How Trump Happened

Source: RSN

Author: Joseph E. Stiglitz, Project Syndicate

Emphasis Mine

As I have traveled around the world in recent weeks, I am repeatedly asked two questions: Is it conceivable that Donald Trump could win the US presidency? And how did his candidacy get this far in the first place?

As for the first question, though political forecasting is even more difficult than economic forecasting, the odds are strongly in favor of Hillary Clinton. Still, the closeness of the race (at least until very recently) has been a mystery: Clinton is one of the most qualified and well prepared presidential candidates that the United States has had, while Trump is one of the least qualified and worst prepared. Moreover, Trump’s campaign has survived behavior by him that would have ended a candidate’s chances in the past.

So why would Americans be playing Russian roulette (for that is what even a one-in-six chance of a Trump victory means)? Those outside the US want to know the answer, because the outcome affects them, too, though they have no influence over it.

And that brings us to the second question: why did the US Republican Party nominate a candidate that even its leaders rejected?

Obviously, many factors helped Trump beat 16 Republican primary challengers to get this far. Personalities matter, and some people do seem to warm to Trump’s reality-TV persona.

But several underlying factors also appear to have contributed to the closeness of the race. For starters, many Americans are economically worse off than they were a quarter-century ago. The median income of full-time male employees is lower than it was 42 years ago, and it is increasingly difficult for those with limited education to get a full-time job that pays decent wages.

Indeed, real (inflation-adjusted) wages at the bottom of the income distribution are roughly where they were 60 years ago. So it is no surprise that Trump finds a large, receptive audience when he says the state of the economy is rotten. But Trump is wrong both about the diagnosis and the prescription. The US economy as a whole has done well for the last six decades: GDP has increased nearly six-fold. But the fruits of that growth have gone to a relatively few at the top – people like Trump, owing partly to massive tax cuts that he would extend and deepen.

At the same time, reforms that political leaders promised would ensure prosperity for all – such as trade and financial liberalization – have not delivered. Far from it. And those whose standard of living has stagnated or declined have reached a simple conclusion: America’s political leaders either didn’t know what they were talking about or were lying (or both).

Trump wants to blame all of America’s problems on trade and immigration. He’s wrong. The US would have faced deindustrialization even without freer trade: global employment in manufacturing has been declining, with productivity gains exceeding demand growth.

Where the trade agreements failed, it was not because the US was outsmarted by its trading partners; it was because the US trade agenda was shaped by corporate interests. America’s companies have done well, and it is the Republicans who have blocked efforts to ensure that Americans made worse off by trade agreements would share the benefits.

Thus, many Americans feel buffeted by forces outside their control, leading to outcomes that are distinctly unfair. Long-standing assumptions – that America is a land of opportunity and that each generation will be better off than the last – have been called into question. The global financial crisis may have represented a turning point for many voters: their government saved the rich bankers who had brought the US to the brink of ruin, while seemingly doing almost nothing for the millions of ordinary Americans who lost their jobs and homes. The system not only produced unfair results, but seemed rigged to do so.

Support for Trump is based, at least partly, on the widespread anger stemming from that loss of trust in government. But Trump’s proposed policies would make a bad situation much worse. Surely, another dose of trickle-down economics of the kind he promises, with tax cuts aimed almost entirely at rich Americans and corporations, would produce results no better than the last time they were tried.

In fact, launching a trade war with China, Mexico, and other US trading partners, as Trump promises, would make all Americans poorer and create new impediments to the global cooperation needed to address critical global problems like the Islamic State, global terrorism, and climate change. Using money that could be invested in technology, education, or infrastructure to build a wall between the US and Mexico is a twofer in terms of wasting resources.

There are two messages US political elites should be hearing. The simplistic neo-liberal market-fundamentalist theories that have shaped so much economic policy during the last four decades are badly misleading, with GDP growth coming at the price of soaring inequality. Trickle-down economics hasn’t and won’t work. Markets don’t exist in a vacuum. The Thatcher-Reagan “revolution,” which rewrote the rules and restructured markets for the benefit of those at the top, succeeded all too well in increasing inequality, but utterly failed in its mission to increase growth.

This leads to the second message: we need to rewrite the rules of the economy once again, this time to ensure that ordinary citizens benefit. Politicians in the US and elsewhere who ignore this lesson will be held accountable. Change entails risk. But the Trump phenomenon – and more than a few similar political developments in Europe – has revealed the far greater risks entailed by failing to heed this message: societies divided, democracies undermined, and economies weakened.

See:http://readersupportednews.org/opinion2/277-75/39719-focus-how-trump-happened

Morning in America Delivered by Democrats

Democratic presidents presided over higher stock market returns and corporate profits, greater compensation growth and productivity increases.

Source:AlterNet

Author: Leo Gerard

Emphasis Mine

Nine years after the Great Recession began during the tax- and regulation-slashing Bush administration, some startlingly good economic news arrived from Washington, D.C., last week.

The incomes of typical Americans rose in 2015 by 5.2 percent, the first significant boost to middle-class pay since the end of the Great Recession, and the largest, in percentage terms, ever recorded by the Census Bureau. In addition, the poverty rate fell 1.2 percentage points, the steepest decline since 1968.  Also smaller were the numbers of Americans without health insurance and suffering food insecurity.

That sounds good, right? Especially after all it took to pull out of the Bush recession. During the month Bush left office, 818,000 Americans lost their jobs. Unemployment increased to 10 percent before President Obama’s stimulus programs started ratcheting it down to the current 4.9 percent. Now, wages are beginning to rise again. It seems like an event that Ronald Reagan might call morning in America. But not the current Republican nominee. Trump says, “This country is a hellhole, and we’re going down fast.”

To hoist America up out of that bogus hellhole, Trump proposes the same tired-and-untrue tax- and regulation-cutting formula that Bush did. The one that actually did drop the country into a hellhole – the Wall Street collapse, massive foreclosures and high unemployment.

Trump offered yet another tax plan last week – the third of his campaign. This one, just like Bush’s, lavishes tax cuts on the rich. He would hack the 35 percent business tax rate to 15 percent. He would eliminate the estate tax paid only by the nation’s richest 0.2 percent. So, basically, Trump would cut taxes for himself – a 10 billionaire.

In Trump’s previous tax plan, low-income people, those in the lowest taxbracket, would have paid 10 percent, but now Trump makes them pay more. They’ll have to cough up 12 percent.

At the same time, Trump said, he’d eliminate all that pesky government regulation that’s getting in the way of business doing whatever it wants. So, for example, he’d abolish that annoying regulator, the Consumer Financial Protection Bureau. That’s the one that just fined Wells Fargo $100 million, part of a total of $185 million in penalties, for issuing credit cards and opening accounts without customers’ consent, sham accounts that customers learned about only after they started accumulating fees and damaging credit. Republicans like Trump have tried to kill the Consumer Financial Protection Bureau from the day Democrats created it.

By cutting taxes on the rich and letting businesses run roughshod over consumers, Trump claims he would create 25 million jobs over a decade. This is Reagan and Bush trickle-down economics. It worked great for the rich. They got richer and richer. It never worked for the rest. The rest always do better when there’s a Democrat in the White House, as there is now. The Census report issued last week showing progress on wages is testament to that. But there’s more. Far more.

Princeton economists Alan Blinder and Mark Watson found in 2013 that since World War II, the economy performed significantly better under Democratic presidents, regardless of the measurement used. For example, Democratic presidents average 4.35 percent Gross Domestic Product (GDP) growth. Under Republicans, it was 2.54 percent.

Democratic presidents presided over higher stock market returns and corporate profits, greater compensation growth and productivity increases.

Economist Steven Stoft analyzed 72 years of jobs data from the U.S. Bureau of Labor Statistics, during which Democrats controlled the White House for 36 years and Republicans for 36 years. He found that 58 million jobs were created under Democrats and 26 million under Republicans. That means Democratic presidents created more than twice as many jobs.

Significantly, because Trump is telling African-Americans how horrible their lives and their communities and their schools are, and how great he would be as a Republican president for them, a study published by the American Political Science Association found that that over 35 years of Republican presidents, black unemployment rose 13.7 percent. On the other hand, over 22 years of  Democratic presidents, black unemployment fell 7.9 percent.

And here’s another noteworthy fact as Trump runs around claiming he’s going to bring manufacturing back, even though he manufactures his own signature suits and ties and shirts offshore in places like China and Mexico and Bangladesh: Democrats create manufacturing jobs; Republicans destroy them.

Bloomberg news service analyzed data from the past eight decades and found manufacturing jobs increased under each of the seven Democrats and decreased under the six Republican presidents.

Even as employment expanded, manufacturing jobs declined under Republican presidents. The largest losses occurred under Reagan and the two Bushes – an average of 9 percent.

Republicans are bad for jobs. They’re bad for manufacturing. They’re bad for the GDP in general. Trump’s 25 million job promise? Malarkey.

Moody’s Analytics looked at his tax, trade and immigration policies and projected they’d cause a recession and eliminate 3.5 million jobs. That was before he changed his mind on taxes again and released the third plan this week, but it’s virtually unchanged from the previous two, other than costing low-income people more.

Americans should reject Trump’s Republican trickle-down promises that have done nothing for workers in the past but swipe their cash and flood it up in torrents to billionaires like Trump.

Americans who want a job, a raise, improved GDP, more American manufacturing, better health insurance – just improved security in general – should look to the Democrats. They’ve got a long track record of actually delivering on those promises.

Leo W. Gerard is president of the United Steelworkers union. President Barack Obama appointed him to the President’s Advisory Committee on Trade Policy and Negotiations. Follow him on Twitter @USWBlogger.

See:http://www.alternet.org/labor/morning-america-delivered-democrats?akid=14668.123424.ZC9-4u&rd=1&src=newsletter1064138&t=20

Obama Shatters Republican Fantasies By Posting Lower Unemployment Numbers Than Reagan

Source: PoliticsUSA

Author: Jason Easley

Emphasis Mine

Reality bites Republicans again, as the unemployment numbers under President Obama are lower than at any time during the Reagan presidency.

This chart from Matt Yglesias at Vox delivers the stone cold truth:

Vox-reagan-obama

Before Republicans start scrambling for excuses, Yglesias pointed out that labor participation is lower now than when Reagan was in office, but that is due to the fact that the United States is an older country that has more retired people than when Reagan was in office. Labor participation rates have been dropping for decades so blaming Obama for decreasing labor participation rate is both false and disingenuous.

In 2011, President Obama became the biggest tax cutter in history, “Beneath all of the Republican and Tea Party grumbling about taxes, one key fact continues to be ignored. According to the Tax Policy Center, Federal taxes are lower than at any time since 1955. Obama has now reduced taxes by more than any president since Dwight D. Eisenhower.”

President Obama’s 2009 stimulus was the single biggest tax cut in US history:

The Obama tax cut is $282 billion which is larger than the tax cuts of Ronald Reagan, JFK, and George W. Bush. Even worse, Republicans voted against it.

According to the Wall Street Journal, George W. Bush’s first tax cut in 2001 was $174 billion. His second tax cut in 2004 and 2005 was $231 billion. As Steven Waldman of Beliefnet pointed out last week, Obama has kept a campaign promise to cut taxes that few Republicans thought he would keep.

Barack Obama has proven to be a more successful president than Ronald Reagan. President Obama brought the country back from a bigger economic crisis, has a lower unemployment rate, and reduced the deficit instead of shattering the finances of the nation like Ronald Reagan did with trickle down economics.

In the face of Republican obstruction, President Obama has built a lasting legacy of presidential accomplishments.

If you want to make a Republican explode, simply point out that even by their own metrics of success Barack Obama has been a better president than Ronald Reagan.

See:http://www.politicususa.com/2015/09/05/obama-shatters-republican-fantasies-posting-unemployment-numbers-reagan.html

Why No One Can End Reagan’s “Dead Wrong” Voodoo Economics

Source: AlterNet from Salon

Author: Paul Rosenberg

Emphasis Mine

Venture capitalist Nick Hanauer, a highly visible champion of Seattle’s $15/hour minimum wage, wrote a piece in the Atlantic last month pushing on another front in the war against toxic income inequality. “Stock Buybacks Are Killing the American Economy,” he warned, and getting rid of them would be a tremendous boon to the economy.

This latest front rebukes those who say that raising the minimum wage does little to address what ails the American middle class. First, it underscores the obvious: that battling against decades of bad economic policy must necessarily be a multi-pronged affair, with no single action able to solve everything at once. But second, it starkly highlights how much of the problem can be traced to a single source—the profoundly misguided notion that giving even more money to rich people would produce prosperity for all. Instead, the exact opposite has happened. That’s why the attack on stock buybacks is an even more profound attack on economics as usual, even if it, too, only represents one facet of what has to be a multi-faceted approach. Corporate profits have doubled since the post-World War II boom years, from an average of 6 percent of GDP to more than 12 percent today, Hanauer pointed out, and yet “job growth remains anemic, wages are flat, and our nation can no longer seem to afford even its most basic needs.” Stock buybacks—which (as explained here) were virtually forbidden from 1934 through 1982—are a key reason why our economy is so cash-starved when it comes to wealth-producing investments:

Over the past decade, the companies that make up the S&P 500 have spent an astounding 54 percent of profits on stock buybacks. Last year alone, U.S. corporations spent about $700 billion, or roughly 4 percent of GDP, to prop up their share prices by repurchasing their own stock….

It is mathematically impossible to make the public- and private-sector investments necessary to sustain America’s global economic competitiveness while flushing away 4 percent of GDP year after year.

Hence, Hanauer argued, it’s time to end stock buybacks—they are crippling our ability to grow our economy robustly. Along the way, Hanauer also sharply criticized what he called “the 40-year obsession with ‘shareholder value maximization’” [SVM] as the narrow-minded definition of corporate purpose, which has been used to justify, rationalize and obfuscate the buyback explosion, and other ills of corporate misgovernance that have become commonplace in the post-1980 era.

Hanauer has plenty of company raising this argument and his critique of SVM, from UMass economist William Lazonick writing in the Harvard Business Review (“Profits Without Prosperity”) to a book by Cornell Law School’s Lynn Stout (“The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public,” author’s overview here),  to the white paper Hanauer himself cited, titled “The World’s Dumbest Idea,” by GMO asset allocation manager James Montier, to a 2014 report from the Aspen Institute, cited by Steve Denning of Forbes, noting it “showed that thought leaders were coming to the same conclusion [questioning SVM]. In a cross-section of business leaders, including both executives and academics, a majority, particularly corporate executives, agreed that the primary purpose of the corporation is not to maximize shareholder value, but rather ‘to serve customers’ interests.’”

With all this criticism out there—from corporate governance obersevers and participants in alike—and the strength of the supporting data, it seemed a bit strange to see a March 2 Wonkblog post by Max Ehrenfreund jarringly titled “The fringe economic theory that might get traction in the 2016 campaign,” particularly since the post itself treated both Stout and Hanauer quite seriously.  “In what universe is this argument ‘fringe’?” Lawyers Guns and Money blogger Robert Farely tweeted, retweeted by UC Berkeley economist Brad DeLong. The title was even stranger in light of a September 2013 Wonkblog post by Steven Pearlstein, straigthforwardedly titled “How the cult of shareholder value wrecked American business.”

But it’s certainly true that you can’t reliably tell fringe from mainstream in economics anymore, especially if you’re trying to track ideas through shifting reference frames. Defaulting on the debt in order to be “fiscally conservative,” anyone?  That fringe-of-the-fringe-of-the-fringe idea very nearly became reality and still might, do so again later this year.

More fundamental, it seemed to me, was the underlying ongoing battle over how economic arguments and analysis are framed, and why that matters—a battle much broader and longer than the 2016 campaign. So I contacted Hanauer, and asked about how he had framed his his article—which in turn was a critique of how Obama had framed his comments on income inequality in his State of the Union speech. At the beginning of his article, Hanauer wrote that Obama “missed the opportunity to draw an important connection between rising income inequality and stagnant economic growth.”  So I asked him what that connection was, why is it so important, and what could be done about it.  In his view, Obama saw extreme inequality as wrong in moral terms, which resonates well with his base, but failed to grasp that it was wrong economically as well, which could resonate much more broadly.

“The problem I highlighted was that President Obama didn’t offer an alternative theory of growth,” Hanaauer said. “He could have, but he didn’t. He’s given six state of the unions, talked a little bit about inequality, he’s made some moral arguments about how it’s bad, he has not once offered an alternative explanation for how an economy like ours grows. And and so if you’re not willing to litigate the methods of growth, then you’re ceding that to the other side.”

It’s not just Obama, in Hanauer’s view. “This is what progressives have done for generations, is that we ceded to the other side that the rich are job creators; we ceded to the other side that less regulation equals more growth; we ceded to the other side that if wages go up, then employment goal go down. And then we wonder and complain about the policies that flow naturally and logically from that set of baseline assumptions. That’s the problem,” he said—a failure to contest the basic framework of economic thought. Hanauer has challenged that framework, with what he calls “middle-out economics”, which was the subject of the summer 2013 issue of Democracy.

He made the same point again, about the failure to contest fundamentals, with a slightly different emphasis and explanation. “The problem with our politics is President Obama and the people who surround him, don’t represent an alternative to trickle down economics, they are trickle-down-lite,” Hanauer told me. “They’re sort of kinder-and-gentler trickle-down economics. They can talk a little bit about the importance of the middle class, but, in my opinion, they haven’t quite seen clearly that they’ve gotten cause-and-effect reversed. They still think that a thriving middle class is an effect of growth, a consequence of growth, and the truth is in a technological, modern economy, a thriving middle class is the cause of growth…. The middle class creates rich people, not the other way around.”  This used to be well-understood by everyone. During America’s long post-World War II boom, the incomes of all levels growing approximately equally—though slightly slower at the very top. “That’s how you sustain virtuous cycle of increasing returns which capitalism can be. Capitalism can be constructed in a way so that everyone does better all the time. It’s a beautiful thing,” Hanauer said. “But if the power dynamics change in really extreme ways, as they have in the last 30 years, and all of the value of enterprise is sucked out by a few owners and the senior managers, then you basically killed the goose that layed the golden egg.” That’s what stock buybacks are all about.

In the article he talked about the doubling of corporate profits from 6 percent of GDP traditionally to 12 percent of GDP today. But now he added another wrinkle: this happened “at the exact same time as labor as a percent of GDP has fallen 6 percent, 53 to 46 or something like that. So, it’s $1 trillion. That extra trillion dollars isn’t profit because it has to be, or should be, or needs to be. It’s profit because powerful people like me prefer it to be. That trillion dollars can go to wages, it could go to discounts to consumers, it could be used to finance the construction of whatever you think of.” Instead, most of it’s going into stock buybacks, “$700 billion a year, 54 percent of profits, 4 percent of GDP,” Hanauer repeated.”It’s just sort of a nefarious and non-transparent way for very rich people to make themselves richer, at the expense of everybody else.”

But stock buybacks make perfect sense in the framework of trickle-down economics, so Hanauer took a moment to describe that logic:

Neoclassical economics and the trickle down policy framework that we have derived from it argues that there is a trade-off between fairness and growth. The general idea of trickle down economics is that the richer the rich get and the less constrained they are, less burdened in regulations, the more jobs they create, the better off everyone will be. It’s the concentrated accumulation of capital which is the principal driver of market capitalism.. So, rising economic inequality isn’t a bug, it’s a feature of the trickle down economics. It’s how you know things are getting better, right? Because the richer the rich get, the more jobs they create. This is a general principle of the thing.

There’s only one problem: It’s “dead wrong,” Hanauer said flatly. And it’s based on the wrong sort of mathematics—like using addition to try to multiply and divide. “The economy isn’t this linear equilibrium system, it’s a complex, nonlinear, nonequilibrium systems, and is best understood not mechanistic terms, but eco-systemically.” Nonlinear, nonequilibrium mathematics is a good deal more difficult and complex than the math used by neoclassical economists. But the qualitative picture it paints is not that hard to grasp, as Hanauer explained it:

Once you see it eco-systemically, what you can see quite clearly is that arguing, for instance, that if wages go up employment will go down would be like arguing that if plants grow animals will shrink, right? Literally, that’s silly.

On the contrary, businesses essentially eat the wages of workers, right? They subsist on the wages of workers, and so obviously, to a reasonable degree, the more wages rise, the more businesses—again, pressing the metaphor—have to eat. And that’s why the fundamental law of capitalism is that if workers have more money businesses have more customers, and need more workers.

With that in mind, the folly of trickle-down economics comes sharply into focus, as Hanauer highlighted next:

What’s very clear, is that when you concentrate income in fewer and fewer hands, you’re essentially killing that feedback loop. You create a vicious cycle. The typical worker to maintain their share of income over the last 30 years, as you well know, the median wage wouldn’t be $50,000 it would be something like $75,000. If that was true,, think about how many more cars who be purchased every year in this country. There are 3 percent of Americans who own exactly the car that they want, but the other 97 percent would like a new one!

In short, Hanauer summed up, in a technological capitalist economy, growth “isn’t a consequence of concentrating capital in the hands of a few people, and hoping it will trickle down,” rather it’s “a consequence of the feedback loop between increasing amounts of innovation and entrepreneurship and demand.” And that, in turn made Hanauer’s criticism of Obama’s missed opportunity crystal clear:

When you see it that way, when you explain where growth comes from, in a realistic way, then you can see that inequality isn’t just unfair, it’s actually terrible for the economy and for business. And that’s the opportunity that Pres. Obama missed. Because he is surrounded by trickle-down thinkers who still sort of secretly believe that if we just made rich people richer, that would be fine.And this explains for instance, why it took the Obama administration six years to even notice that they had the ability, for instance, to increase the overtime threshold. Inquiring minds want to know, why it took them six years. And, by the way, that somebody else had to point it out.

This also explains Obama’s timidity regarding in the minimum wage, Hanauer said:

This explains why President Obama, in his last State of the Union, thought a $9 minimum wage would be a big step in the right direction, and that’s because, again if you’re captured by this trickle down view, the only reason you increase wages for poor people is because you feel sorry for them, as a matter of social justice. But once you realize that trickle down economics isn’t true and that middle out economics is true, raising wages for low-wage workers is the quickest and fastest way to drive business activity. That’s why we [in Seattle] ended up at $15.

The problem with Obama’s thinking is not so much Obama himself, but the whole entourage of policy people surrounding him. “Trust me, these guys all got PhD’s in economics in the same places, they all learn the same crappy neoclassical ideas, they are captured by them, and they can’t get out of their own way,” Hanauer said. “And I think that’s the big problem. They don’t know how to make this argument because they are so wedded to these old stale ideas. Even if they say they’re not. But they are!”

There are rays of hope, however. The Wonkblog “fringe theory” story also cited a recent “Report of the Commission on Inclusive Prosperity,” sponsored by Center for American Progress [CAP] and co-chaired by former Treasury Secretary Larry Summers, long a poster boy for that sort of thinking who has apparently begun to change his tune. The very notion of “inclusive prosperity” indicates a more hopeful policy direction, and the report itself recognizes the need for actions on multiple fronts, including stock buybacks. Overall, Hanuer said he’d give the report “a B or a B+, because it’s pointed in the right direction…. I don’t think there’s a policy in it I would change, I just think there’s a way to more forcefully articulate for people how you grow a modern economy, that is much less a moral argument, and much more a practical, growth-based argument.”

Although not involved with the report, Hanauer is part of the conversation informing it. “I”m deeply involved in CAP,” he said. “There’s a middle-out economic center at CAP, and the inclusion argument is something we’ve been driving.” But he keeps coming back to talking about growth the way you’d expect a venture capitalist might.  “Growth, in technological capitalist economies, is a consequence of the feedback loop between increasing amounts of innovation and increasing amounts of demand. And the mechanism that drives that feedback loop is inclusion. Inclusive economic policies are the thing that create growth. The more people who are included as innovators and entreprenuers, and the more people who are included as robust consumers, the better the thing goes.”

The task ahead is a daunting one, Hanauer admits. “There’s a huge amount of economic nonsense that needs to be cleared away,” he said. For example, “You have a Speaker of the House of Representatives, John Boehner, who can get up until the crowd and say, ‘You know, if you raise the price of employment, guess what happens, you get less of it.’ And most people in this country nod in agreement, right? Idiotic! It’s just not true. And until political leaders are willing to face him down and face that idea down, and point out the obvious, which is that it’s the opposite is true, essentially, that when the workers earn more money businesses have more customers, you’re in this trap, you’re just in this trap.”

One could cite this as a classic example of hegemony—the expression of a dominant ideology in drag as common sense, facilitated by a vast array of different institutional forces. The great irony is that while the concept of hegemony, and hegemonic warfare to challenge the existing hegemonic order, was developed by a famous leftist, the Italian Marxist Antonoio Gramsci, the practice of hegemonic warfare in America over the past half century or more has been almost exclusively seen on the right.

Centrist or center-left think tanks, for example, are largely focused on analysing problems and proposing “politically viable” solutions, primarily by integrating findings generated by academics. But rightwing think tanks use a completely different model. Their purpose is not to try to solve existing problems, but to continually shift the framework of acceptable solutions ever farther to the right. They aim to change the very definition of what counts as “politically viable”, whether it actually solves anything or not. Advocacy, messaging, media outreach and political collaboration are the core activities of think tanks using this model, problem-solving plays virtually no role at all.  If something doesn’t work, simply suggest something else, even farther to the right than what’s already failed. Failure can actually be more valuable than success—it can accelerate the process of moving the conversation ever farther to the right.

This model was most clearly articulated on the state level, starting at the Mackinac Center in Michegan, where the model of the “Overton Window” was developed as a way to think very specifically about shifting the framework of acceptable ideas continually farther to the right. But the same sort of calibrated, ideologically premeditated thinking can be found throughout the rightwing foundation and think-tank world, while it remains extremely rare on the center-left.  A big-picture view of how this has unfolded in the realm of economics can be found in Kim Phillips-Fein’s bookInvisible Hands: The Making of the Conservative Movement from the New Deal to Reagan.”

This history has also undoubtedly played an important role in shaping how most Americans—academics, politicians, journalists, everyday people—think and talk about economics without even realizing it, the subject of implicit cognition dissected by cognitive linguist Anat Shenker-Osorio in her book, “Don’t Buy It: The Trouble With Talking Nonsense About the Economy” (my review here). Shenker-Osorio found that conservatives share a much more coherent, broadly shared—if questionable—view of what the economy is and what it’s for than progressives do, reflected in part by the sorts of metaphors used when talking economics. As I wrote in my review, “Conservative models tell us that the economy is autonomous (most typically, a self-regulating body) and morally demanding – a view encapsulated in an episode of ‘South Park’ [‘Margaritaville’],” in which the market is portrayed as an angry god, an example cited prominently in the book.  These shared implicit models in turn profoundly influence what may seem like “common sense,” while no single progressive model has nearly as much salience.

All this history and social science helps explain why the complete failure of trickle-down economics over the past 35 years—culminating with the financial crisis and the Great Recessiondid not result in any sort of systemic rethinking from the left, but rather unleashed an profound resurgence of even more ancient, previously discredited ideas from the right, most notably the cult of austerity, which is still strangling  governments and economies around the world.

Still, the power of a single good real-world example remains extremely potent, which may explain why Hanauer loves to talk about what’s happening in Seattle, where he lives:

Washington state has the highest wage of any state in the nation. If Speaker Boehner was right, we would be sliding into the ocean. And yet, Seattle is the fastest-growing big city in the country. Washington state has the highest small business rate of small business job growth in the country. And this is because workers here earn enough money so that they can afford to shop at stores. It’s positive feedback loop.

In fact, Hanauer points out, part of their strength has been doing the most for those who are otherwise helped the least—tipped workers:

In Washington State, tipped workers, who make up a big proportion of the low-wage workforce, earn $9.47 plus tips. So that’s I think it’s like 440 percent more than the federal tipped minimum of $2.13 plus tips. That’s not 4% more, that’s not 40% more, it’s 440% more. So, if the trickle-down economic idea was true, that these sort of his extravagant wages would destroy businesses, restaurants and so on…. And yet, there is no more faster growing city in the country than Seattle, and there isn’t a restaurant industry is going crazier than Seattle. It’s not. It’s booming. You can’t get a table. And here’s why, because, when restaurant workers earn enough so that even they can afford to eat in restaurants, it turns out that’s good for the restaurant business, despite what the Restaurant Association may tell you.

Hanauer is extremely good at what he does, which is communicate ideas, a vision. But the history Phillips-Fein unearths in “Invisible Hands” strongly indicates that communication alone is not enough, any more than ideas in ivory tower isolation are. Institutions must be built to sustain, enhance and shape future communications. As I put to Hanauer, “It seems to me that that’s what happened on the other side, they have this theory of trickle-down economics, which is not really good for most people; it’s bad for them. And yet they built a political machine that engages them, swallows them up, even. So what I’m asking is what we do to build the political machine that works on behalf of what works.”

Rather than answering directly, Hanauer doubled down on his message. “You have to be able to define, in concrete terms, what your alternative theory of growth is. I submit to you – and I know this sounds self-aggrandizing – but no one on our side, can explain to you as succinctly and clearly where growth actually comes from than me and my gang. When I say growth in technological capitalist economies is a consequence of the feedback loop between increasing amounts of innovation and demand, that’s a theory of growth. So, you find me a Democratic leader whose said anything like that, find one, you’ll find lots of complaints, you’ll find lots of great attacks. So, our theory of the case is that until we can get people to recognize how these technological economies actually grow, and unite people around an alternative to the trickle-down economics idea, until you do that, you cannot build the machine. Once you do that, then the machine part’s easy.”

Of course Hanauer’s right to say that complaints far outnumber alternative solutions. That’s a balance that needs to shift dramatically, and Hanauer is leading the charge. But despite his acumen and his eloquence, there is no magical one-size-fits-all way of communicating ideas and insights, no matter how true or beneficial they may be. The right has long realized this, and organized itself accordingly. And the landscape of unconscious assumptions, models and metaphors strongly favors them as well. Hanauer may well have the message we need, and he’s brilliantly highlighted what’s been lacking in even Obama’s most progressive moments more clearly than anyone else. But the medium in which that message can spread to everyone—that’s a whole other can of worms that’s still crying out to be explored. Now that Hanauer has articulated that message so clearly, the time is ripe for others to step forward and take on that work as well.

 

Paul H. Rosenberg is senior editor at Random Lengths News, a biweekly serving the Los Angeles harbor area. He runs the site Merge Left, a community of progressive thinkers free to submit their own content.

 

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See: http://www.alternet.org/economy/rigged-economic-system-why-no-one-can-end-reagans-dead-wrong-voodoo-economics?akid=12917.123424.Q6MHDc&rd=1&src=newsletter1033595&t=13

When it comes to trickle-down economics, everyone’s got a right to their own opinion but not their own facts

Source: WashPost

Author: jared Bernstein

(Jared Bernstein, a former chief economist to Vice President Biden, is a senior fellow at the Center on Budget and Policy Priorities and author of “Crunch: Why Do I Feel So Squeezed?” among other books.)

Emphasis Mine

When evaluating economic policies, the value of fact-based argument cannot be overstated. If we’re arguing about our favorite film or restaurant, by all means, let’s hear your opinions. But if we’re evaluating the impact of Kansas Gov. Sam Brownback’s deep tax cuts on economic outcomes in the state, it’s critical to get the facts right.

That’s why parts of this radio show debate on the “To the Point” show last week were intensely frustrating. Myself, my CBPP colleagues and various journalists/editorialists have looked at the claims that Brownback’s strong pivot to trickle-down tax cuts have benefited the state and found them wanting.

So I was struck by this exchange on the show between guests Amity Shlaes and Thomas Frank.

Shlaes: [referencing BLS data] “Kansas has unusually low unemployment – its neighbors have higher unemployment. That’s a good sign – it says there’s some sun shining in Kansas.”

Frank, responding: “I’m at my desk looking at [presumably] the same BLS page … and Missouri has growth year over year ending in August of 1.6% and Kansas only 1.1%.”

The moderator then pivots to whether Brownback can garner support on cultural issues, leaving listeners in that all too familiar position of having no idea who’s right about an important fact: Is there or is there not evidence that the Kansas tax cuts boosted their employment outcomes?

A moment’s thought should lead one to reject the unemployment level cited by Shlaes as not relevant. Listeners don’t know whether that level is higher or lower than that which prevailed before the cuts were in place, and, more importantly, how the Kansan unemployment trend compares to that of neighboring states that share similar economic trends but didn’t pursue the same tax-cutting agenda. In fact, since the tax cuts went into effect, unemployment is down 0.7 percentage points (ppts) in Kansas (since the cuts went into effect in January 2013, this comparison is from December 2012 until the most recent data point, August of this year). Looking at surrounding states, that’s the same decline as Oklahoma, worse than Colorado, and a little better than Missouri and Nebraska. Combining those four states that surround Kansas, unemployment fell 1.1 ppts compared to Kansas’s 0.7. The national decline over this period was 1.8 ppts.

In other words, unemployment fell less in Kansas than in the combined neighboring states, and a lot less than in the nation.

Employment growth over this period has been 1.8 percent in Kansas, 2.9 percent in the surrounding states, the latter of which is about the same for the nation — 3.1 percent — suggesting Kansas to be a negative outlier.

And nobody, including Shlaes, denies that tax revenue is down sharply in the state as the result of the tax cuts, both in absolute terms and relative to other states, as shown in the figure below.

In regard to the state’s revenue losses, Shlaes argued that it takes time for an experiment like this to work. What went unmentioned was that states have to balance their budget deficits every year, meaning they have to cut services, most notably education, while waiting for the experiment to bear fruit. And based on the history of supply-side, trickle-down tax cuts, Kansans are likely to be waiting a long time for the bars in the above figure to realign.

That’s not the extent of the false claims that went unanswered during the show. Steve Moore from the Heritage Foundation, after noting that it was he and Art Laffer who lobbied Brownback to try this experiment, argued that state tax cuts were a good way to lure people to move to your state: “You’re seeing a pretty massive change in migration, especially the states like Texas and Tennessee and Florida and other states that have low taxes … and that’s kind of the pitch we made to Sam Brownback, and he bought into it.”

Again, my CBPP colleagues have taken a deep, substantive dive into this question, and found little relationship between tax cuts and migration. Mike Mazerov concludes, for example, that “differences in tax levels among states have little to no effect on whether and where people move, contrary to claims by some conservative economists and elected officials.” In fact, using the same data on which Moore and Laffer base their claims, Mazerov finds that “the raw data — confirmed by a series of careful academic studies — show that for the vast majority of people — including the vast majority of the rich — tax levels are a minor consideration [in relocation decisions] or completely irrelevant.”

This makes sense if you think about the Kansas case for a moment. As Frank notes in the interview, many Kansans highly value their system of public education, and as the revenue losses are felt in the schools, they’re expressing great discontent with the trickle-down experiment. Mazerov’s findings likely stem from the fact that there are many people

who don’t want to move to places with deteriorating public services.

Full disclosure: I’ve been on the “To the Point” show and it’s usually a smart and engaging discussion. And a good debate requires the representation of different viewpoints. Moreover, aside from the revenue results which really are dispositive, I’m not claiming that these differences in employment outcomes over relatively short periods are the final word.

They are, however, relevant factoids to add to the debate, and it is essential to get them right. The punchline here goes well beyond one show where a few numbers were abused. When, regarding hard facts, listeners hear one person say “A” and the other say “not A,” and the difference remains unresolved, they justly conclude, “Oh well, who knows? I might as well make my political choices based on stuff that doesn’t involve an intermediary, like: Would this be someone with whom I’d like to go out for a beer?”

What can be done? Newspapers have fact checkers. While they, too, make mistakes, on net they’ve been a real positive when it comes to these sorts of straightforward claims. Of course, neither radio hosts nor their staffs can do real time fact-checking.

So I’ve got a proposal. When there’s a disagreement about a basic fact, like the one regarding job growth between Frank and Shlaes, the moderator should flag it and tell listeners that they’ll check the sources and post the result on their Web site shortly after the show.

Furthermore, if someone is a serial offender who constantly makes up “facts” to support their case, it should be noted that they won’t be invited back. We all make mistakes, myself at the top of the list, so I’m not suggesting the banishment of anyone who cites an incorrect number on occasion. I talking about those who consistently reveal a disregard for facts.

My strong sense is that while this will require some time and resources — though less than you’d think as it’s not that often that you have such clear-cut, factual disagreements — it will pay off in a boost in credibility that will benefit these shows and maybe even grow their audience.

And I’m sure it will help our other big experiment, the one involving democracy.

 

See:http://www.washingtonpost.com/posteverything/wp/2014/10/13/when-it-comes-to-trickle-down-economics-everyones-got-a-right-to-their-own-opinion-but-not-their-own-facts/?tid=hybrid_1.0_strip_2