Why is Paul Ryan still considered a “serious” person…when he suffers from DCFS?

After a brief hiatus, Badger Democracy is back. We’ll get to Paul Ryan and deficit hawks in a moment, but first, some announcements.

Thanks to all followers of Badger Democracy for your comments and participation in 2012. 2013 will be a critical policy year in Wisconsin, so continue to stay informed and engaged in the democratic process. To that end, Badger Democracy will focus on media coverage of political events in Wisconsin, and look to fill the void, offering media criticism when and where appropriate.

Next, Congratulations and welcome back to Sly! There will again be a little balance on political talk radio in the state. Sly is taking over afternoon drive time with a three state on-air reach (Wisconsin, Illinois, Iowa), and worldwide on the web. Starting February 4th, Sly will be heard from 3 – 6:30pm, Monday – Friday on 93.7 WEKZ-FM. Updates and archived segments will be available on the revamped “Sly’s Office.” Watch out Rahm and Pat Quinn, Sly can now be heard in Illinois…

Now, for Mr. Ryan. Congressman Ryan rejoined the ranks of “serious people” on Sunday, joining Greg Neumann on Capitol City Sunday. The Congressman from the 1st District of Wisconsin continued his litany of deficit reduction being of greatest importance to the fiscal health of the nation. Unfortunately for Mr. Ryan, he is suffering from DCFS – Deficit Crisis Fear Syndrome.

The President got his tax increase.  That pays for about five percent of the deficit, (and) spending is the ultimate part of the problem here that we have to deal with.  The President has been trying to hide, or stay away from a conversation about spending.  We gotta deal with spending.

I want to do this in a responsible way, but I do not want to let an opportunity slip by to get a control on spending, which we so desperately need if we’re going to prevent a debt crisis.

Classic DCFS (Deficit Crisis Fear Syndrome). If using serious language is the new standard for being taken seriously, our nation is in serious trouble. The media in Wisconsin needs to read the memo from real economists, and see through the talking points. The deficit is not our biggest problem. Chronic, long term unemployment is our biggest problem. What the new breed of conservatives refuse to acknowledge is that by creating real, family-supporting jobs and an increase in revenue, our deficit problem will be solved.

Brad DeLong illustrates the point rather nicely today.

…policies to reduce the deficit in the short run–before 2016, say–are highly, highly likely to actually increase the long-run burden of the national debt. Even making the unlikely assumption that deficit reduction in the near future would reduce rather than increase the long-run burden of the debt, the fact is that the debt-to-GDP (Gross Domestic Product) ratio is now stable until at least 2020. A lower debt-to-GDP ratio would be a good thing in the long run, but there is absolutely no urgency. And there is enormous urgency in getting the economy moving again. (emphasis added)

“Moving again…”- as in investment to create those illusive, family-supporting jobs that pay more than $15/hour. The truth about the deficit is, that with the current growth of the economy (as slow as it is) and recent revenue measures, the debt-to-GDP ratio is already beginning to stabilize. Paul Krugman posted the Center for Budget and Policy Priorities graph last Thursday:

Image

 

The vertical line represents the projected debt as a percentage of GDP. Each colored line projection represents a different scenario affecting the deficit. Krugman breaks down the analysis:

The blue line at the top represents the projected path of that ratio as of early 2011 — that is, before recent agreements on spending cuts and tax increases. This projection showed a rising path for debt as far as the eye could see.

Conservatives are framing the discussion as if that dark blue line represents the current fiscal reality, because it re-enforces DCFS (Deficit Crisis Fear Syndrome)…but that is not the truth of the situation. Krugman continues:

The orange line shows the effects of those spending cuts and tax hikes (Budget Control Act 2011, American Taxpayer Relief Act 2013): As long as the economy recovers, which is an assumption built into all these projections, the debt ratio will more or less stabilize soon.

“The debt ratio will stabilize soon.” The CBPP advocates for an additional $1.4 trillion in combined revenue and spending cuts, represented by the red line. As a frame of reference, in 2010, debt-to-GDP exceeded 100% and has been on the decline – dropping to about 72% in 2012:

Based on the factual data, not Paul Ryan’s DCFS talking points, the deficit situation, even without any additional revenue or cuts, is stabilizing. It has been stabilizing since early 2011, a fact that is consistently ignored as the media continues allowing Ryan and company to get away with promoting their DCFS talking points.

The runaway debt crisis talking point is something that should be relegated to the 2012 election dustbin. The focus should really be jobs that get the economy moving again, and investment to make that a reality.

With all due respect to Greg Neumann, who is one of the best political reporters in the state, I would suggest referencing the final point from Krugman for his next interview with a conservative who attempts propagating Deficit Crisis Fear Syndrome (DCFS):

  …at this point reasonable projections do not, repeat do not, show anything resembling the runaway deficit crisis that is a staple of almost everything you hear, including supposedly objective news reporting.

Fear never solved anything. Paul Ryan and company need help getting over DCFS-Deficit Crisis Fear Syndrome, so we can get down to something REALLY serious – solving our long-term unemployment problem.

 

 

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Current Job Drought is disastrous for economy, Wisconsin…and disproves Walker, GOP ideology

Wisconsin lost 11,700 private sector jobs in June. Including 1,500 jobs lost  in the Government Sector, the total is a dismal 13,200 – the most in 11 months. The unemployment rate is poised to rise from 6.8% to 7.0%:

The report clearly had an impact on the Walker Administration. Department of Workforce Development (DWD) Secretary Reggie Newson sent a letter to Bureau of Labor Statistics Commissioner John Galvin, blasting the agencies accounting methods – in essence, because they make the Walker Administration look bad:

“From the college graduate contemplating which state to launch a career to the business owner analyzing whether to expand at home or elsewhere, people across our state and nation are making major life decisions based on this information and, collectively, these decisions have an impact on our overall economy.”

Walker, his administration, and Conservative Republicans will never solve this unemployment or economic crisis. They will instead continue to distract; casting doubt about the survey methods previously heralded by Walker, when those numbers makes him look good. The facts, however, are this – Walker and conservatives nationwide are staking their economic policy about job creation on a lie. The result will be a deepening economic, and worse, unemployment crisis.

The economic myth that says “lower taxes on the job creators” will result in job creation is at the forefront of GOP campaigns this year. US House Majority Leader Eric Cantor has the claim on the “jobs” page of his website:

Fix the Tax Code to Help Job Creators:

  • Increase American competitiveness to spur investment and create more American jobs by streamlining the tax code and lowering the tax rate for businesses and individuals including small business owners to no more than 25%.

The right-wing answer to our chronic jobs problem is to cut the top rate to 25%. Here’s the problem – tax rates for the wealthy and “job creators” have been decreasing for decades. This writer (and other’s) question to conservatives…Where the h*ll are the jobs? There can be no more doubt that this economic philosophy is a failure.

In a recent blog, Paul Krugman summarizes the fundamental issue:

Tax rates for the super-elite, the top .01%, have fallen in half since Mitt Romney’s father ran for president; or to put it differently, after tax income for this group has doubled due to policy alone. And bear in mind that the US economy flourished just fine under those 60-70 tax rates

A table from a 2007 study published in the “Journal of Economic Perspectives” shows the “job creators” benefitting from decreased progressivism in the tax code:

Noteworthy is while the top tax rates have been cut nearly in half, the tax rate for the middle 60-90% (the functional middle class) has INCREASED by 25-33%. In Wisconsin, Scott Walker made tax cuts for the wealthy and corporations his first priority as Governor. With all this additional income in the hands of the “job creators,” where are the jobs? Wisconsin in particular has had a trend of lowering tax rates on top-tier earners. The top marginal personal income tax rate from 1979 – 1985 was 10%. In 2009, the rate was 7.75% (Legislative Fiscal Bureau). This represents a combined (state and federal) 42.25% tax cut for the top-tier earners since 1979.

The current unemployment situation reflects that additional income in the hands of top-tier wage earners has done nothing to spur job creation – in fact, in Wisconsin, there is virtually zero growth in jobs. Evidenced by the recent BLS data, there are 15,200 fewer people employed from May 2011-May 2012; and only 8,000 more than May 2010:

State employment 2010-2012

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2010 2716.9 2714.5 2718.0 2725.3 2728.0 2723.0 2727.2 2731.5 2729.4 2740.9 2743.0 2740.8
2011 2744.8 2750.2 2754.5 2753.4 2751.5 2742.5 2738.8 2729.0 2734.0 2731.2 2719.4 2719.8
2012 2725.0 2735.1 2737.9 2733.7 2736.3

 The unemployment rate ticked up to 6.8% in May, and as reported above, to preliminary 7.0% in June:

State unemployment rate 2010-2012

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2010 9.2 9.1 9.0 8.8 8.6 8.4 8.3 8.2 8.1 8.0 7.9 7.8
2011 7.7 7.6 7.6 7.5 7.6 7.6 7.6 7.6 7.4 7.3 7.1 7.0
2012 6.9 6.9 6.8 6.7 6.8

The Walker Administration has pointed to the decline in the RATE as being the benchmark that his policy is  “working”, but there is data which disputes their claim. The “Labor Force” data points to a bigger problem – chronic long-term unemployment. People dropped from the system due to benefits expiring; or those who do not qualify for benefits are not reported in the unemployment rate. The Labor Force data for Wisconsin shows this is a real and persistent problem. Since 2010, the number of people in the eligible workforce has remained basically flat. There have been modest gains and losses, but no expected trend upwards:

State Labor Force 2010-2012

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2010 3096168 3099651 3099906 3096209 3089619 3082208 3075845 3071277 3068599 3067648 3067750 3068342
2011 3069656 3070780 3070312 3067707 3063898 3060386 3058088 3057357 3057366 3057248 3056534 3056367
2012 3054610 3059442 3064447 3069130 3075391

Wisconsin averaged a .9% annual increase in workforce population over the past two years (US Census Data), roughly 1%. A drop in labor force of over 14,000, when population increases would predict an increase of 60,000 means one thing – more people are dropping out of the workforce, and are not reported in the unemployment rate. Any job growth is not keeping up with the increase in workforce, and it leads to one conclusion.

The arrogance and ideology of Scott Walker and the conservative Republicans are preventing them from admitting to economic policy failure. The reduction of taxes for the “job creators” has been occurring for decades. High taxes on “job creators” is not our problem. As previously stated by economists worldwide, the deficit is not our primary problem – weak consumer demand and unemployment are our problems. Put people back to work and increase demand for goods among the middle class, and the economy will recover; deficits will decrease, the economy will recover.

A note to Walker and his allies. You can’t run government like a business. Managing a “micro” economy like a corporation (no matter how large) is no comparison to running a complex, interconnected, “macro” economy of a state or national government. Many people have trouble grasping the difference in complexity between even the largest business and a national economy.

The U.S. economy employs 120 million people, about 200 times as many as General Motors, the largest employer in the United States. Yet even this 200-to-1 ratio vastly understates the difference in complexity between the largest business organization and the national economy. A mathematician will tell us that the number of potential interactions among a large group of people is proportional to the square of their number. Without getting too mystical, it is likely that the U.S. economy is in some sense not hundreds but tens of thousands of times more complex than the biggest corporation. (Harvard Business Review, January/February 1996)

Stop fighting about the numbers and govern…but we won’t hold our breath. We’ll be looking for your replacements.

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Economic Recovery…as easy as accepting truth – and rejecting the austerity lie

Scott Walker, Mitt Romney, Paul Ryan, Ron Johnson…and any other right-wing ideologue need do one simple thing to really begin moving this economy forward. Accept the economic facts of our current situation, and admit to the failure of austerity – ever. Easier said than done. To the likes of Ryan et al, the cause of austerity is a religion. A religion being written and funded by the few multi-billionaires who stand to amass further power and influence; all while the middle class collapses under the weight of an entirely preventable depression. How else does one justify their behavior in light of fact? Ideology and religious crusade are the only explanation to the blind faith of austerity they now follow to the cliff.

We need not plunge into the abyss – economic recovery is a relatively simple matter. There is historic precedence, and some of the best economic minds in the world have defined the solution recently.

A MANIFESTO FOR ECONOMIC SENSE” was published last week by Jonathan Portes, Paul Krugman, Barry Eichengreen, Simon Wren-Lewis, Brad DeLong, and John Van Reenen. The “Manifesto” is written to dispel the factual and historical inaccuracies behind worldwide austerity measures. Proponents of austerity have relied on 1930′s economic policy, which is rife with “profound errors” about the causes, nature, and response to the current crisis.

The CAUSE of this crisis is not (as the right supposes) “irresponsible public sector (government) borrowing”, with very few exceptions (one being Greece). The factual CAUSE was excessive, unregulated  PRIVATE sector borrowing and lending, and over-leveraged banks. The collapse of this private sector “bubble” led to massive falls in output (tax revenue). The current large government deficits are a consequence, not the cause of the crisis.

The NATURE of the current crisis is being mischaracterized by the extreme right. When the worldwide bubbles burst, the private sector immediately slowed spending to pay down its past debts. A rational response for individuals – but (as in 1930), COLLECTIVELY this is self-defeating. In a national economy, one persons spending is another person’s income. Private sector spending cuts, coupled with recent public sector spending cuts have resulted in a spending collapse – and economic depression. This has worsened the public debt situation. Again a consequence of the crisis.

The right-wing RESPONSE in this crisis is misguided. To further push austerity at a time of economic depression (the stagnant nature of this “recovery” has been termed a “depression” by the authors of the manifesto) is, again, self-defeating. When private sector spending is collapsing, public sector must stabilize to sustain spending (again, a lesson from 1930). Continuous public sector spending cuts (as Mitt Romney, Paul Ryan, Scott Walker, etc. advocate), or middle class tax increases (as Scott Walker’s Act 10 results in) will worsen the depression as revenue continues to plummet. We are seeing this effect in Wisconsin – as projected revenues are contracting and job growth is stagnant.

With interest rates near zero, monetary policy can only do so much. The focus has to be on increased employment, before long-term unemployment becomes endemic. This long-term unemployment problem leads to the flaws in austerity proponents’ arguments:

Flaw #1 – “Austerity will increase confidence; deficits will dampen that confidence and cause interest rates to soar.” There is absolutely no evidence to support this claim. On the contrary, many governments have record deficits and record low interest rates – where there is a functioning central bank. In Japan, debt is 200% of GDP, yet Japan has low interest rates. Moreover, the credit downgrades in Japan have not resulted in higher interest rates.

The IMF has studied 173 cases of austerity budget cuts in individual countries - the result has ALWAYS been economic contraction. Austerity measures have NEVER resulted in economic growth.

Flaw #2 – “There are structural ‘Supply Side’ issues in output.” As evidenced from 1930-1940, this is wrong. Industry and business are currently highly productive – there is simply not enough consumer demand to drive a long-term recovery. The lack of well-paying jobs and employed individuals has led to a contraction of spending – all CONSEQUENCES of the current crisis.

The deficit is simply not our greatest economic threat. In this time, we have the historic knowledge and facts to end this depression. It is only ideology and greed that is stopping us. In this day, it should be unacceptable to all of us that mistaken and misguided fears over deficits and interest rates “outweigh the horrors of mass unemployment.”

This economic truth deserves to be front-and-center for the coming months. Visit the website (http://www.manifestoforeconomicsense.org/), sign the manifesto, and share this information with everyone, politicians, candidates, and media. Next time you see Paul Ryan, ask him to name a time in history when austerity led to economic growth…and watch his head spin.