Dems With Vertebrae

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economy

Ben White and Tarini Parti write in Politico that some Dems are finally pushing back against the “debt crisis” myth.

These Democrats and their intellectual allies once occupied the political fringes, pushed aside by more moderate members who supported both immediate spending cuts and long-term entitlement reforms along with higher taxes.

But aided by a pile of recent data suggesting the deficit is already shrinking significantly and current spending cuts are slowing the economy, more Democrats such as Virginia Sen. Tim Kaine and Maryland Rep. Chris Van Hollen are coming around to the point of view that fiscal austerity, in all its forms, is more the problem than the solution.

I’ve always thought of Kaine as something of a milquetoast, so good for him.

Joe Weisenthal of that socialist rag Business Insider writes,

You might wonder what, exactly, is the big deal here. After all, Democrats haven’t been the ones pushing for spending cuts. Republicans have. But most of the time, Democrats have ceded the general point to Republicans that debt is a major problem, and that in some form or another, fiscal policy should focus on reducing that debt. The realization that growth is how you close the deficit and that austerity (because it saps growth) is counterproductive allows Democrats to form a counter-argument that doesn’t cede to the GOP’s premise. And that in itself is an important change in the debate.

Make no mistake that the data supports this concept.

He has line graphs. Do look.

Jared Bernstein writes,

Now, it’s surely the case that the spell isn’t as broken as all that–the force has been disturbed, the U-Mass team sprayed a heavy hose on the hair-on-fire austerions. But neither is Keynesianism about to break out all over.

Still, you gotta love the incredibly juicy irony of what’s going on. Nobel laureates, former Treasury officials, think tankers, yours truly and zillions of others have been trying to break through on this for years. Some bespectacled twenty-something comes along, and for a term paper–a term paper!–tries to replicate Rogoff and Reinhart’s study, he perseveres, gets some solid guidance from his profs, who happen not to genuflect at either the alter of austerity or the academic hierarchy (I’m afraid other profs might have shut the young man down)–and BOOM!

Somebody really needs to make a movie out of all of this someday.

I don’t think the debunking of Reinhart/Rogoff all by itself caused the partial collapse of the austerity myth. There were signs of disillusionment elsewhere, especially in Europe. The debunking may have been a tipping point, though. The myth isn’t dead, of course; it will be with us for a long time. But it’s nice to see the myth being challenged.

I disagree with White and Parti that this is going to hurt President Obama. The more Dems tell Republicans they can take their austerity and shove it, the weaker the Republican position. My sense of things is that the President is less pro-austerity than pro-get something passed, even if it isn’t what he wants.

See also “What if Simpson and Bowles threw a debt-reduction party and nobody came?

Update: Krugman

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14 Comments

14 Comments

  1. c u n d gulag  •  Apr 29, 2013 @10:51 am

    WHODATHUNKIT?!?! –
    That the mighty heavyweight that is Austerian Goliath, couldn’t quite take that sock on the button that this American David, with his slingshot full of knowledge of EXCEL, landed?
    Not for his Doctoral Thesis.
    Not for his Masters Thesis.
    But for a term paper.
    A TERM PAPER!!!

    Now, Dem’s, NOW is the time to start piling on!

    Enough, ENOUGH, of bleeding the anemic patients with leeches!
    Try feeding those patients some meat, fish, bread, and fresh fruits and veggies.
    And some wine and/or beer and/or booze, too!

  2. Dan  •  Apr 29, 2013 @11:08 am

    I’ve said for a long time: If you want the job done, hire a Republican.
    If you want to figure whether to do the job or not, hire a liberal…

  3. Stephen Stralka  •  Apr 29, 2013 @11:37 am

    Well, Andrew Jackson paid off the national debt in 1835, Then the economy collapsed in 1837. Which isn’t to say that the one necessarily caused the other, but it’s worth looking at in light of our current debates.

  4. Dolorous Stroke  •  Apr 29, 2013 @12:34 pm

    Kaine has been my Mayor and my Governor, and now he is my Senator. He is somewhat more conservative than I am — most Democrats, especially Virginia Democrats, are — but I really like him. He’s smart and savvy and seems to be a fundamentally decent person. He reminds me a lot of Barack Obama.

  5. Dan  •  Apr 29, 2013 @5:11 pm

    Great example, Stephen, because Andrew Jackson is a talisman to the right wing.

    A large part of right’s error in judgment comes from the fact that they are NOT conservative, but very radical and ideological. Being ideological, they are easily mislead. One of their great informational weaknesses is a complete misunderstanding of what money is (HINT: they think gold is money). You can be sure that the people who lead the right-wingers around by the nose do not share their misunderstanding!

    Gold (gold and silver are functionally equivalent here) is the right-wing’s ideological replacement for money. This ideological mislabeling leads directly to their belief that “fiscal restraint” is desirable: gold supply is naturally limited and cannot be easily increased in quantity – being thus limited, an economy based on gold is itself self-limiting, and can only grow by discovering new gold or taking it from someone who has gold (by conquest or trade). The right wing desperately wishes to return to the gold standard largely in part because of this circular ideological blinder.

    What they fail to remember (or have never heard about) is that once every generation that the US was on a nominal “gold standard” there was a depression, culminating with the Great Depression.

    Gold is, in fact, just one form of currency.

    Money is an entirely different concept than currency: money is the idea that one need not barter directly to exchange value, but that one can substitute a mutually agreed upon medium (the currency) to exchange the value of one product (including labor) at one time and place for a different product at a different time and place, and even trade that value with a different person. The wider the area that a certain currency is accepted, the better.

    They who fail to study history…

  6. justme277  •  Apr 29, 2013 @7:01 pm

    The right knows what they are doing. They know the economy cannot grow and that the cuts are not a solution. But they are not looking for the same solution as the rest of us. The problem they seek a solution for is making sure things don’t get better. They don’t care what happens to the country, after all it’s the same bunch of people who elected Obama, so screw em people need to suffer for that in their minds…and when their own feel the cuts, well then they just fix that.

    Look I am so pissed off about the FAA thing it makes me want to load up all the cow dung in the state and drive it to DC and drop it off. You know what? TOO F’ING BAD if you have to wait to fly someplace. If you don’t have the extra time, sorry , stay HOME. The cut should have stood and those stooges should have been told FIX IT ALL or the cuts stay in place, assholes! Head start? Kids gotta wait to learn, buck up you can wait to go on vacation or where ever. Cancer patience are not getting treatment but waiting in line at the airport is the gotta have fix? Screw grandma and her handicapped ass, she can go stand on the corner and work for her meals ..she has more time to do that then a bunch of stuffed suits have to sit in an airport! Enough already!

    They couldn’t beat Obama so they are going to make sure the country goes bad. And the people who are suffering are just collateral damage. Between this and the gun issue , which 90% of the country wanted, I can’t believe millions have not just stormed the streets of DC with pitch forks and torches. They are not doing their jobs yet they are still getting a big fat paycheck and pension and free healthcare for life. And thats where the American people should have demanded the cuts START. Taxation without representation.

    They can’t have things going well in this country because they will never get the white house if folks see that so lets not pretend it is because they are oh so concerned about the debt. Republicans are not good at much, but one thing they have is dishonesty. They take a issue like back round checks and they make it about big brother coming to get your guns. AND PEOPLE LET THEM define the topic. They are attempting the same thing here with the debt issue.

    They are like a really really really bad spouse America needs to kick to the curb.

  7. Doug  •  Apr 29, 2013 @8:49 pm

    Dan – Badtux (the snarky penguin) is stronger in economics than I am – which isn’t a high hurdle. He pointed out something a while back about the gold standard. Paper currency looses value normally due to inflation. A dollar this year is only worth 98 cents next year if inflation is 2%. For the worker, this loss is generally replaced by an increase in wages. (I said generally.) For a rich man – inflation can be devastating. His wealth is worth less every year unless he does something with it to make more money. So even mild inflation is a cattle prod for the rich man forcing him to take risks with his money to increase its value. Under ideal circumstances, this goad will produce jobs, increase wages and spur innovation. This is economic theory that is true in practice IF the rich aren’t allowed to tinker with the rules, but that’s a topic for Krugman.

    Let’s look at the gold standard. If the supply of gold is considered a fixed quantity and the monetary system is based on the gold standard, a growing economy has to push UP the value of gold per ounce. The people with gold don’t need to do anything to increase their wealth – the gold standard works for the rich man in exactly the opposite way that inflation does. He does not need to take risks or innovate – the safest investment is gold in the bank. And this will affect jobs and wages – not in a good way – for those who don’t have gold.

    I posted this late so any of you who suffer from insomnia can read this three times – or try. Most people achieve REM sleep before finishing the second paragraph the second time. Sweet dreams.

  8. JR  •  Apr 29, 2013 @10:02 pm

    Well Obama’s enabling of the Simpson/Bowles theology could make one think that this is going to hurt his cause. I’d like to think he’s just pro-getsomethingdone but I don’t. I’m happy to be proven wrong though. If he won’t go in that direction this may be a “now make me do it” moment. I’m not sure he’ll make the switch on his own. But it’s sad that Obama seems to be the only Democrat in Washington who people expect to get anything done.

  9. Swami  •  Apr 30, 2013 @1:26 am

    Dem’s with vertebrae can happen. I was just reading Darwin’s Origin of Species, and he presents a very strong argument supporting natural selection through the process of adaptation to environmental stresses within certain political species. Basically he’s saying it’s possible that they can grow a spine if conditions are politically favorable, although it is rare.

  10. Porlock Junior  •  Apr 30, 2013 @3:05 am

    @Doug-
    Fortunately, I did my dozing-off time, quite a bit of it, earlier in this evening’s blog-reading session.

    You’ve nailed it quite cleanly. I figured out for myself many years ago the more obvious half of this: gold as the rich guy’s currency, immune to inflation but quite capable of deflation to any extent at all, to the benefit of Them As Has.

    But the gold standard’s automatic, inevitable sucking up of economic growth by people whose interest is in contributing *nothing* to it by innovation or any kind of risk taking — this seems to get no coverage at all, ever, and I have somehow always missed this piece of the puzzle. To people with a proper understanding of economics, maybe it’s too obvious to bear mentioning? [Joke. But why *isn't* being shouted constantly from the rooftoops?]

  11. maha  •  Apr 30, 2013 @9:49 am

    Porlock — people with a proper understanding of economics seem to understand the problem with the gold standard somewhat differently from how you understand it (see, for example, an old Krugman blog post), which may be why they aren’t shouting your perspective from the rooftops.

    The problem with “people whose interest is in contributing *nothing* to it by innovation or any kind of risk taking” is happening without the hold standard. Mitt Romney and his ilk are prime examples.

  12. c u n d gulag  •  Apr 30, 2013 @10:01 am

    maha,
    I believe that the “hold standard” is what the Senate Republicans are using to thwart the Presidents judicial nominee’s. ;-)
    Also too – economic growth.

  13. c u n d gulag  •  Apr 30, 2013 @10:07 am

    Way OT – nice article about Jason Collins, the basketball player who just outed himself:

    http://www.thenation.com/blog/174101/jason-collins-substance-change#

  14. goatherd  •  Apr 30, 2013 @10:56 am

    Thanks for the “Badtux” suggestion Doug and the Krugman link too, Maha.



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