The question of who “won” the fiscal cliff won’t be answered till we know what happens when Congress reaches the debt ceiling. The White House says that there’ll be no negotiations over the debt ceiling, and that if Republicans want further spending cuts, their only chance is to hand over more tax revenue. If they’re right and they do manage to enforce a 1:1 ratio of tax hikes to spending cuts in the next deal, they’re going to look like geniuses.
Republicans swear they are crazy enough to push the country into default, and they promise that the White House isn’t strong enough to stand by and let it happen. If they’re right, and the White House agrees to big spending cuts absent significant tax increases in order to avert default, then Republicans will have held taxes far lower than anyone thought possible.
But both Republicans and Democrats can’t be right.
--Ezra Klein (via andrewgraham)
There Is (Economic) Power in a Union: An Illustrated Guide
Who are the real “job creators”? Contrary to conventional wisdom, the answer seems to be: People who have jobs – particularly those that pay well. Well-paid employees buy things, and that creates jobs for other people.
And what creates those kinds of jobs? A healthy union movement. Unions are also a bulwark against income inequality, an economic distortion which even conservative Forbes magazine acknowledges is bad for the economy.
It looks to all the world as if there’s a correlation here: Union membership goes down – deficits go up. Perhaps the correlation isn’t as strong as it looks, but the idea isn’t crazy. Higher-paid employees pay more in taxes, which is good for the government’s bottom line. They require fewer government services. The same is true of their families, neighborhoods, and communities. And their contribution to economic growth means everybody’s better off.
The lesson for all those deficit-obsessed policymakers might be, to paraphrase the late Joe Hill: Don’t “austerize,” organize.
Maybe that’s why the 1956 Republican Party platform boasted that under the leadership of President Eisenhower “unions have grown in strength and responsibility, and have increased their membership by 2 millions.” They knew what was good for the economy … and good for business.
Republicans claim to be for much smaller government, but as a political matter they have always attacked government spending in the abstract, never coming clean with voters about the reality that big cuts in government spending can happen only if we sharply curtail very popular programs.
…if you look at the facts, you learn that the great bulk of those who pay no income tax pay other taxes; also, many of the people in the no-income-tax category are (a) elderly (b) students or (c) having a bad year, having lost a job — that is, they’re people who have paid income taxes in the past and/or will pay income taxes in the future. The idea that half of Americans are just grifters is grotesque.
Stop, hey, what’s that sound? Actually, it’s the noise a great political party makes when it loses what’s left of its mind. And it happened — where else? — on Fox News on Sunday, when Mitt Romney bought fully into the claim that gas prices are high thanks to an Obama administration plot. This claim isn’t just nuts; it’s a sort of craziness triple play — a lie wrapped in an absurdity swaddled in paranoia. It’s the sort of thing you used to hear only from people who also believed that fluoridated water was a Communist plot. But now the gas-price conspiracy theory has been formally endorsed by the likely Republican presidential nominee.
--Paul Krugman, Paranoia Strikes Deeper. Krugman tears down the Republican idea that the Obama administration is pushing for higher gas prices.
All four significant Republican presidential candidates still standing are fiscal phonies. They issue apocalyptic warnings about the dangers of government debt and, in the name of deficit reduction, demand savage cuts in programs that protect the middle class and the poor. But then they propose squandering all the money thereby saved — and much, much more — on tax cuts for the rich
--Paul Krugman, Four Fiscal Phonies.
Judging from the candidates’ tax proposals, they seem to believe that the most Reagan-like candidate is the one with the biggest tax cut. But as the person who drafted the 1981 Reagan tax cut, I think Republicans misunderstand the premises upon which Reagan’s economic policies were based and why those policies can’t — and shouldn’t — be replicated today.
--Bruce Bartlett, explaining why the GOP should stop invoking Reaganomics.
Wisconsin Public Workers Face Reduced Buying Power
State of Wisconsin clerical worker Gina Bertolini started paying about 6 percent of her $15.48 hourly wage toward her pension in August plus $84 a month for her health coverage.
Many other government employees carrying family health coverage took bigger hits, but overall Bertolini saw an 8 percent reduction in her $32,000 annual pay, about $2,500.
She worried, but took it in stride. Until the holidays.
“I’ve never been rich, but I always made a nice Christmas dinner for my family,” said Bertolini, 59, who has two grown sons and two small grandchildren. “This year I couldn’t afford to do the dinner. I did buy everyone a gift, but it was really modest. I didn’t decorate. I thought, ‘I’m just not going to think about this.’”
Bertolini is just one of tens of thousands of public workers in Wisconsin without union contracts who have faced reduced buying power in the wake of Gov. Scott Walker’s landmark legislation — unveiled one year ago this week — to balance the budget by curtailing union collective bargaining and extracting financial concessions from workers.
True, the federal government has avoided all-out austerity. But state and local governments, which must run more or less balanced budgets, have slashed spending and employment as federal aid runs out — and this has been a major drag on the overall economy. Without those spending cuts, we might already have been on the road to self-sustaining growth; as it is, recovery still hangs in the balance.
The infuriating thing about this tragedy is that it was completely unnecessary. Half a century ago, any economist — or for that matter any undergraduate who had read Paul Samuelson’s textbook “Economics” — could have told you that austerity in the face of depression was a very bad idea. But policy makers, pundits and, I’m sorry to say, many economists decided, largely for political reasons, to forget what they used to know. And millions of workers are paying the price for their willful amnesia.
--Paul Krugman, The Austerity Debacle.