Romney Stays True to Form, Blames Obama’s Habit of Helping People for Winning a Democratic Election

CNN Political Ticker 

“What the president, president’s campaign did was focus on certain members of his base coalition, give them extraordinary financial gifts from the government, and then work very aggressively to turn them out to vote,” Romney said in the afternoon call, according to audio aired on ABC News.

Romney, who lost to Obama by 126 electoral votes, said the president courted voters by offering policies — some of them this election year — that appealed to key constituencies.

“With regards to the young people, for instance, a forgiveness of college loan interest, was a big gift,” Romney said, according to The New York Times. “Free contraceptives were very big with young college-aged women,” he continued. “And then, finally, Obamacare also made a difference for them, because as you know, anybody now 26 years of age and younger was now going to be part of their parents’ plan, and that was a big gift to young people. They turned out in large numbers, a larger share in this election even than in 2008.” The president’s health care reform plan, he added, also brought out support from African Americans and Hispanic voters.

“You can imagine for somebody making $25,000 or $30,000 or $35,000 a year, being told you’re now going to get free health care, particularly if you don’t have it, getting free health care worth, what, $10,000 per family, in perpetuity, I mean, this is huge,” he said. “Likewise with Hispanic voters, free health care was a big plus. But in addition with regards to Hispanic voters, the amnesty for children of illegals, the so-called Dream Act kids, was a huge plus for that voting group.”

Looks like Romney being “completely wrong” about his comments on the 47% were themselves completely wrong.  The sad fact here is that I don’t think Romney gets that his “I’ll give you a 20% tax cut that doesn’t affect the deficit” was his own cynical attempt at “buying” the electorate….by advocating policies he thought were right for the country.

This GOP notion that the entirety of the Obama electorate, or even a sizable portion of it, just wants free stuff, is what is costing the GOP support.  It’s a foolish notion, based on bloviating talkers on the radio, that was never based on any objective reality.  It’s always been a subjective opinion.  And a fairly unpopular one.

I think the thing that threw the GOP pollsters and faithful off was the this notion that the U.S. is a “conservative” nation (based on polls like this).  They think that because twice as many people self-identify as “conservative”, they are therefore going to be Republicans.  But when asked to self-identify, we find a greater number of people find themselves to be Democrats.

This is the GOP-Disconnect.  Yes, many more Americans consider themselves to be conservative rather than liberal.  But we also find more Americans consider themselves to be Democrats than Republicans.

Conclusion…Republicans assuming all Democrats are liberals is just flat out wrong.  Republicans assuming all Democratic voters are just poor commies wanting free stuff are just wrong.

Until the GOP (and more importantly, their loudest media representatives) can come to terms with this disconnect, expect more “candid” comments like the ones Romney made…it’s what the GOP faithful truly believe…and it’s just not true.

 

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Iraq records huge rise in birth defects, the Cost of War, Continued….

It played unwilling host to one of the bloodiest battles of the Iraq war. Fallujahs homes and businesses were left shattered; hundreds of Iraqi civilians were killed. Its residents changed the name of their “City of Mosques” to “the polluted city” after the United States launched two massive military campaigns eight years ago. Now, one month before the World Health Organisation reveals its view on the legacy of the two battles for the town, a new study reports a “staggering rise” in birth defects among Iraqi children conceived in the aftermath of the war.High rates of miscarriage, toxic levels of lead and mercury contamination and spiralling numbers of birth defects ranging from congenital heart defects to brain dysfunctions and malformed limbs have been recorded. Even more disturbingly, they appear to be occurring at an increasing rate in children born in Fallujah, about 40 miles west of Baghdad.

via Iraq records huge rise in birth defects – Health News – Health & Families – The Independent.

There is “compelling evidence” to link the increased numbers of defects and miscarriages to military assaults, says Mozhgan Savabieasfahani, one of the lead authors of the report and an environmental toxicologist at the University of Michigan’s School of Public Health. Similar defects have been found among children born in Basra after British troops invaded, according to the new research.

US marines first bombarded Fallujah in April 2004 after four employees from the American security company Blackwater were killed, their bodies burned and dragged through the street, with two of the corpses left hanging from a bridge. Seven months later, the marines stormed the city for a second time, using some of the heaviest US air strikes deployed in Iraq. American forces later admitted that they had used white phosphorus shells, although they never admitted to using depleted uranium, which has been linked to high rates of cancer and birth defects.

The Iraq War happened.  Even when many in this country can’t remember how Wall Street destroyed the economy four years ago and are now poised to vote for a Wall Street Tycoon, err, “Job Creator, we also forget about the nearly decade long occupation of Iraq.   There’s going to be more to this story.  I’ll write about it from time to time, but if anyone wants to dedicate their lives to solving a real and horrid problem…this is a good one.

You can also continue to advocate against offensive, BASED-ON-UTTER-BULLSHIT WARS!!

The problems they cause tend to last for generations.  Generations.

If you’re wondering why I fight for peace so hard, this is reason N!.

Post RNC-Mid DNC Desktop Clearing Link Dump

Let’s get this stuff out of here…another backlog of articles that were interesting but didn’t find the time…

First up, we start in conservative media fantasy-land.

THR: Does the media tie mistakes made by Democrats to President Obama as readily as they tie Republican mistakes to Romney?

Wallace: Yes, the mainstream media is terribly unfair to Obama, and they have to stop their bias in favor of Romney.

[Note: the funny part…Wallace was joking…and doesn’t consider the network that got the highest ratings for the RNC to be part of the mainstream media.]

Next up we see what is driving ratings for Fox News.

From : Fear of a Black President

Obama is not simply America’s first black president—he is the first president who could credibly teach a black-studies class. He is fully versed in the works of Richard Wright and James Baldwin, Frederick Douglass and Malcolm X. Obama’s two autobiographies are deeply concerned with race, and in front of black audiences he is apt to cite important but obscure political figures such as George Henry White, who served from 1897 to 1901 and was the last African American congressman to be elected from the South until 1970. But with just a few notable exceptions, the president had, for the first three years of his presidency, strenuously avoided talk of race.

Next we move onto folks in black-face being using as political props…

WASHINGTON, D.C. — When GOP presidential candidate Mitt Romney visited an Ohio coal mine this month to promote jobs in the coal industry, workers who appeared with him at the rally lost pay because their mine was shut down.

The Pepper Pike company that owns the Century Mine told workers that attending the Aug. 14 Romney event would be both mandatory and unpaid, a top company official said Monday morning in a West Virginia radio interview.

We need to develop a “canary in the convention” that falls over dead when the b.s. gets too deep.

Speaking of b.s. at the convention, here’s the Rolling Stone piece that looks a bit deeper into how Mitt Romney’s Bain Capital made its start, and how it was saved in the early years by a taxpayer bailout.

And this is where we get to the hypocrisy at the heart of Mitt Romney. Everyone knows that he is fantastically rich, having scored great success, the legend goes, as a “turnaround specialist,” a shrewd financial operator who revived moribund companies as a high-priced consultant for a storied Wall Street private equity firm. But what most voters don’t know is the way Mitt Romney actually made his fortune: by borrowing vast sums of money that other people were forced to pay back. This is the plain, stark reality that has somehow eluded America’s top political journalists for two consecutive presidential campaigns: Mitt Romney is one of the greatest and most irresponsible debt creators of all time. In the past few decades, in fact, Romney has piled more debt onto more unsuspecting companies, written more gigantic checks that other people have to cover, than perhaps all but a handful of people on planet Earth.

Read more: http://www.rollingstone.com/politics/news/greed-and-debt-the-true-story-of-mitt-romney-and-bain-capital-20120829#ixzz25c4gDbu1

In the background, quietly crying, you’ll find our environment.

Yesterday was August 28th 2012. Remember that date. It marks the day when the world went raving mad.

Three things of note happened. The first is that a record Arctic ice melt had just been announced by the scientists studying the region. The 2012 figure has not only beaten the previous record, established in 2007. It has beaten it three weeks before the sea ice is likely to reach its minimum extent. It reveals that global climate breakdown is proceeding more rapidly than most climate scientists expected. But you could be forgiven for missing it, as it scarcely made the news at all.

It also appears that Paul Ryan is quickly creating lots of jobs in various fact-checking departments…

•Accused President Obama‘s health care law of funneling money away from Medicare “at the expense of the elderly.” In fact, Medicare’s chief actuary says the law “substantially improves” the system’s finances, and Ryan himself has embraced the same savings.

•Accused Obama of doing “exactly nothing” about recommendations of a bipartisan deficit commission — which Ryan himself helped scuttle.

•Claimed the American people were “cut out” of stimulus spending. Actually, more than a quarter of all stimulus dollars went for tax relief for workers.

•Faulted Obama for failing to deliver a 2008 campaign promise to keep a Wisconsin plant open. It closed less than a month before Obama took office.

•Blamed Obama for the loss of a AAA credit rating for the U.S. Actually, Standard & Poor’s blamed the downgrade on the uncompromising stands of both Republicans and Democrats.

And there’s more….

The next statement Ryan made was that in 1980 “330,000 businesses filed for bankruptcy. Last year, under President Obama’s failed leadership, 1.4 million businesses field for bankruptcy.”

This is not true. According to American Bankruptcy Institute, under Carter 331,264 businesses and non-businesses filed for bankruptcy. That number includes not just businesses, but personal bankruptcies as well. In 1980, there were 43,694 business bankruptcies and 287, 570 non-business bankruptcies.

Ryan also got it wrong with regard to the number of business bankruptcies last year. In 2011, there were 1, 410, 653 total bankruptcies. Of that number 47,806 were business bankruptcies and 1,362,847 were non-business bankruptcies.

and just to keep it in perspective, Paul Ryan is being sold as the gold standard in Republican honesty and integrity when it comes to numbers.  Really.

Here’s a bit of the “liberal” media conspiracy…in that we have an actual liberal calling out the media for keeping certain things from the eyes of the public.

When Mitt Romney walked down the aisle toward the stage Thursday night, among the people whose hands he shook was the conservative billionaire and major political donor David Koch. But it was a moment missed by the tens of millions of viewers at home. While Democracy Now! was there on the floor and captured the handshake on video, the networks cut away just before the handshake to show footage of two enthusiastic young women supporters and then an overhead shot of the convention center.

You can even see Mitt’s face light up when he sees the Koch.

Heading back to that Rolling Stone story about how firms like Bain avoid paying taxes on their income…the NY State Attorney General (the one after the whore-monger) is now looking into the practice of treating wealthy and connected people’s labor as if it were capital (and thus getting a 20% tax break, from 35% down to 15%).

The New York attorney general is investigating whether some of the nation’s biggest private equity firms have abused a tax strategy in order to slice hundreds of millions of dollars from their tax bills, according to executives with direct knowledge of the inquiry.

The attorney general, Eric T. Schneiderman, has in recent weeks subpoenaed more than a dozen firms seeking documents that would reveal whether they converted certain management fees collected from their investors into fund investments, which are taxed at a far lower rate than ordinary income.

According to financial statements, Bain partners saved more than $200 million in federal income taxes and more than $20 million in Medicare taxes.

[full story]

Thus goes the “secret to his success”.

And finally we see a Business Insider story that hits the nail on the head.

Lots of things are wrong with the economy, but the main problem can be summed up with two simple facts:

  • Corporate profits as a percent of the economy are at an all-time high
  • Wages as a percent of the economy are at an all-time low

The following charts clearly illustrate that problem.
Read more: http://www.businessinsider.com/henry-ford-salary-increase-2012-8#ixzz25cGRYdou

I repeat…

  • Corporate profits as a percent of the economy are at an all-time high
  • Wages as a percent of the economy are at an all-time low

This is the natural results of 30+ years of supply-side economics.

History of Supply Side Experiment

Here we see the real world effect of “supply side” economics.

And there you have it.  Links dumped.

Oh…one final note…it appears that some of the rich, if eaten, might actually sustain us for a while.  Just a thought…

Just in case you were beginning to think rich people were deeply misunderstood and that they feel the pain of those who are less fortunate, here’s the world’s wealthiest woman, Australian mining tycoon Gina Rinehart, with some helpful advice.

“If you’re jealous of those with more money, don’t just sit there and complain,” she said in a magazine piece. “Do something to make more money yourself — spend less time drinking or smoking and socialising, and more time working.”

Yeah, let them eat cake.

Rinehart made her money the old-fashioned way: She inherited it. Her family iron ore prospecting fortune of $30.1 billion makes her Australia’s wealthiest person and the richest woman on the planet.

 

Pundit calls out political operative’s “Obama isn’t American” b.s.

GOP Convention: Chris Matthews tees off on Reince Priebus – Tim Mak – POLITICO.com

This has been a fairly consistent theme by Republicans. It’s a political move, built on rhetoric and repetition, designed to push the indredibly destructive idea that Obama isn’t really American and secretly hates the country.   The entire birther movement is predicated on this assumption about the current President.

The sad part is how well it resonates with low-information and low-intelligence voters who have no functioning political memory (I.e. Obama is European for passing a stimulus…but Bush’s stimuli were all fine and dandy...just like Paul Ryan said at the time).   Further to this point, if anyone brings up something Bush did in the context of Obama, it’s always about “blaming Bush”…even if one is simply pointing out what happened and what was said sometime during history.

Many of the idiot brigade now openly claim that Obama was trying to hide his birth certificate and didn’t release it until 2011.   That’s because they ignored him releasing it before the election in 2008.

One has to wonder if idiots, racists and Mormons will be enough to carry Romney in November. We shall see.

Update: Video segment.

BTW, note how as “evidence” Priebus cites the Political Lie of the Year, 2010.

That’s how bad it is…the point man for the GOP has a go to point…which is a lie…yet somehow it’s the guy pointing out he’s a liar that is the bad guy.    That’s a broken culture, right there.

Talking Point Smash : “Obama had full control of Congress of two years, and look what happened”

This is one of those things I hear a lot in various forms.  Essentially this is “blaming” Obama for not fixing the Great Recession in 4 years despite having “complete” control of Congress for two full years.

The reality of the history is a bit different.

On July 7th, 2009, Al Franken was sworn in as a Senator for Minnesota.  This was after a protracted legal battle regarding the vote count.  Franken was the 60th vote that the Democrats needs to overcome the unprecedented number of “filibusters” by Republicans in the Senate.

On August 26h, 2009, Ted Kennedy finally succumbed to brain cancer and unsheathed from the mortal coil.   His seat was taken by Scott Brown, a Republican of sorts currently facing off against Elizabeth Warren to hold the seat.  The loss of Kennedy’s vote removed the Democrats ability to overcome the Republican filibuster.

The point here isn’t to focus so much of legislative minutia, but to smash a talking point.   The President has faced, on the numbers alone, unprecedented opposition in trying to get *anything* done over the past 3 years and 46 weeks.   For 6 weeks, the one’s noted earlier, he had the full support of Congress.  Outside of that, it’s been a battle every step of the way.

To be clear…

 

United States Total Employment By President 1977-2012 (Misleading Statistics Lesson)

I was recently going about my daily business when I was confronted on the Facebook with the following chart…

"Reason" Magazine Net Jobs Analysis...From the Mercatus Project of George Mason University*

Taking these raw numbers without any context leaves a bit to be desired on the “providing insight” part of statistical analysis.

During the ensuing discussion, I noted a couple of things…first that 5 months remain in Obama’s first term. At the current roughly 200K-job/mo pace we are gaining, that’s another 1M on his tally.  As we’ll see in a moment, looking at *how* these numbers came about can be quite enlightening.

As noted in the charts, all raw data is provided from here.

We’re going to start with Jimmy Carter.  In the following analysis, we are calling the inaugural month the first one they are responsible for, going through December of their last year.   A quick comparison shows this to be very close to how Veronique de Rugy of the Mercatus Center* did the original chart.

Non Farm Employment under Carter, Seasonally Adjusted

Non Farm Employment under Carter, Seasonally Adjusted, 1977-1980

From here you can see something that will be a consistent theme in the following analysis…a stagnant job market causing issues for a sitting President.  Employment peaked in March, 1980, having moving little since the previous summer.  The long, hot year and rising unemployment was too much for voters, and a change was made.

Enter the Reagan…

Total Employment Reagan, Seasonally Adjusted, 1981-1988

Total Employment Reagan, Seasonally Adjusted, 1981-1988. One can see how Reagan faced initial skepticism, but has gained long-term respect.

Here we see Carter’s “malaise” lasting well into 1983.  The lowpoint in unemployment, to Reagan’s great fortune, came late in 1982.  By the time the election rolled around in 1984, everything appeared to be on track.  Employment continued to expand throughout the rest of his term.  Then we had to pay for it, and the business cycle shifted again.

Total Employment, Bush the Elder, Seasonally Adjusted, 1989-1992

Total Employment, Bush the Elder, Seasonally Adjusted, 1989-1992. Here we see Bush the elder’s problem, employment peaking two and half years prior to the election.

Bush the Elder saw the peak of the Reagan “what’s debt?” economic expansion, and watched as nearly 2M jobs evaporated after peaking in Jun of ’90. Economic recovery in job form came only in the last few months before the 1992 election, not nearly enough to stop the new kid on the block from stealing heart and minds and electoral votes.

Next we get to *see* what the longest and largest and most stable economic expansion in U.S. history like…in bar graph form.

Total Employment, Clinton, Seasonally Adjusted, 1993-2000

Total Employment, Clinton, Seasonally Adjusted, 1993-2000. It really is pretty impressive, standing there all big and growing like that, Mr. President.

Like all the other graphs, I’ve marked the low and high point in employment during Clinton’s term. That’s how it’s done, folks.  Really can’t ask for more.  Well…maybe a bit less disgracing the Office of the President.  He did, however, get impeached for that.  Not sure if it was the peace and prosperity or the blowjob that got him impeached, but something sure made the Republicans mad.  It didn’t stick in the Senate, but did doom his VP.

Regardless, after so much peace and prosperity, we decided it was time for a change.   And oh what a change it was.

Total Employment, Bush the Lesser, Seasonally Adjusted, 2001-2008

Total Employment, Bush the Lesser, Seasonally Adjusted, 2001-2008. Bush was all over the map. First losing 3M jobs, then finding 9M building houses, then losing 4M in a year after the bust.

Oh George.  What can we do about this one.  If you want to see what a bursting real estate bubble looks like?  Click on that one.  First we see the extended era of peace end on 9/11.  Then we see the prosperity depart as we marched to war, hitting the  low employment point just as the mission in Iraq was “accomplished.”    Then we went on an easy-credit mortgage-fueled home-building binge, topping out with the greatest number of working Americans ever reported, 138,023,000 in January 2008.

By the end of 2008, 4M of those jobs had disappeared, and the Great Recession wasn’t nearly done.

Total Employment, Obama, Seasonally Adjusted, 2009-2012

Total Employment, Obama, Seasonally Adjusted, 2009-2012. Here we see the second half the Great Recession, with 4M more jobs going away in Obama’s first year. Since then there’s been a steady grind upwards, as we work to recover lost ground.

And this brings us up to the present data (Jul 2012).  Here we see the graphic and dramatic employment results of the Great Recession.  Four Million Jobs gone in the first year, reaching Obama’s lowpoint in February of 2010.  Since then (as the “failed” Stimulus package was implemented) we’ve seen steady employment gains over the intervening two years, finally within grasping distance of where from we started.

To wrap the whole thing together…here’s the whole thing together…

Total_Employment_1977_2012

Total_Employment_1977_2012. All of it. Together.

Here we see each and every year laid out side by side.  Now longer term business cycles become more apparent, and we see the huge dip created by the crash of 2008.

All in all I wanted to provide this analysis because I found the original chart to be so incredibly lacking in context as to be misleading.

* the Mercatus Project is funded (to a noticeable degree) by the Koch Bros, who have used some of the $100M they pledged to unseat the current President producing graphs like this…which don’t tell the whole story.  Often telling so little of the story, they might as well be lying.

"Reason" Magazine Net Jobs Analysis...From the Mercatus Project of George Mason University*

Taking these raw numbers without any context leaves a bit to be desired on the “providing insight” part of statistical analysis.

I Guess That Makes It Official, Game On [WARNING: REALITY]

If you are wondering what the crowd is a gathering around when the government thugs use a flashbang, it’s this man.

Two tours Iraq, check.  One tour Oakland...

If you are wondering what kind of low-life scum sucking socialistic parasite he is to be attending such a protest, first up, fuck you, second, here you go.

Oakland’s independent police review body will examine the clashes between riot officers and protesters that left an Iraq war veteran in a critical condition as Occupy protestors prepare to rally at the same spot for a third night of protests.

Police battled protesters following an Occupy Oakland march to demonstrate against the closing of two occupations in the city in the early hours of Tuesday morning. More than 100 people have been arrested in Oakland since police cleared a camp in Frank Ogawa plaza.

Scott Olsen, 24, suffered a fractured skull and brain swelling after he was allegedly hit in the head by a police projectile during the clashes on Tuesday. A spokesperson for Highland hospital in east Oakland confirmed he was critically ill after being admitted on Tuesday night.

[full story]

One thing I generally know is that when people have nothing left, or very little to risk other than their own skin in the game, they tend to push toward extreme solutions.  There is a race on now, and that race is whether or not our society can change fast enough to keep itself relevant to the vast majority of the people in our society.  It’s dang near an article of faith around here.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed. That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness.

To be clear, I don’t think OWS is, as of yet, a full-on revolutionary movement.  But there is a stark difference in what is going on here and what happened with the Tea Party.

It’s evident now that “Tea Party” is really just code for “Hardcore Republican”.  I call them “Fox News Republicans” and their ultimate act of defiance culminated in the 2010 elections.  This hugely revolutionary act was to elect a bunch of…wait for it…hardcore Republicans to the House, and give control of that chamber back to the folks who had it under Bush. (they failed in the Senate, because Senate districts, known as “states”, are harder to gerrymander and get nutjobs elected on straight party votes than house districts).

So any comparison between the two “movements” is shallow at best, and more likely the result of lazy “left-right” thinking than any real analysis.

There’s a book that one needs to read to understand why I’m being so melodramatic (I’m not) about the situation, and throwing out big words and bloody pictures.   It’s here.  A very quick read, in it you will find a section about this.. (from the ‘pedia).

 To be successful, these mass movements need the adherents to be willing to sacrifice themselves and others for the future goals. To do so, mass movements often glorify the past and devalue the present. Mass movements appeal to frustrated people who are dissatisfied with their current state, but are capable of a strong belief in the future. As well, mass movements appeal to people who want to escape a flawed self by creating an imaginary self and joining a collective whole. Some categories of people who may be attracted to mass movements include poor people, misfits, former soldiers, and people who feel thwarted in their endeavors.

To put it simply, you fucked with the wrong Marine.

I’m not sure if you folks are aware, but our President (the one who won a Nobel Peace Prize) is ending wars left and right.  He’s going to end the one in Afghanistan before the 2012 election, bank on it.  That’s a whole lot less soldiers being needed, a whole bunch of which are going to get shafted by a government now focused on cutting spending (on them).

That’s, as they use to say in that commercial, two great tastes that taste great together, a purpose…and an army.

OWS isn’t going away.  A good portion of the 99% are paying attention, and now there’s blood on the ground.    Our blood, on our ground.

So yea…like I said…game on.

 

Smashing the Laffer Curve

This might very well be a long post (if not a series of posts turned into a quick book).

The target of this post is something called the “Laffer Curve”.   There’s a few different things this might refer to.  Let me lay out a basic level of understanding of this concept now, straight from the source…

If the existing tax rate is too high–in the “prohibitive range” shown above–then a tax-rate cut would result in increased tax revenues. The economic effect of the tax cut would outweigh the arithmetic effect of the tax cut.

Because tax cuts create an incentive to increase output, employment, and production, they also help balance the budget by reducing means-tested government expenditures. A faster-growing economy means lower unemployment and higher incomes, resulting in reduced unemployment benefits and other social welfare programs [hence lower spending -RPN].

[source…which will be referred to again]

If you would like, wikipedia is a good source of info on this as well as further reading.  The analysis you are about to read is not concerned so much with the theory, but the application and the results.

Over time, the idea of the Laffer Curve has evolved into a notion that “tax cuts pay for the themselves” and “raising taxes will only decrease revenue”.   There are a number of other popular myths and misconceptions dealing with taxes in the 21st Century United States, far too many to deal with today in this post.    One we will deal with in part two of this series is who is paying those taxes and how the application of the Laffer Curve has changed that dynamic.  However, that is beyond the scope of this initial piece.

Section I : The Perfect Lab

In the year 2000 (que Conan…)…the United States of America had a balanced budget.  I know, I know…this is hard to believe.   Hard to even conceive of at this point.  However, it was true.

Q: During the Clinton administration was the federal budget balanced? Was the federal deficit erased?

A: Yes to both questions, whether you count Social Security or not.

[source]

A couple terms to deal with real quick, “deficit” which is a yearly negative difference between revenue and spending, and “debt” which is  accumulated, usually counted on a per year basis as we’ll do below.  While it doesn’t seem particularly relevant as this point, such a thing as a “surplus” also exists.  A surplus is when revenue exceeds spending.  Surpluses are the only thing that can be used to pay down “debt”.

So in the United States, circa 2000, there existed the perfect “test case” for an economic theory dealing with the direct and raw stimulative power of tax cuts directed mainly at top earners.  We would be able to see, very clearly, whether or not “the economic effect of the tax cut would outweigh the arithmetic effect of the tax cut.”

IMPORTANT NOTE: For simplification purposes, the charts below DO NOT INCLUDE debt accumulated prior to 2000.  Back in the 20th Century (mostly the 80’s) the U.S. racked up $10,000,000,000,000 in debt.  We’re going to ignore that for the next little while (it became a custom in the 90’s, and for not horrible reasons).   In part 3 of this series we’ll tie the whole thing  together with unemployment [here’s a taste].

As math tends to do, the “arithmetic effect” on revenues was immediate.   Our next section will deal with the math that goes into the “arithmetic effect” (which BTW, is a euphemism for saying, “Duh, it’s obvious if you cut taxes you get less revenue.”)

So let’s start small and build from there.

Section II : The Little Equation

To be honest, there are many “equations” which figure into public accounting.  In this case the equations we’re talking about are the ones that governs the graphs below.  The first can be described simply as this…

A deficit (and it’s alter ego the “surplus”) is simply the difference (negative for deficits, positive for surplus) between the amount of revenue the government takes in and the amount of spending it puts out.

Part of the disconnect that is happening right now is we are seeing huge deficits, focusing solely on the “spending” side of the equation, and don’t seem to be largely aware how badly *revenues* have dropped off during the recession.

To simplify:  Revenues [R] – Spending [S]= Deficit(-)/Surplus(+) [I]

Those are the only numbers driving this first graph, spending, revenue and deficits.  In addition to the straight spending, revenue and deficit surplus numbers, we’ve also added to lines for change over time (in this case % per year), and one section for accumulated gross debt.

Here’s how the numbers came out.   In a moment we’ll looks a few choice events in the timeline, and the corresponding (general) effects in the graph.

Graph of Revenues, Spending, and Debt 2000-2010

Revenues, Spending, and Debt 2000-2010

What we see here is a *very* basic look at the economic situation in the United States in the 21st Century.   As indicated in the legend, we’ve set up Revenue as positive income, Spending as negative, and graphed the *cumulative* difference, in the this case “debt” in the black-fading-to-bright-red.

One thing which is on this chart you will not see quite so often on other charts are the wavy lines.   The blue wavy line is the Year 0ver Year (YoY) percent change in revenue.  That is…compared to the previous year, how much did it change?  Understanding the reason this line is so important brings us back to the definition of the Laffer Curve.  Recall:

If the existing tax rate is too high–in the “prohibitive range” shown above–then a tax-rate cut would result in increased tax revenues. The economic effect of the tax cut would outweigh the arithmetic effect of the tax cut.

The reason this stands as such a perfect lab example for testing this theory is that we had both a balanced budget (with a surplus, no less) in 2000, and then has massive tax cuts in both 2001 and and in 2003 (note: both these included specifically in their titles that they would create jobs and economic growth.  Their titles, however, have little to do with their effects).

What this graph indicates, and we’ll do a close-up below, is that tax cuts decimated revenue in 2001, 2002, and 2003.

Bush Tax Cuts Immediately Reduced Government Revenue

Bush Tax Cuts Immediately Reduced Government Revenue

As we’ll indicate in a moment, there is no larger contextual reason for this reduction outside of tax rate.  During each of these years, GDP went up.   The above chart indicates the “arithmetic effect” of tax cuts.  This is the basic idea that if you tax a smaller percentage of something, you get a smaller amount of that something (i.e. it’s “duh” math).

When many* point to as the “economic effect”  of tax cuts, they use the following cut out.

Coming up from the Bottom

Coming up from the Bottom

* who are trying to selectively use data to prove a point that doesn’t exist in the larger data set.

The problem with the above data is that it is *very* selective about what data it is representing.  We can’t even count the number of times we at RPN have seen opinion columns that claims “the Bush Cuts worked” and then selectively use the period 2003/4-2007.   When you pick the year with the *lowest revenue* and then start going from there, even if it’s a number of years *after* the tax cuts took revenue to that lowest point, there’s some honesty issues with those numbers.

Luckily we have another way to look at these numbers (as Ratios of GDP), and we get to measure the “arithmetic effect” of the tax cuts vs the “economic effect”.

 Section III : The Big Equation

Now that we have a base set of data, we are going to expand it back into the big equation.   In order to give it context, and not just freak everyone out with big numbers, we are going to show both revenue and spending as a % of GPD.   Here’s how that looks.

The Full Equation

Here we see both Spending and Revenue as a % of GDP

What this shows is a slow and somewhat steady growth in the overall U.S. economy over the last decade.  However, as the tax cuts are implemented, not even that level of steady economic growth is enough to slow the quick decline in revenue.

Revenue plummets due to tax cuts

Revenue plummets due to tax cuts.

Those next years, from 2003/4 through 2007/8 are the ones cited by supporters of this method of spurring economic growth.  Indeed, we do see a return to revenue growth (purple line), and it begins to catch up to steady spending (orange line).

Revenue begins to recover at a faster rate than spending

Revenue begins to recover at a faster rate than spending

The problem with this is that even with the favorable economic growth, steady spending patterns, and the “favorable tax rates” revenue still never quite manages to catch up.  And we still see that quickly reddening debt line.

So for the third time we look at the question, the data, and reach the conclusion.

The question:   Does the economic effect of the tax cut would outweigh the arithmetic effect of the tax cut?

The data: See graphs that should both have opened in new windows. 

The conclusion: As alluded to in the title and the next subject heading.

Section IV: Smashing the Laffer Curve

So now we bring the whole thing together, and point out what our analysis just indicated.

The revenues never catch up after falling so far behind, it didn't work

The revenues never catch up after falling so far behind, the Laffer Curve didn't work

The revenues never catch up after falling so far behind, even in our perfect laboratory, the Laffer Curve didn’t work.

Previous analysis has shown that taking into consideration *even more* favorable, longer term, economic conditions, the revenue will never catch up.

What we have here is a situation where the reality has match up to the basic math quite nicely.  Except for one thing…what happens when long term public policy is based on an economic fallacy?

Section V: The Second Great Economic Collapse.

We are going to try and wrap this up shortly.  Examining the reactions to, and the results of, the economic collapse that happened in September/October of 2008 are going to take another decade at least.   Hindsight, such as we’ve employed throughout this analysis, is incredibly accurate…one is simply looking at what happened and doing the math.

Foresight, on the other hand, and even shall we say “current sight” are much more fickle beasts.  One thing that can be very easily said, when looking at either graph, is that spending is less than half our problem.   Revenue, both in real terms and as a % of GPD, has hallen through the floor.

You’ll noticed that the only year, in all of those posted, where we had a real and actual reduction in spending was from 2009 to 2010, our current President’s first full fiscal year in office.  An office taken amidst a literal plethora of crises.  To claim this is indicative of anything beyond that simple fact is a tough argument to make.

We’ll see how that works out when more data is available.  There is more hindsight to consider at the moment.

Section VI: What the Laffer Curve Really Does

This part, for now, we’ll let Art Laffer answer himself.

From the original Heritage Foundation link.

The most controversial portion of Reagan’s tax revolution was reducing the highest marginal income tax rate from 70 percent (when he took office in 1981) to 28 percent in 1988. However, Internal Revenue Service data reveal that tax collections from the wealthy, as measured by personal income taxes paid by top percentile earners, increased between 1980 and 1988–despite significantly lower tax rates (See Table 8).

Table 8

Table 8 Which shows how the rich got richer

Table 8 Which shows how the rich got richer by paying a higher percentage of total income taxes

Here’s the thing that has misguided nearly 30 years of public policy.  Table 8.   What Art Laffer neglects to mention in that description of this chart are the following words, “as a percentage of total income.”

That is, what the data indicates (and has for nearly 30 years of this policy) is that “tax collections from the wealthy, when measured as a ratio of all income taxes paid, by top percentile earners, increased between 1980 and 1988–despite significantly lower tax rates (See Table 8).”

So despite having lower tax rates, the highest income earners still took in a higher percentage of all income, hence paying a higher percentage of total taxes.  The above graph is doubly misleading, as it consistently recounts the same people, over and over again, to give the impression that more actual money is being paid, not a higher ratio.   Indeed, in many of these years, much like after the Bush tax cuts, overall revenue went down.

What went up was how much, as a ratio, was earned by the top X %.

Final note on Art Laffer’s Table 8….it doesn’t include, anywhere, the bottom 50% of AGI.  Each one of those columns recounts the top 1%, with the final column recounting every single one to the left of it.  Were I to grade the chart on intellectual honesty, it would fail.   It is not saying what he is saying it says.  [NOTE: Illustrating this graphically is going to be the focus of Part II]

Quick note on where the Laffer Curve came from…

As recounted by Wanniski (associate editor of The Wall Street Journal at the time), in December 1974, he had dinner with me [Arthur Laffer] (then professor at the University of Chicago), Donald Rumsfeld (Chief of Staff to President Gerald Ford), and Dick Cheney (Rumsfeld’s deputy and my former classmate at Yale) at the Two Continents Restaurant at the Washington Hotel in Washington, D.C. While discussing President Ford’s “WIN” (Whip Inflation Now) proposal for tax increases, I supposedly grabbed my napkin and a pen and sketched a curve on the napkin illustrating the trade-off between tax rates and tax revenues. Wanniski named the trade-off “The Laffer Curve.”

At the time this happened, RPN was one month old.  This concept, sketched on a napkin, has been driving public policy in my country MY ENTIRE LIFE.

We guarantee you, we swear on it, Excel is faaaaaaaaar better at graphing numbers and doing economic analysis than any bar napkin.   Especially in hindsight.

CONCLUSION:

TL:DR, Applying “the Laffer Curve” cannot increase revenue unless current tax rates are north of 70-80%.  Oh, and it’s why we’ve run up 13 of the 15 trillion $ we owe.

—-


Basic Economic Math for U.S. Americans (re: Taxes, Revenues, Debts, Deficits, and Defaults)

Remember when you were in the seventh, or maybe eight grade, and your teacher came in and said you were going to learn something called “Algebra”?   Remember how you were all like, “What could I possibly ever need to know this for?!  I’m never going to need to know this stuff!”.

Guess what?  This week is that week.  This is why you need to know this stuff.

We have some fairly important decisions to make in the near future as U.S. Americans on the direction our country needs to take.  I’m sure many of you have divergent opinions on what that direction is, or what we need to do to get there.  So do I.  This post isn’t about that.  This post is about math.  Basic economic math.

Without having this foundation in verifiable, repeatable reality (1+1 always equals 2 in basic math), it is difficult to build a framework of understanding for large and complex systems.  If you don’t know how much of something something else is, or if it’s becoming smaller or larger relative to that thing, it’s hard to make important decisions regarding how you would like things to change (and how to functionally make that happen).

I’ve touched on this subject before.  I think it is fundamental to the disconnect we are now experiencing in this country.  We suck at math.    So without further ado…let’s define terms.

WHAT DO YOU MEAN BY THAT WORD?!

The two most important numbers in the debt equation are the Debt [D] and GPD [GDP].   Debt is *numerator*.  GPD is the *denominator*.   This gives us a debt-to-GDP ratio.   D/GDP = Debt Ratio.

The largely agreed upon goal for the U.S. economy, that is considered “stable” by pretty much everyone, is a 50-60% Debt to GPD ratio.  What this means is that at any given time, we are carrying a debt load that is slightly larger than one-half (.6 or 60%) of our yearly earning power.    Countries in such a balanced situation to do a few things easily…one, they can borrow quickly and cheaply to deal with crises; two, they can quickly pay down debt if need be to smooth out boom/bush business cycles and three, they aren’t as exposed to downturns in others markets (as opposed to a country with no debt that instead uses a “sovereign wealth fund“).

So…now we have the main component of this this quation…the D/GPD ratio.

You have probably heard a LOT a about “spending” over the past few months, and how it is “out of control”.   You may have even seen some folks cite *yearly deficits* as evidence that “spending is out of control.”

A deficit (and it’s alter ego the “surplus”) is simply the difference (negative for deficits, positive for surplus) between the amount of revenue the government takes in and the amount of spending it puts out.

Part of the disconnect that is happening right now is we are seeing huge deficits, focusing solely on the “spending” side of the equation, and don’t seem to be largely aware how badly *revenues* have dropped off during the recession.

To simplify:  Revenues [R] – Spending [S]= Deficit(-)/Surplus(+) [I]

HOW DO ALL THESE THINGS WORK TOGETHER?!

Remember how I mentioned how there would be Algebra?   Here’s where it all comes together…..(and perhaps, can all fall apart).

There are two final factors that need to be addressed before we can get a final equation that captures the situation.  The are interest rate (i) and growth (G).   Interest, in this case, is interest on our debt.   Growth, in this case, is the change in GDP.

This gives us a Debt-to-GPD ratio that looks like this:

(D+I)*i/GPD*G = Debt-to-GPD Ratio

Which read as  “Debt (D) plus income (I) times interest rate (i) divided by GPD times Growth.

Notice that last equation.  We’ve been hammered by folks that this whole problem is caused by a single thing *spending*.   However, when we look at the whole forest instead of that one tree, we see that spending is a part of the annual deficit/surplus which changes the debt which is the divided by GPD that has been multiplied by the amount of growth (both positive or negative).

When someone says spending “is the whole problem”, they are lying to you through omission.    The deficit/surplus isn’t solely created by spending, it is the *difference between spending and revenues*.     As I’ll illustrate in the next segment of this piece, a good portion of recent huge deficits have been created by corresponding huge drops in revenue.

When you understand that “spending” is one of that largest factors in GROWTH, you should start to wonder about what the point of cutting spending, and hampering growth, is going to do to *help* our overall fiscal situation (the GDP-to-Debt Ratio).

Cutting spending during a recession is like taking the foot off the gas and declaring, “We’ll coast up this hill!”

Coming in the next Part…

FREQUENTLY ASKED QUESTIONS ABOUT RECENT U.S. AMERICAN HISTORY BY U.S. AMERICANS?! (these are actual responses to actual questions I’ve answered over the past few days…hopefully this covers yours as well)

Penis, Palin, and Policy

UPDATE: Near the end of the video I mention the Republican 2012 Presidential campaign strategy (alleged).  It seems to be working…

Unless shares rally, they are on track for a sixth straight weekly loss — longest losing streak since the fall of 2002. The market’s last seven-week stretch of losses began in May 2001, as the dot-com bubble deflated.

Stocks have suffered this month after a raft of weak economic news dampened hopes for a speedy recovery. Traders fear that weaker hiring, industrial output, and a moribund housing market are reversing a bull market that lifted the Dow Jones industrial average 20% the past year.

The Dow is down 5% since June began.

Shares bounced back Thursday after a report that U.S. exports unexpectedly hit a record in April.

[full story]

It’s almost like there’s some underlying “uncertainty” in the market about whether or not the U.S. will default on its loans that is causing everyone do do weird things just in case.   For example…

Treasuries are considered the safest and most liquid, investments in the world. The U.S. is the world’s biggest debt issuer. It has $14.2 trillion of debt outstanding, while marketable Treasuries total $9.7 trillion. Central banks and other overseas investors own $4.48 trillion, or 46 percent of marketable debt.

The negative position reflected trades that would profit from a decline in Treasuries. Cash and equivalents, the largest component of the Total Return Fund, rose to 37 percent from 35 percent in April, under the revised categories.

Gross has been betting against U.S. debt through short sales, in which the Total Return Fund would borrow and then sell government bonds, hoping to profit by repurchasing the securities at a lower price in the future. The fund’s annual report showed that, as of March 31, it had sold short about $2.2 billion of Treasuries that mature in about 10 years and $5.8 billion of agency debt that comes due in 2041.

[full story]

That’s a whole lot of technical finance talk, but what it amounts to is this…

While the swaps are costly for the fund, given that it must pay out more than it takes in under the contracts, Gross would reap profits from the trades should long-term rates rise, causing Treasuries to tumble. Conversely, a decline in long-term rates would punish the fund’s returns.

The bet here is that there is very little chance long term rates will fall.  An unattractive dollar has to have higher rates to be more attractive…this is especially true when there is an open question about default (and a goodly portion of the people tasked with answering that question don’t  seem to understand  it).   These kinds of bets, and positions, are how a small crack in a dam becomes a total failure.   They are essentially acting as a lever, just watching for an opening to stick  in, and break the whole thing wide open.

Of course, simple and responsible lawmaking would make bets like this complete folly…but if you haven’t noticed lately, simple and responsible lawmaking is not very high on certain folks agendas.

UPDATE2: Quick reminder of what happened…

And what happened the next day...

Imagine the firestorm that would be raging on Republican propaganda outlets right now if the stock market had dropped 2.2 percent within 24 hours after Democrats had voted unanimously not to raise the nation’s debt ceiling.

The entire right-wing noise machine — from Fox & Friends to Limbaugh, from Hannity to O’Reilly — would be singing the same refrain: The stock market has sent a clear message of disapproval over the Democrats’ irresponsible vote. Whether that assertion was true would not matter. They would make it true simply by unanimously agreeing that it was.

But because it was Republicans who voted irresponsibly, right-wing media sees no relationship between the vote and market drop.