on the other side.

Widening inequality? Not occurring, they say. Even though the data show otherwise, they claim the measurements are wrong.

Voting fraud? Happening all over the country, they say, which is why voter IDs and other checks are necessary. Even though there’s no evidence to back up their claim (the best evidence shows no more than 31 credible incidents of fraud out of a billion ballots cast), they continue to assert it.

Evolution? Just a theory, they say. Even though all reputable scientists support it, many Republicans at the state level say it shouldn’t be taught without also presenting the view found in the Bible.

Weapons of mass destruction in Iraq? America’s use of torture? The George W. Bush administration wasn’t overly interested in the facts.

The pattern seems to be if you don’t like the facts, make them up.

Or have your benefactors finance “think tanks” filled with hired guns who will tell the public what you and your patrons want them to say.

If all else fails, fire your own experts who tell the truth, and replace them with people who will tell falsehoods.

There’s one big problem with this strategy, though. Legislation based on lies often causes the public to be harmed.

Mark Pocan (D-WI) and Barbara Lee (D-CA) are the most progressive members of the House Budget Committee. Neither is happy seeing the Republicans making this move. Yesterday, Pocan told us that "Dr. Elmendorf was a perfect choice for a non-partisan agency; fair, unbiased and trusted by all. As the Republicans realize the facts aren't on their side when it comes to budgeting, their solution seems to be to get rid of the facts and try to replace them with distorted ones from a shill they select to spin their view of the world. That's a completely wrong way to start out the 114th Congress." Congressman Lee had a similar perspective she shared with us: "As a member of the Budget Committee, it is imperative that the Congressional Budget Office (CBO) remains independent and objective. The CBO’s objectivity provides needed assurances to Congress and the American people about the impacts of legislation. Conservative attempts to influence CBO and undermine its independence, especially by forcing the CBO to fudge the numbers by using 'dynamic scoring,' is outrageous."

And because the conservatives now control both houses of Congress, they can do just that.

Paul Krugman warns not to "shrug off" Marco Rubio's "awkward moment" -- it's "symptomatic of a much broader problem"

Above: David Sipress's offering today in his week of New Yorker Daily Cartoon-ing. Says Paul Krugman, the attitude reflected in Marco Rubio's GQ whiff on the age of the planet -- the Right's willingness, even eagerness, to simply deny inconvenient evidence -- has implications far beyond biology, including economics.

"On economics, as in hard science, modern conservatives don't want to hear anything challenging their preconceptions -- and they don't want anyone else to hear about it, either.

"So don't shrug off Mr. Rubio's awkward moment. His inability to deal with geological evidence was symptomatic of a much broader problem -- one that may, in the end, set America on a path of inexorable decline."

-- Paul Krugman, in his NYT column today, "Grand Old Planet"

by Ken

Earlier this week Howie, writing about new GOP rising star Marco Rubio's embarrassingly desperate pandering, in a GQ interview, to the creationist nutjobs he counts on to be his political base, quoted a good deal from Paul Krugman's NYT blogpost "Views Differ on Age of Planet." PK subsequently used that post as a springboard to his column today, "Grand Old Planet," returning to the Flordia senator's pronouncement, on the subject of the age of the earth (after stipulating that "I'm not a scientist, man") that this is "one of the great mysteries."

"Reading Mr. Rubio's interview is like driving through a deeply eroded canyon," says PK in the column.

All at once, you can clearly see what lies below the superficial landscape. Like striated rock beds that speak of deep time, his inability to acknowledge scientific evidence speaks of the anti-rational mind-set that has taken over his political party.

By the way, that question didn't come out of the blue. As speaker of the Florida House of Representatives, Mr. Rubio provided powerful aid to creationists trying to water down science education. In one interview, he compared the teaching of evolution to Communist indoctrination tactics -- although he graciously added that "I'm not equating the evolution people with Fidel Castro." Gee, thanks.

Rubio's problem with science teaching, PK writes, is "that it might undermine children's faith in what their parents told them to believe."

And right there you have the modern G.O.P.'s attitude, not just toward biology, but toward everything: If evidence seems to contradict faith, suppress the evidence.

The most obvious example other than evolution is man-made climate change. As the evidence for a warming planet becomes ever stronger -- and ever scarier -- the G.O.P. has buried deeper into denial, into assertions that the whole thing is a hoax concocted by a vast conspiracy of scientists. And this denial has been accompanied by frantic efforts to silence and punish anyone reporting the inconvenient facts.

"But the same phenomenon is visible in many other fields," says PK.

The most recent demonstration came in the matter of election polls. Coming into the recent election, state-level polling clearly pointed to an Obama victory -- yet more or less the whole Republican Party refused to acknowledge this reality. Instead, pundits and politicians alike fiercely denied the numbers and personally attacked anyone pointing out the obvious; the demonizing of The Times's Nate Silver, in particular, was remarkable to behold.

PK wants to know what might account for this pattern of denial, and brings up the book he noted in the earlier blogpost he had finally gotten around to reading, Chris Mooney's The Republican Brain, which isn't, "as you might think, a partisan screed."

It was, instead, a survey of the now-extensive research linking political views to personality types. As Mr. Mooney showed, modern American conservatism is highly correlated with authoritarian inclinations -- and authoritarians are strongly inclined to reject any evidence contradicting their prior beliefs. Today's Republicans cocoon themselves in an alternate reality defined by Fox News, Rush Limbaugh and The Wall Street Journal's editorial page, and only on rare occasions -- like on election night -- encounter any hint that what they believe might not be true.

And, no, it's not symmetric. Liberals, being human, often give in to wishful thinking -- but not in the same systematic, all-encompassing way.

PK returns to Senator Rubios claim that the age of the earth doesn't matter, which he dismisses as "a dispute amongst theologians" ("what about the geologists?" PK wonders), which has "has nothing to do with the gross domestic product or economic growth of the United States." PK insists that "he couldn't be more wrong."

We are, after all, living in an era when science plays a crucial economic role. How are we going to search effectively for natural resources if schools trying to teach modern geology must give equal time to claims that the world is only 6.000 years old? How are we going to stay competitive in biotechnology if biology classes avoid any material that might offend creationists?

PK further cites "the matter of using evidence to shape economic policy."

You may have read about the recent study from the Congressional Research Service finding no empirical support for the dogma that cutting taxes on the wealthy leads to higher economic growth. How did Republicans respond? By suppressing the report. On economics, as in hard science, modern conservatives don't want to hear anything challenging their preconceptions -- and they don't want anyone else to hear about it, either.

And he concludes:

"So don't shrug off Mr. Rubio's awkward moment. His inability to deal with geological evidence was symptomatic of a much broader problem -- one that may, in the end, set America on a path of inexorable decline."

#

Remember Trickle-Down? Supply Side? Voodoo Economics? These Days They Call It Austerity-- And It Works No Better Under Its Latest Moniker

Successful car thief-turned-congressman Darrell Issa, was tweeting away yesterday, digitally yammering about all the legislation he's voted for over the past decade that has destroyed the middle class is somehow President Obama's fault. I 'm not singling out Issa. He isn't any different from any of his delusional right-wing colleagues. When they're not complaining about Jimmy Carter or lionizing Bill Clinton-- who almost all of them (including Issa) voted to impeach-- they're trying to blame the results of the Bush/Republican Party economic agenda on President Obama. Or they say he hasn't fixed the problems they caused fast enough... as they plot to reinstate the policies that brought on the greatest economic collapse of most of our lives.


Inconveniently for Issa and his cronies, though, the Wall Street Journal ran a different kind of analysis not long ago (and still accessible online)-- one explaining why former Ronald Reagan Budget Director David Stockman says his own party, the Republicans, destroyed the U.S. economy. Stockman was a conservative Michigan congressman before Reagan made him Director of the Office of Management and Budget in 1981. He was an avatar of supply-side economics-- even though he caught on pretty quickly that trickle-down economics wasn't going to help anyone but the very rich. His post-Reagan career has been mostly one of failed investment schemes and an indictment for defrauding investors. About a year ago he had a short brush with fame again when he was quoted saying "The Republican Party has totally abdicated its job in our democracy, which is to act as the guardian of fiscal discipline and responsibility. They're on an anti-tax jihad-- one that benefits the prosperous classes." Paul Farrell piece for MarketWatch predates that:

"How my G.O.P. destroyed the U.S. economy." Yes, that is exactly what David Stockman, President Ronald Reagan's director of the Office of Management and Budget, wrote in a recent New York Times op-ed piece, Four Deformations of the Apocalypse.

Get it? Not "destroying." The GOP has already "destroyed" the U.S. economy, setting up an "American Apocalypse."

Yes, Stockman is equally damning of the Democrats' Keynesian policies. But what this indictment by a party insider-- someone so close to the development of the Reaganomics ideology-- says about America, helps all of us better understand how America's toxic partisan-politics "holy war" is destroying not just the economy and capitalism, but the America dream. And unless this war stops soon, both parties will succeed in their collective death wish.

But why focus on Stockman's message? It's already lost in the 24/7 news cycle. Why? We need some introspection. Ask yourself: How did the great nation of America lose its moral compass and drift so far off course, to where our very survival is threatened?

We've arrived at a historic turning point as a nation that no longer needs outside enemies to destroy us, we are committing suicide. Democracy. Capitalism. The American dream. All dying. Why? Because of the economic decisions of the GOP the past 40 years, says this leading Reagan Republican.

...Stockman rushes into the ring swinging like a boxer: "If there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation's public debt ... will soon reach $18 trillion." It screams "out for austerity and sacrifice." But instead, the GOP insists "that the nation's wealthiest taxpayers be spared even a three-percentage-point rate increase."

In the past 40 years Republican ideology has gone from solid principles to hype and slogans. Stockman says: "Republicans used to believe that prosperity depended upon the regular balancing of accounts-- in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses too."

No more. Today there's a "new catechism" that's "little more than money printing and deficit finance, vulgar Keynesianism robed in the ideological vestments of the prosperous classes" making a mockery of GOP ideals. Worse, it has resulted in "serial financial bubbles and Wall Street depredations that have crippled our economy." Yes, GOP ideals backfired, crippling our economy.

...Stockman continues pounding away: "The third ominous change in the American economy has been the vast, unproductive expansion of our financial sector." He warns that "Republicans have been oblivious to the grave danger of flooding financial markets with freely printed money and, at the same time, removing traditional restrictions on leverage and speculation." Wrong, not oblivious. Self-interested Republican loyalists like Paulson, Bernanke and Geithner knew exactly what they were doing.

They wanted the economy, markets and the government to be under the absolute control of Wall Street's too-greedy-to-fail banks. They conned Congress and the Fed into bailing out an estimated $23.7 trillion debt. Worse, they have since destroyed meaningful financial reforms. So Wall Street is now back to business as usual blowing another bigger bubble/bust cycle that will culminate in the coming "American Apocalypse."

Stockman refers to Wall Street's surviving banks as "wards of the state." Wrong, the opposite is true. Wall Street now controls Washington, and its "unproductive" trading is "extracting billions from the economy with a lot of pointless speculation in stocks, bonds, commodities and derivatives." Wall Street banks like Goldman were virtually bankrupt, would have never survived without government-guaranteed deposits and "virtually free money from the Fed's discount window to cover their bad bets."

Finally, thanks to Republican policies that let us "live beyond our means for decades by borrowing heavily from abroad, we have steadily sent jobs and production offshore," while at home "high-value jobs in goods production ... trade, transportation, information technology and the professions shrunk by 12% to 68 million from 77 million."

As the apocalypse draws near, Stockman sees a class-rebellion, a new revolution, a war against greed and the wealthy. Soon. The trigger will be the growing gap between economic classes: No wonder "that during the last bubble (from 2002 to 2006) the top 1% of Americans-- paid mainly from the Wall Street casino-- received two-thirds of the gain in national income, while the bottom 90%-- mainly dependent on Main Street's shrinking economy-- got only 12%. This growing wealth gap is not the market's fault. It's the decaying fruit of bad economic policy."

Get it? The decaying fruit of the GOP's bad economic policies is destroying our economy.

Ryan and Issa and Romney have no idea how to answer this kind of critique and no idea how to move forward from it. Progressive Democrats certainly do and Prosperity Economics, the antidote to their latest trickle-down/voodoo theory, explains it step by step. Santa Clarita surgeon Lee Rogers, running for a seat currently occupied by Voodoo Warrior Buck McKeon is one of the 16 progressive challengers backing Professor Jacob Hacker's program for the renewal of American Prosperity. Roger's own website statement on the deficit sounds like he's paid close attention o both Hacker and Stockman:

Irresponsible spending by politicians has created our fiscal crisis. Congressional inaction and grandstanding creates uncertainty that makes markets cautious. Investors don’t trust that Washington will be able to resolve our fiscal crisis in a manner that will prevent a worsening recession. We need to send people to Washington who will work together to fix the economy and not wait until the last minute, when things are on the brink of collapse, before acting.

We all know you can’t spend more money than you bring in. Through taxes and other income sources, Washington brings in about $6.9 billion every day and spends about $10.5 billion. In 2011, the government spent about $1.27 trillion more than it made.

This imbalance must be repaired. Now, some in Washington want the burden of paying off the deficit to fall on the shoulders of the middle class and the poor.

We can’t let Medicare lose out to corporate tax breaks and subsidies for the richest companies. We can’t let defense spending on wars, which we’ve already won, threaten the future of Social Security. We shouldn’t let foreign aid to rich nations keep us from providing healthcare to our own poor.

Reducing the deficit is important, but it shouldn’t be done at the expense of growth in America. In order to grow, we need to invest in our own country’s infrastructure. The World Economic Forum ranked US infrastructure at 24th out of 142 nations, a downgrade from 10th five years ago. Infrastructure (which includes transportation, energy, water/waste management, and communications) is paramount to US prosperity and global competitiveness. These serious deficits in our infrastructure are already having dire effects on the economy and on our safety.

Financing infrastructure should not be seen as an expense, but an investment that will have far-reaching beneficial effects beyond just the short-term job growth it causes.

...[W]e face a different threat from within: a runaway defense budget that threatens the fiscal security of our nation. Our civilian leaders who govern the defense budget don’t know how to reduce spending as our overseas obligations approach the projected reductions. We have our budgeted defense spending and our war spending, which is not budgeted. We’ve spent nearly $1.3 trillion on wars since 2001, adding it directly to our deficit. We have achieved our objectives in the conflicts in Iraq and Afghanistan and should make steps to immediately end the wars and bring our troops home.

Budgeted defense spending is being subject to automatic reductions since Congress failed to achieve agreements on deficit reduction. However, the reductions are not really reductions at all, but rather a slower rate of growth. Defense spending will only increase by 16% over the next 10 years, instead of 23%. Some defense hawks in Congress have made outrageous claims to avoid the slow down, such as that our military will be at pre-WWI levels, or that we’ll have to bring back the draft. We can reduce defense spending while still remaining vigilant to emerging and changing threats.

We don’t need to spend money on engines for planes with canceled contracts, for unneeded technologies, or to maintain some of our 700 military bases around the world. The US spends more on defense than every other nation on the planet combined. We can keep necessities, cut waste, save money, and be more secure.

Please consider contributing to the election efforts of Lee and other pro-Prosperity Democrats at the Americans For REAL Prosperity ActBlue page. Even Republican David Stockman admits the alternative is very, very bleak.