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Wednesday, July 14, 2010


Paul Krugman:

For the last few months, I and others have watched, with amazement and horror, the emergence of a consensus in policy circles in favor of immediate fiscal austerity. That is, somehow it has become conventional wisdom that now is the time to slash spending, despite the fact that the world’s major economies remain deeply depressed.

This conventional wisdom isn’t based on either evidence or careful analysis. Instead, it rests on what we might charitably call sheer speculation, and less charitably call figments of the policy elite’s imagination

Yes, America has long-run budget problems, but what we do on stimulus over the next couple of years has almost no bearing on our ability to deal with these long-run problems. As Douglas Elmendorf, the director of the Congressional Budget Office, recently put it, “There is no intrinsic contradiction between providing additional fiscal stimulus today, while the unemployment rate is high and many factories and offices are underused, and imposing fiscal restraint several years from now, when output and employment will probably be close to their potential.”

The argument isn't merely academic. People vote on this. Chris Bowers:

Real disposable income is the dominant ideology among swing voters. This should not come as a shock, or even a mild surprise. The mushy middle is not full of political junkies, but it is full of people who worry about their pocketbooks. As such, whether things get better or worse for their pocketbooks, those voters will blame the governing party, and vote accordingly.

Blocking unemployment benefits will result in less money in the hands of voters who are unemployed. Blocking the Medicare "doc fix" will result in less money in the hands of doctors who vote. Blocking an extension of COBRA and a public option will result in voters who have to purchase individual insurance having less money in their hands. Cutting aid to states to prevent layoffs will result in state workers who vote having less money in their hands. Blocking a cap on ATM fees means less money in the hands of voters. Blocking $100 billion in the first stimulus resulted in voters of all sorts having less money in their hands.

The dominant ideology of swing voters is disposable income. As such, enact public policies that increase real disposable income, or else face defeat at the ballot box. It really is that simple.

And, indeed, Brian Beutler's report for TPM suggests this is really about Republicans playing politics with the economy:

It was a Democrat -- James Carville -- who coined the phrase "it's the economy, stupid." And to this day, leading Democrats understand that Carville was correct. They get it all the way down to their trembling bones. They'd love to take dramatic steps to improve the economy, but Republicans are using every tool at their disposal to prevent that. It's led Democrats to blame Republicans explicitly for causing Americans economic pain for short-term political gain, but it also means we're not going to see much in the way of economy-improving legislation in the months ahead.

"They think the worse the economy is come November, the better they're going to do election wise," said Senate Majority Leader Harry Reid at a press conference this morning.

Sen. Debbie Stabenow (D-MI) echoed that analysis last month on a conference call with reporters.

"If [the GOP] can stop the recovery from occurring, if they can create as much pain as possible, people will be angry and will not vote at all or will vote against those in the majority," she implored.

With Republicans pushing for tax cuts for the rich and blocking unemployment benefits, you can see where they're coming from. And yet, with unemployment hovering near 10 percent, and a midterm election threatening to sweep them out of power on Capitol Hill, Democrats are trapped and running out of time.

They can't pass anything other than modest stimulative measures without running into obstruction, mostly from Republicans -- but they face similar obstacles within their own party. Compounding matters is the fact that the Senate schedule is packed to the brim with other must-pass initiatives and that the White House is divided over whether the President should press Congress to spend more money (stimulus) or to retreat into deficit reduction mode (anti-stimulus).

With leadership like that nobody (particularly at the White House) is picking up a megaphone and demanding Congress (particularly Republicans) do something significant to reduce unemployment. And they're not gonna.

"Look at what we had to go through for the last eight weeks," said Reid's spokesman Jim Manley. "The fact is that we have a Republican party that's betting on this President to fail. We'll continue to look at additional efforts to provide help for the economy but the fact is in this heavily polarized Senate, it's very difficult to get stuff done."

Checkmate. Suddenly, a picture has emerged of Democrats stumbling toward November with nothing to show the unemployed, only to feel the full wrath of a disenchanted electorate.


Americans worship winners and they don't really care about unfair process. This is the nation that reveres the quote "winning isn't everything, it's the only thing." I think the best example is the stolen election in 2000, in which most people seemed to believe that the partisan manipulation of the system in Florida and the biased Supreme Court decision were actually a fairly decent way to figure out who should be president in what was essentially a sudden death playoff --- the one who did whatever was necessary to make it happen was the one who was most qualified, simply by dint of his ability to come out on top at the end of the "game." (We see that same ethos on Wall Street and among those who think it's perfectly fine to torture and hold innocent people in jail indefinitely.) In America, the operating principle is that the ends justify the means.

Paul Krugman rebuts arguments against extending unemployment benifits:

Do unemployment benefits reduce the incentive to seek work? Yes: workers receiving unemployment benefits aren’t quite as desperate as workers without benefits, and are likely to be slightly more choosy about accepting new jobs. The operative word here is “slightly”: recent economic research suggests that the effect of unemployment benefits on worker behavior is much weaker than was previously believed. Still, it’s a real effect when the economy is doing well.

But it’s an effect that is completely irrelevant to our current situation. When the economy is booming, and lack of sufficient willing workers is limiting growth, generous unemployment benefits may keep employment lower than it would have been otherwise. But as you may have noticed, right now the economy isn’t booming — again, there are five unemployed workers for every job opening. Cutting off benefits to the unemployed will make them even more desperate for work — but they can’t take jobs that aren’t there.

Wait: there’s more. One main reason there aren’t enough jobs right now is weak consumer demand. Helping the unemployed, by putting money in the pockets of people who badly need it, helps support consumer spending. That’s why the Congressional Budget Office rates aid to the unemployed as a highly cost-effective form of economic stimulus. And unlike, say, large infrastructure projects, aid to the unemployed creates jobs quickly — while allowing that aid to lapse, which is what is happening right now, is a recipe for even weaker job growth, not in the distant future but over the next few months.

But won’t extending unemployment benefits worsen the budget deficit? Yes, slightly — but as I and others have been arguing at length, penny-pinching in the midst of a severely depressed economy is no way to deal with our long-run budget problems. And penny-pinching at the expense of the unemployed is cruel as well as misguided.

So, is there any chance that these arguments will get through? Not, I fear, to Republicans: “It is difficult to get a man to understand something,” said Upton Sinclair, “when his salary” — or, in this case, his hope of retaking Congress — “depends upon his not understanding it.” But there are also centrist Democrats who have bought into the arguments against helping the unemployed. It’s up to them to step back, realize that they have been misled — and do the right thing by passing extended benefits.

People like Ben Nelson (HuffPo):

For the past several weeks, Nelson has joined the Republican party in filibustering a measure to restore unemployment benefits for the long-term jobless, which lapsed at the beginning of June. The upshot: a legislative debacle that has made the entire Democratic party look ineffectual while 2.1 million people who've been out of work for longer than six months have missed checks. Economists no less mainstream than Mark Zandi, former advisor to Sen. John McCain (R-Ariz.), have said that the failure to reauthorize the benefits could jeopardize the economic recovery.

Deficit reduction is more important, Nelson and Republicans say. The Congressional Budget Office estimated that the original bill to reauthorize long-term unemployment benefits, a broad domestic aid package that also included business tax breaks and state Medicaid money, would have added $134 billion to the deficit over 10 years. When Senate Majority Leader Harry Reid (D-Nev.) first brought it to the floor in June, it failed with a whopping dozen Democrats voting nay. Over the next several weeks, Reid and Senate Finance Committee Chairman Max Baucus (D-Mont.) reduced the bill's deficit impact by adding revenue raisers and doing things like cutting $25 per week from every unemployment check. They got closer and closer in a series of votes, but Nelson joined moderate Republicans in saying the bill was moving in the "right direction" while still voting no. Democrats (except for Nelson) rejected Republican proposals to reauthorize the benefits and offset the cost by cutting spending elsewhere -- something that is generally not done when enacting federally-funded extended benefits during recessions.

Eventually, Reid brought forward a bill just to reauthorize the extended benefits through November at a cost of $33 billion in "emergency spending." Maine Republicans Olympia Snowe and Susan Collins voted for the bill; Nelson didn't, and, with the late Sen. Robert Byrd's seat unfilled, the bill failed by one vote.

Greg Sargent on why House Dems are particularly pissed off right now:

What's really driving the anger is that House Dem leaders feel like they've done a whole bunch of heavy lifting to pass jobs-related measures -- while the Senate and the White House have effectively dithered. And, crucially, it's House Democrats who are likely to pay the price at the polls this fall over this failure.

The House passed an extension to unemployment benefits weeks ago, and have passed a host of other jobs-creation measures, too. But the Senate is stymied on jobs and unemployment. It's true that Republicans are blocking the unemployment extension. It's true that it's easier to pass legislation in the House, where the Dem majority is larger and the procedural obstacles are fewer.

But fairly or not, House leaders feel that the White House and Senate leaders could be doing more to force the issue -- and that Obama could be showing more urgency about jobs and unemployment and driving the Senate harder to take action.

Ultimately, the real irony is it's House Dems who will likely suffer the biggest losses this fall over the ongoing failure to act on this front.

I seriously hope the Dems have a plan for filibuster reform at the start of the next session. If they allow Republicans to continue blocking everything they won't get anywhere. If they survive the midterms priority one needs to be making the Senate a "majority rules" institution.

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