Was perusing this Slate article and was amazed by the appalling overstatement of his case. I will therefore give the article two Fisks and call him in the morning. Let us begin.
"While neoconservatives in the Bush administration remake American foreign policy, another cadre of ideologues—call them the neoconomists—is busy attempting to transform American society."
I hate to be the one to break it to ya pal but foreign policy has been remade, only the degree remains to be determined. If we are successful, Iraq may become the model for more forays into democracy production. The follow-on work should be easier as our enemies will have already given our defeat their best shot, but that's another story.
"The revolution in economic policy is not being televised. There was no big speech by President Bush to mark its birth, no "Axis of Evil" catchphrase designed to capture headlines. Yet it is every bit as dramatic and risky a change."
It seems to me that Bush's economic policy has been the cause of much consternation, with its large tax cuts and like-he-has-a-rich-uncle spending.
"The neoconomists have one goal: to increase the rate at which the economy grows by changing how the nation uses its resources. It is a worthy goal, too. Following such as path could lead to a period of untold prosperity, with living standards rising faster than ever before. Or it might not. But even if the plan works, it might just lead to the collapse of the capitalist system."
Sounds like a pretty good goal to me. But whoa, nelly. Don't you think that it leading "to the collapse of the capitalist system" is a little eensy weensy tiny little bit over-the-top? Especially since cutting taxes seems more conducive to capitalism. Let's see if you can back that kind of talk up.
Removed a couple of paragraphs describing Bush's advisor and their super-cool plan to maximize our economic long-term potential. Good times
"With George W. Bush's cooperation, the first steps have already been taken. So far, the president has signed bills eliminating the estate tax, lowering the tax rates on dividends and capital gains, and helping companies to reduce the tax they pay on their profits. In addition, by cutting rates for "ordinary" income, the Bush administration has lowered taxes on interest payments, rental income and income from mutual funds, and pensions and retirement accounts. (Though slated to be temporary, the Bush administration is campaigning to make its tax breaks permanent.) All of these changes make it relatively more attractive to accumulate wealth than to spend money."
Mmmmmm lower taxes. Doh! More money good.
"In addition, the White House is pushing for an initiative that would almost single-handedly accomplish Hubbard and Lindsey's goal: a huge expansion of tax-free savings accounts. And the growth of these tax-free savings accounts would dovetail well with the White House's plan for reforming Social Security, which calls for the creation of another type of tax-free investment account for every working American."
I seem to recall economists and pundits complaining about the lack of savings in the U.S. over the past ten years since I started following this kind of stuff. Shouldn't people be happy that we're encouraging savings?
"Hubbard and Lindsey's agenda is long-term, but it has already incurred some substantial costs. In the short term, their focus on savings has offered relatively little stimulus to the economy. Had the White House directed more incentives toward spending, the lag between recession and recovery might have been shorter."
OK, so it's possible that by changing the tax cuts the recession would have been shorter. So what? The economic policy should try to maximize growth and growth potential over the long-term. You can't win: target short-term growth and be accuse of ignoring economic long-term health for political gain and target long-term growth and people complain that they're not getting everything right now.
"In the long term, the cost of the Bush administration's policy has been forgone opportunities. The combination of the weak economy and the White House's decadelong schedule of tax cuts has left future administrations with little room to maneuver. Forecasts for budget balances from 2002 to 2011 have dropped from $5.6 trillion in surpluses to $2.9 trillion in deficits in the past three years. In the coming years, the federal government will have little money to invest in economic growth directly, by spending money on education, worker training, or basic research, which generate reliably high returns to society in the long run."
Perhaps the whole lack of flexibility is the point. Makes it more difficult for the Droopy-man to screw things up just in case the electorate has a temporary bout of insanity. And long-term economic forecasts based off short-term trends are ALWAYS wrong; meaning those numbers count for jack squat.
"This latter cost is particularly germane, since there is no assurance that the positive chain-reaction the neoconomists envision will actually occur. Hubbard and Lindsey's strategy has never been tried in a large, wealthy economy. One flaw in the theory is that American savings do not always stay in America for use by American companies. In the past two decades, the share of savings sent abroad appears to have risen from about 10 percent to at least 40 percent. And when the Treasury borrows to make up for large deficits, more American savings will end up in the hands of government and less in investments by businesses."
Beep beep, be-be-be-beep, beep. Newsflash: This just in "The future is uncertain!" Uh, thank you very much Captain Obvious. There is no guarantee of anything. The logic is sound and all the economic models predict more growth, what more do want? Someone to come back from the future and tell you everything will be OK?
"The speedy growth of the economy in the last three quarters—averaging more than 5 percent at an annual rate—could signal impressive things to come. And the experience of the Clinton administration proved that even the biggest deficits can disappear given a broad enough expansion in the economy. But even if the Bush administration succeeds, its policies could create two problems that could undo all their positive effects: rising inequality and a drastic change in incentives."
Right now everythings great, but... and there's always a but ... "rising inequality and a drastic change in incentives" will cause the end of the world. We'll talk about inequality later but the whole drastic change in incentives thing is the whole point. That's what's supposed to cause the frickin growth!
"Wealthier people derive more of their income from returns on saving—both in dollar terms and as a proportion of income—than poor people do. When taxes on the return from savings suddenly disappear, the wealthy benefit the most. It may be that people who depend on their jobs for income will benefit, too, in the long run, thanks to an expanding economy and rising wages. But for several years, in all likelihood, the income gap will continue to widen."
So what? (I seem to be saying that alot lately, maybe I need to change the name of my blog?) The income gap is a chimera. No one gives a crap unless their situation is declining, which it shouldn't.
"That income gap poses some real dangers to the economy and even to the earnings of the wealthy. With rising inequality, it's harder for poor people to obtain economic opportunities, because chances to get education and training, or to bring ideas to market, depend on money as well as talent, and because the number of these opportunities is limited."
Rising inequality only makes it harder for poor people if the inequality is resulting from them being worse-off. That shoudn't be the case; the rich will just be more better-off. It will be easier for rich people to donate to charities to help these people get more opportunities or to invest their money to bring more jobs to help these people. And let's remember that we're not stealing from poor people to give to the rich, we're letting the rich keep more of their money.
"The Bush administration has done little to alleviate either of these conditions. So, when income gaps widen, more of the potential of poor people—even the smartest and most innovative poor people—will inevitably be wasted. The wealthier people who own America's companies won't have as skilled a workforce, or as fast a flow of new ideas, as they might have had otherwise."
See above. Why is that some people think the government should solve every problem? There are many opportunities; the people who are "wasted" choose to be that way.
"Perhaps more important, abolishing taxes on saving would give people every incentive to receive all their income from financial assets rather than wages and salaries. For some, spending all day adjusting one's portfolio might make more sense than taking a job. Even people who work will seek ways to avoid taxes, for example by being paid solely in stock options or high-interest bonds."
The number of people who could afford to spend "all day adjusting one's portfolio" is not going to be a big loss; others will fill their shoes. And isn't it possible that these people would actually contribute to the economy by investing in more productive areas to maximize their return on investment? Isn't that the whole point?
"Of course, those people would probably be chief executives and other financial sophisticates, rather than home health workers, call-center operators, and short-order cooks. Eventually, the new incentives could lead to a whole new way of classifying people: working and upper-class would be replaced by taxpayer and free-rider. Titans of industry, heirs and heiresses, and wizards of Wall Street wouldn't pay for national defense, cancer research, or President Bush's trip to Mars. All those costs would be borne by America's breadwinners."
Yawn. Let's take a trend and extrapolate to some point way in the distance and point how horrible it will be. For example, if we continue on our present path we will have invaded every country in the world by the year 2500, and then everyone will be extra-special mad at us. Just as worthless.
"It sounds like a recipe for the kind of social unrest that can make an economy stagger, stagnate, or worse. A political backlash would seem almost inevitable. And something worse—like a riotous manifestation of anticapitalist sentiment—would become a real possibility for the first time in decades. And that's what could happen if the theory works."
And now he reveals his true colors: RED. Looks like contrary to the last 150 years of history Karl Marx was right and capitalism will implode. Don't hold your breath. That's about as over-the-top as it gets. Let's follow his logic:
1. Bush tax cut (Yay!)
2. People save more
3. Rich stop working (if you don't count finding productive places to invest work)
4. Poor people see rich, lazy bastards (and don't make the connection that these rich, lazy bastards are the ones providing them with jobs)
5. Poor people get mad
6. Proletariat revolution (viva la Marx!)
Here's another timeline:
1. Bush tax cut (Yay!)
2. People save more
3. Everyone gets richer
4. We all live happily ever after
OK not counting that last point, which do you think is more likely?