Unforced Error, or How Well Has That Worked Out for You, BarryO?
PGL, in the process of an optimistic piece, points us to Martin Feldstein ringing in 2011. Apparently, the reason is this:
The most substantial potential boost to spending comes from a temporary reduction of the payroll tax, lowering the rate paid by employees on income up to about $100,000 from 6.2 per cent to 4.2 per cent. But, while the decline in tax payments will be about 0.8 per cent of GDP, it is not clear how much of this will translate into additional consumer spending and how much into additional saving. Because this tax cut will take the form of lower withholding from weekly or monthly wages, it may seem more permanent than it really is, and therefore has a greater impact on spending than households’ very feeble response to the previous temporary tax changes.
Feldstein attempts a free-finesse with “it may seem more permanent than it really is.” This is like playing the seven to the Queen when you’re only other holding is 10-x and expecting it to work.
It’s six months later. The crowd jewel of BarryO’s deficit-saving agreement, per Feldstein, was a low-impact change that was mostly (if my paycheck is any indication) neutralized by other factors (such as increases in health insurance costs). So the payroll cut is going to UHC or Aetna, or BCBS, or some other place where the money multiplier will be significantly less than one.
Even more interesting is that, just three paragraphs before, Feldstein understood that workers are still engaged in balance-sheet repair, and the likely consequences of same:
Even for those taxpayers who had feared a tax increase in 2011 and 2012, it is not clear how much the lower tax payments will actually boost consumer spending. The previous temporary tax cuts in 2008 and 2009 appear to have gone largely into saving and debt reduction rather than increased spending.
It is surprising, therefore, that forecasters raised their GDP growth forecasts for 2011 significantly on the basis of the tax agreement.
But Feldstein did see some good in the greater tax deal—it would temper deficit fears:
Obama wanted to continue the 2010 tax rates permanently for all taxpayers except those with annual incomes over $250,000….By agreeing to limit the current tax rates for just two years, the tax package reduces the projected national debt at the end of the decade (relative to what it would have been with the Obama Budget) by some $2 trillion or nearly 10 per cent of GDP in 2020.
That reduction in potential deficits and debt can by itself give a boost to the economy in 2011 by calming fears that an exploding national debt would eventually force the Federal Reserve to raise interest rates — perhaps sharply if foreign buyers of US Treasuries suddenly became frightened by the deficit prospects.
There can be only one remaining question:
When will Martin Feldstein endorse Jon Hunstman for President?
Can anyone really argue that Obama’s economic policy hasn’t been a disaster? The only good thing is what. we avoided a Great Depression? That McCain would have been worse?
McCain may have been better. We have no way to know as Obie has done such radical things that we can only “dream” that McCain would have been even more radical.
Yes, he could have gone ahead and attacked Iran (as many feared), but it seems clear that Hillary has exactly the same policies, so that’s on the list for days ahead now anyway.
I guess they can claim that they didn’t cause inflation to roar yet (which Krugman says is totally unlikely in this economic quagmire anyway).
I feel calmer already.
like playing the seven to the Queen when you’re only other holding is 10-x and expecting it to work.
i wouldn’t blame Obama’s administration alone. He has had a dysfunctional Congress to work with. He has been far too pandering to the financial industry and his continuation of taxes holiday for those who don’t need it has aggravated the situation. Can we blame the continuation of the middle east campaign solely on Obama? I don’t think so, but he certainly lacks forceful leadership qualities. It seems that every ideal that he holds is up for serious revision at the slightest sign of Republican resistance. All in all, I’d say we have a government that toadies to wealth and isn’t interested in appealing to the masses in an honest manner.
Jack are you saying we’ve got the government that we deserve? We have “yes we can” labeling to sell a “no we won’t” party, and “yes we will” packaging to market a “no we can’t” party. The Madison Avenue ads are what we think we are buying, but both parties offer Wall Street products for government delivery. Perhaps that’s what we deserve–voters who aren’t demanding more jobs and better pay deserve what they get?
McCain might have been better for the economy, because he would not have run up against such obstruction in the Senate, and he would not have spent time and political capital on a health insurance bill.
I wasn’t saying that directly, but that seems to be the most valid conclusion from the facts. Does the term lowest common denominator seem to fit? With the current Congress certainly so, but in regards to the Obama presidency I’d have to say that the wool was over the public’s eyes. Expectation is some times everything that results in nothing, or at least too little to be impressed. I see the situation as a continuing episode of “Good Cop, Bad Cop,” with the identity of the good guys and bad guys being dependent on one’s perspective. They all seem to be members of the same party with mildly different specifics to their professed ideologies. The ranting and raving of the players on the extremes, though the Repubs all seem to be gathering there, are for consumer consumption, enabling oour hapless citizenry to more easily see distinctions that don’t actually exist.
The payroll tax holiday is nothing more than a scam to weaken Social Security. The enemies of Social Security will say anything they think will fool you into letting them cripple the program so it no longer provides retirement security for American workers.
When they wanted you to think SS was a “poor return on your money” they insisted that “the employer’s share was really the worker’s money.” Now they want to take the worker’s money and give it to the employer so he can… they say…. hire more workers at a wage that won’t leave them enough to save for their retirement.
They have been telling us Social Security is going broke. Now they want to CUT the way workers pay for it.
They have been telling us about huge deficits. Now they want to cut taxes and borrow more money for a “stimulus.” Their idea of a stimulus is to give more money to the bankers that caused the recession.
The told us that Social Security was going to cause huge deficits. When it was pointed out to them that Social Security pays for itself and has nothing to do with the deficits, now or ever, they got this plan to cut Social Security taxes and borrow the money to pay for it, so now they can say, “See, Social Security really does add to the deficit.”
But it’s not Social Security adding to the deficit, it is the lying politicians and their schemes to kill the only way ordinary workers have to save their own money safe from inflation and market losses.
I was lukewarm but hopeful about Obama from the get go, but the deal he cut in December was the last straw. Whether it is because he is a secret republican or just dumber than a pile of rocks I do not know. I do know that extending Dumbya’s tax cuts and the 2% payroll holiday was a very poor decision and played right into the GOP’s current position of strength. That the GOP may be unable to capitalize on it fully because of the crazies in its “base” should not be considered political acumen by Mitch’s Bi**h. The unforced errors began from the day he took office and assembled a “crony capitalist” economic team which had no idea of how difficult it would be to deleverage the economy–to be fair almost nobody did–and continued when the Dems spent all their political capital on health care with little to show for it. Had they really tackled the economy they would not have lost the House in 2010 and could have done something since then. As it stands Obama would not have a prayer for re-election if the GOP was not so dysfunctional.
Has Obama’s economic policy been anything but a disaster? Yes. His predecessor made far less effort, steadfastly refusing to consider major spending increases when demand was inadequate. Obama agreed to a smaller-than-needed fiscal plan, but larger than nothing and larger and better focused than his predecessor would have allowed.
Now, when the question is about Obama’s economic record, I think blaming Obama for doing health care reform wildly misunderstands the interaction between the fastest growing major sector of the economy and overall economic performance – not to mention that it repeats a GOP talking point meant to derail health care reform. The health care reform bill contains mechanisms aimed at slowing the growth of health care costs, expands coverage and fixes a number of market flaws. That is not a distraction from economic policy. That is economic policy.
Obama should have asked for a bigger stimulus. Obama should not have given the GOP a pass on confusing taxes with the deficit. Obama should have ignored all that “he’s a big meanie, he won’t listen to us” nonsense from the GOP about health care, when their whole intend was preventing legislative victory of any kind. Then we’d have had a better health care bill. So his record has been far from perfect, but he has backed important legislation that has prevented things from being worse, and that his predecessor had not been willing to undertake. Comparisons to McCain are a little silly, because we will never know what McCain would have done. McCain is such a cameleon that I don’t think he could guess what he’d have done.
Thank you. I thirst for people who can “follow the dollar” as opposed to moan about “macro”, “micro”, “Keynes”, etc. Perhaps they are important, I don’t know but I do know that, ultimately, the effect on “we the people” is what really matters.
I don’t think dumb or smart is the important thing here. I think experience is the problem. I sometimes wonder if it is a bad thing that an experienced member of Congress has almost no chance of becoming president as the process of getting that experiences leaves bread crumbs.
With Obama, I think he is a good man. But I have wondered if he wanted to be larger than FDR, Kennedy, Reagan and Clinton combined. We will need to wait but we may have quantity at the expense of quality because of his determination to do anything to have a line in this resume.
The two-year $400-per worker tax credit that was part of the Feb. 2009 fiscal bill quietly faded away after last year, as no one in either party was willing to keep it going. This “tax increase” is still a drag on household budgets that no one is talking about, I don’t think it was a particularly good part of the stim. bill (would have liked to see more direct spending or aid to the states instead), but it was something that put a few bucks into middle class pockets. Far less pernicious than cutting (now apparently permanently) the payroll tax, which is the first step to killing Social Security.
“So his record has been far from perfect, but he has backed important legislation that has prevented things from being worse, and that his predecessor had not been willing to undertake.”
Even though though things not only got worse….they got way worse, and puts into question whether his specific policies are going to make things even worse yet down the road?
“Oh Dear Leader….we know you had nothing to do with it….It was that Evil Bush”-KHarris 2011
Battlefield Letters from the Eastern Front in 1943 had similar messaging.
try to think of it this way.
the kid drives the family car into the ditch. dad borrows money to get it fixed. (probably hires a bad mechanic and pays too much). now dad gets blamed for all the borrowing.
the trouble with you Darren is that you suffer from what you accuse your enemies of suffering from. terminal bias.
if i understand you, i agree. i get crazy listening to intellectuals talking about stuff as if it were a graduate seminar in english literature and not the lives of millions of people.