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Another look at Spending and Revenues

This is more or less relevant to Beverly’s post from earlier today.

How many times have you heard Boehner, McConnell, Ryan or one of the legion of right-wing talking heads say, “We don’t have a revenue problem, we have a spending problem?”  I refuted that lie repeatedly in this AB post and at the included links.   But this is one of those zombie ideas that simply will not stay in the grave.  

Therefore, some prominent voices have found it necessary to sing out again against the lie. I will add my humble quavery baritone to the chorus.

Here in Graph 1 is Kevin Drum demonstrating how Real Government Expenditures per Capita have changed under the last three presidents.

What we have isn’t a spending problem. That’s under control. What we have is a problem with Republicans not wanting to pay the bills they themselves were largely responsible for running up.

 Graph 1, Real Government Expenditures per Capita

By using real [inflation adjusted] and per capita numbers, Drum has introduced a couple of denominators.  Real expenses per cap is a rational way to display the data, but not the only way. So lest someone cry out about that ol’ devil denominator, let’s have a different look.

Via Paul Krugman we get Graph 2 and Graph 3, from FRED, showing total Government expenditures and Federal Government expenditures, respectively, on log scales.

Graph 2. Government Total Expenditures
Graph 3, Federal Government Total Expenditures

Yes, you can argue that spending was growing too fast under Bush, although it’s funny how few deficit scolds saw fit to mention that at the time. Or you can say that you just want less spending, although as always people who say this tend to be short on specifics. But the narrative that says that spending has surged under Obama is just wrong – what we’ve actually seen is a slowdown at exactly the time when, for macroeconomic reasons, we should have been spending more.

Remember, a log scale represents constant growth as a straight line, and zero growth as a horizontal line.  So, in pure dollar numbers, spending hasn’t quite declined, but it has stagnated to almost zero growth.  Hence Drum’s decline in inflation adjusted, per capita terms.

In Graph 4, we get one more longer range look, using Krugman’s data series, this time on a linear scale.  Also presented is the difference between the two, which is the amount of spending by state and local governments.

 Graph 4, Government Spending at Different Levels

 The red line is total spending at all levels of governemnt, the blue line is federal only, and the green line is the difference, state and local spending.  Note that the green line flattens early in the recession

To bring things full circle, Graph 5 shows Federal Government current receipts.  Look at this and tell me we don’t have a revenue problem.

Graph 5, Federal Government Current Receipts

To drive this point home, Graph 6 shows Federal Receipts as a fraction of GDP.  The purpose of the ratio is to provide context, using GDP as a proxy for the size of the economy.

Graph 6, Federal Receipts as a fraction of GDP

As you can see, revenues/GDP are in a historically low range.

– Federal spending is flat in nominal dollar terms.
– Federal spending is declining when adjusted for inflation and population growth.
– Federal revenues are far below trend lines based on any historical reference you chose.
– Federal revenues as a fraction of GDP are historically low.
– The Republican claim that we have a spending problem not a revenue problem is simply a lie, on both counts.
– Disproportional spending growth has only occurred under two presidents: Republicans Ronald Reagan and George W. Bush. 

The simple fact is we have a revenue problem, not a spending problem.

Why do Republicans lie?

The truth is hostile to their agenda.  PK Explains.

Cross posted at Retirement Blues

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John Boehner Says Defense Spending Is the Problem with the Economy. Awesome. – [UPDATED]

Politico’s Glenn Thrush reports this morning that Republicans believe the GDP report showing the economy is shrinking gives them political “leverage” over Obama, since bad economic news is terrible for the President. But Thrush notes that this shouldn’t be the case, since the contraction was the result of spending cuts, which in theory should undermine the GOP argument that we should cut spending as deeply as possible:
The fact that the shock this time came from a plunge in defense/federal spending should, in theory, bolster Obama’s contention that budget-cutting and trimming entitlement spending is the worst thing for the economy right now. It should, in a more Spock-like world, be an argument against the sequester cuts and big changes to Medicare and Social Security.

Forget about that.

All nuance is lost in the howling gale of an economic “contraction” — and the advantage, at least in the current news cycle, shifts to a down-in-mouth GOP. It’s not likely to be a major shift in the dynamics of looming fiscal fights, but Republicans, in the words of one senior Hill staffer I spoke to this morning, “will take any leverage we can get.”

Thrush very well be right that people won’t take the right message from the contraction. But in a rational world, what should be glaringly obvious is that the belief that this gives the party “leverage” highlights how absurdly incoherent the GOP message about the economy has become. (Read Steve Benen for all the other problems here.)

The economic contraction was driven largely by a steep drop in defense spending. As Ezra Klein details, this shows that “government is hurting the recovery” by “spending and investing too little.” As Ezra notes, “government spending and investment have, at all levels, been contractionary since 2010.”

Yet Republicans are responding to the news of the economic contraction by suggesting invalidates their view that we need to further cut spending to help the economy. Hence their claimed “leverage” in the coming battle over the sequestered cuts, half of which is to defense spending. Republicans are actively using the sequester to force Dems to agree to avert it by offsetting it entirely with other deep cuts to social programs, and no new revenues from the wealthy. In response to the contraction, John Boehner tweeted out this hashtag:


In other words, the contraction confirms that we need more spending cuts.

We all agree that spending cuts hurt the economy. Right? Right., Greg Saregent, Washington Post, today

Okay, look.  If Obama doesn’t now, finally, explain Keynesian economics to the general public, using actual facts–such as the reason for the economic contraction–and point out that Boehner & Co. either are ignorant of the facts or are willing to deliberately misinform the public about such a critically important matter, then he should resign and let Joe Biden explain it as president.  

I mean it.

Obama did a stellar job a week before his inaugural address explaining the debt ceiling law and what “raising the debt ceiling” means–and that ti does not mean what the Republicans’ campaign of disinformation was saying it means.  He should do the same now, on this.  

Presumably, he’ll enlist as his chief speechwriter for his State of the Union address a speechwriter who understands how to easily explain Keynesian economics and the current “contraction” statistics.  But, just as with his inaugural address, he should not wait until that speech to expose the Republican game plan for what it is: a concerted campaign to misinform the public about critical facts, knowing that the public will not know the accurate specifics, and aware that–as Thrush says, outright–the mainstream press will not sufficiently (or at all) apprise the public of those fact.  

In other words: that Romneyism–the flagrant lying, con artistry, as the chief modus operandi–is now at the very heart of what the Republican Party is.

The public did catch on to Romney by the fall.  And, thanks largely to Obama’s statements at his press conference on Jan. 14 abou the debt ceiling, they caught on to that, as well.  And if Obama makes an effort to explain to the public basic Keynesian economics, and cites actual facts, actual statistics, about the fourth-quarter contraction, they’ll catch on this time, too.  And, maybe, finally, to the fact that the Republicans have decided upon a strategy of fraud in order to disassemble the social safety network, including Social Security and Medicare.  

In his State of the Union address, he’ll have an opportunity to finally educate the public about the actual causes of the Greek meltdown, of the actual effect of Tory austerity in Britain, of the actual cause of economic near-collapse in Spain, in Italy, in Ireland, in Iceland–and of the actual effect of the safety net in Germany, in Holland, and elsewhere.  And maybe he’ll even take that opportunity.  But the State of the Union address is two weeks away.  And in responding to Boehner’s tweet at #spendingistheproblem, there’s no time like the present.  Or at least like the next few days.  Just as with the fiscal cliff and the debt ceiling, the Republicans’ political leverage, whether real or fanciful, will turn out to be ephemeral.  

Unless Obama remains mute.

UPDATE: Wow.  Either Greg Sargent is channeling me, or I’m channeling him.  He posted this one minute after I posted my post on AB.

But as I say in my post, Obama shouldn’t wait the two weeks until the State of the Union address to begin making the point.  Just as he didn’t wait a week until his inaugural address to explain to the public what “raising the debt ceiling” actually means–thus pulling the rug out from under Repubs’ disinformation campaign telling the public that it means increasing spending appropriations.  

Sargent titles his post “Make strong case that spending cuts hurt economy, Mr. President!”  (Amen.)  He points out: that

Unfortunately, at times, Obama has diluted this message. During his 2010 State of the Union speech, for instance, the President proposed a temporary spending freeze, and said:

“Families across the country are tightening their belts and making tough decisions. The federal government should do the same.”

But I think it’s a mischaracterization to describe that as a dilution of the Keynesian message.  It’s actually an outright misrepresentation of economic fact; that’s why that statement has been so detrimental.  And, if necessary, Obama should expressly acknowledge that this was misleading about economic fact, and then explain exactly why.

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Paul Ryan Says Taxes Should Be Raised to Pre-Bush-Tax-Cut Levels. But the Republicans Will Opt Instead For the “Sequester.” Unless, Of Course, the Koch Brothers Intervene.

There were three big political stories that came out of David Gregory’s fabulously interesting interview of Paul Ryan aired last Sunday on Meet the Press.  One was that Ryan said:

Well, we can debate the efficacy of Keynesian economics or not. And I don’t obviously believe– I think the debt is pretty clear it doesn’t work.

Another was that he said that if Bill Clinton were president, we would have solved the budget-deficit problem, a statement that he presumably bases on the fact that when Bill Clinton was president, he solved the budget-deficit problem.

The third headline-grabber from that interview was that the Republicans will allow the “sequester” to take effect, presumably because they think it’s pretty clear that Keynesian economics doesn’t work, and because Bill Clinton is not longer president.  If Bill Clinton were president, the Republicans would allow him to raise tax rates to the level he did in 2001, this time without having to have the vice president cast the 51st vote in the Senate for the tax increase, and with enough Republican votes in the House to allow a vote on the tax increase.  

In other words, if Bill Clinton were president, Ryan and his compadres would not keep refusing to allow the Bush tax cuts on annual incomes of less than $450,000, and tax cuts on corporations, capital gains, and dividends, to expire.  But because Obama, rather than Clinton, is president, they won’t. They should be allowed to expire, Ryan says.  But they won’t be allowed to expire, because Obama is president.

Instead, the Republicans will opt to test out the the efficacy of Keynesian economics, or not–depending, probably, on whether the Koch Brothers pick up the phone and disabuse Ryan of his belief that Keynesian economics doesn’t work.  Before Wall Street does.  

Here’s what I obviously don’t believe: That if Ryan actually obviously doesn’t believe–thinks the debt is pretty clear it doesn’t work–he has even basic knowledge of past and current economic fact.

I’ll take his word for it that he was being truthful about his belief. But I sort of expect that the Koch brothers and others will educate him and other congressional Republicans who hold that belief, very soon.

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Jon Swift Memorial Blogroll Amnesty Weekend, 2013

This coming weekend is the annual Jon Swift Memorial Blogroll Amnesty, the reasoned, proportionate response to some of the Bigger Names suddenly deciding that they needed to cull their recommendations.  Swift’s brilliant (and certainly modest) proposal was that you should instead find five blogs with lower hits than you and recommend (i.e., promote) them, not drop them.

I don’t need to tell you to read Brad DeLong or Mark Thoma or Bill McBride—or David Altig or David Beckworth.or Jared Bernstein. Or anyone else who is probably already on the AB blog roll.
Things that have been disappearing from view as Blogroll Amnesty Years pass:

  • Single-person blogs
  • Blogs that are not always updated daily
  • Blogs that are not themed but are rather “what the owner feels like mentioning”

The following five are my recommendations for this year, in alphabetical order:

  1. Andrew Rickard (updated almost every day; in perfect timing, just went on a week’s hiatus)
  2. A Boat Against the Current (Mike does update almost every day)
  3. The Hunting of the Snark
  4. You and Me, Dupree
  5. Underbelly (who sent me to Andrew Rickard)

    and a bonus one, because you can never have enough (a) Canadian content or (b) food blogs, let alone both:

  6. Double Trouble, Kitchen Edition
(h/t to Skippy the Bush Kangaroo for the reminder)

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Chuck Hagel Is a Threat to America’s National Security! And to the Koch Brothers’ Financial Interests.

The American Future Fund is an Iowa based 501(c)(4) tax-exempt organization affiliated with the Center to Protect Patient Rights, which in turn has reported ties to billionaires Charles G. Koch andDavid H. Koch.

American Future Fund was founded by individuals who worked for Mitt Romney‘s 2008 bid for the Republican U.S. Presidential nomination. Nick Ryan, an adviser to Republican US Representative Jim Nussle, founded the organization in 2007, with Nicole Schlinger, a GOP leader in Iowa, as its president. Its current president is Iowa Republican state Sen. Sandra Greiner.

The fund “advocates conservative and free-market principles” and energy positions that include support for drilling offshore and in the Alaska National Wildlife Refuge.


In 2010 the American Future Fund reported over 9 million dollars of independent campaign expenditures to the FEC, and 100% of its expenditures benefited Republicans.

In 2012 the organization funded ads supporting Mitt Romney‘s bid for the U.S. presidency. In the same year, it also funded ads attacking Missouri Attorney General Chris Koster and in support of California’s Proposition 32, which would prevent unions from collecting political contributions as paycheck deductions.

The organization does not disclose the names of those who have provided its funding.

Add to the Activities list an anti-Chuck Hagel TV ad.

Okay. So I happened to catch a segment on CNBC just now (don’t ask; catching segments on CNBC is not quite part of my normal daily routine) that ended with an ad blasting Hagel for … um … a whole lot of stuff geared toward making people think he would have lots of conflicts of interest if confirmed as Secretary of Defense, even if he sells all those financial interests in defense contractor companies that the ad says he has, and in that company that invests in Iran, and stops flying on corporate jets.

At the end of the ad, the viewer is told that it’s sponsored by The American Future Fund.  Which I couldn’t identify from memory, since the names of these organizations all sound alike.  And are all very interested in America’s future.  

But, having seen the ad, I now knew that Hagel would be a very dangerous guy to have as Defense Secretary.  I just didn’t know who exactly he posed a danger to.  But thanks to Wikipedia, I know now.

Sounds to me like Paul Ryan should have consulted the Koch brothers before he declared on Meet the Press last weekend that Keynesian economics has proved to be a failure.  If you get my drift. Those oil and gas subsidies and defense contracts that the Koch businesses receive are important to our national defense … and to the economy.*

*Edited for clarity after initial posting.

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Webb on SS

If I could put my Vulgat Marxist hat on for a second another major difference between an invested pension fund and Social Security is that the fiormer fattens its balance by maximizing the extraction of value from labor productivity (and so increases ROI on capital) where SS thrives when labor retains as large a share of its own productivity as is consistent with drawing needed capital investment. And while some would argue that any reduction in ROI automatically leads to Capital Going Galt, the real world suggests that some capitalists will stick around even at smaller margins. (Not every pizza maker wants to be Pizz-onaire like Papa John, some just want to run a nice pizzeria)

Back in 2005 Dean Baker put forth his NELB (No Economist Left Behind) Challenge that demanded that privatizers show how they could get historic ROI on equities using the economic numbers assumed for Intermediate Cost {Dean didn’t formulate it this way, blame me and not him}. And some people claim to have met the challenge, but on inspection it SS by drawing much of their return by moving production overseas and so maintaining productivity at the cost of American worker wage. Left unexplained was how this magic was supposed to work when those same workers were being called to fund their private accounts out of now decreased wages so as to share in gains of even more suppressed wages of overseas workers was left unexplained.

That is you don’t have to be a full throated advocate of Labor Theory of Value to understand that ROI on production investment depends crucially on cutting labor costs for any given productivity unit. And conversely Real Wage increases by taking a bigger share of productivity gains.

This to me explains why union pension funds heavily invested in company stock will almost always come a cropper. Managements need to maximize ROI for stockholders as a whole in practice means starving the compensation of workers depending on the pension fund. Most easily by just deferring company contributions over time and then complaining about ‘unsustainable promises’ based on ‘unfunded liability’. Social Security reduces the inclination for labor leaders and more senior vested members in the plan to buy in to “starve the new guy with two tier wages and shaft him by going from DB to DC with corporate ‘match’ (if the match ever comes). Whereas SS benefits wherever actual wage compensation increases, whether that comes at the expense of ROI or not.

SS vs pensions is not just about time shift between contribution and payout, each reacts differently to Real Wage as share of productivity. Not in linear fashion. But still.

 I agree in principle. Which suggests a discussion focused on three points:

One) what level of ultimate productivity does the current Intermediate Cost Alternative projection assume?

Two) is that level of productivity actually justifiable given all we know (or think we know) about future economic trends?

Three) are there ways to address productivity through policy so as to attain results above IC and approaching LC (Low Cost and also fully funded SS) numbers?

But we never have that discussion or indeed anyone actually using the ultimate productivity number in question. Instead we have hand waving that in effect asserts Intermediate Cost outcomes and then proposes solutions that implicitly rely on much better productivity numbers.

This shell game was highlighted in 2005 by Dean Baker with his NELB (No Economist Left Behind) Challenge which in effect asked privatizers to show how they could achieve traditional rates of return on equities given the productivity assumptions of Intermediate Cost.

And I added the request that if it became necessary for privatizers to adjust those productivity numbers up then that they should rescore Social Security outcomes.

The overall response to both challenges was crickets. But I haven’t given up hope that someone would step up to the plate. Either future productivity numbers are sucky enough that all retirement schemes are moot or there is some potential upside in the direction of SS solvency. But crisis mongers can’t have it both ways.

Maybe we are fucked. Fine admit that and we can move on to mitigation. Which won’t include magical returns on equities given IC productivity numbers. Over to you.

Jan 16, 2013, 9:51:00 PM

Table V.B1.—Principal Economic Assumptions
Ultimate Productivity (2020 on) 1.68%
Ultimate Real Wage: 1.1%
Real interest: 2.9%
Nominal interest: 5.7%
Unemployment: 5.5%
Real GDP: 2.1%

Are those really our best estimates of MEDIAN outcomes? Are there exactly no policy proposals that could target ANY of those numbers in ways that would improve solvency?

If so why? And why not? Until we actually have discussions focusing on the actual numbers underlying Social Security ‘crisis’ I have to call bullshit. Note that the corresponding numbers for fully funded Low Cost are 2.8% Real GDP and 1.7% Productivity. Are those really such pie in the sky numbers that even results approaching them are out of the question? And if not how does that translate to solvency scoring?

Until I get some answers to those questions a few sorta lazy claims about productivity aren’t going to cut the mustard. MAKE me look like an uninformed IDIOT. Using NUMBERS.

Jan 16, 2013, 10:03:00 PM

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Dell restructuring–all for a tax advantage?

by Linda Beale

Dell restructuring–all for a tax advantage?

David Cay Johnston writes for Tax Analysts, in Dell’s Multiple Restructurings Aid It in Tax Avoidance (2013), about a global reorganization disclosed by Dell in its January 2007 Form 8-K filed with the SEC:  “just before the end of 2006, [Dell] issued more than 475 million shares worth $12 billion to invest in a subsidiary.”  In the Form 8-k, Dell notes that “Dell has modified the corporate structure of certain of its subsidiaries to achieve more integrated global operations and to provide various financial, operational and tax efficiencies”  (as quoted in the Johnston article).

What Dell did was remake itself in a way that lets it escape taxes on profits earned in the United States by running them through a Netherlands entity and newly formed subsidiaries in Singapore and the Cayman Islands.

Dell later quietly dropped the Singapore and Cayman Islands entities in what appears to be a pattern of remaking its corporate structure every few years. This nuanced timing pattern may have great significance as a tool for tax avoidance because IRS corporate audit practices were established on the assumption that companies tend to have stable structures. The IRS rarely audits newly formed entities.

The documents suggest that Dell created companies with no apparent purpose except to funnel profits into jurisdictions where they would be untaxed. In some cases, subsidiary names existed for a day or so and then were changed to the names of existing entities. The company shuffled its subsidiaries like a deck of cards — a deck stacked against shareholders and the IRS.

Sometimes the deals used companies with identical addresses, suggesting circular flows in which what would be taxable profits in the United States were run through offshore entities with no discernible purpose except escaping tax.  Id.

Describing the work of a couple who sleuthed through Dell’s state filings and court papers to examine its tax compliance, Johnston reports:

Before one restructuring, Dell Inc. sold products to domestic customers through Dell Catalog Sales Corp., which shared the same address in Texas.
The couple distilled from annual corporate ownership and sales tax filings with state governments, as well as stipulations in various civil lawsuits, that Dell then replaced this simple organizational structure with a hierarchy of tax haven holding companies.

In all, Dell inserted four new companies between the parent and operating entities, which use the same Texas street address.

The result was that a Texas company reported to a Netherlands company that reported to a Singapore company that reported to a Caymans company that reported to what appears to be another Netherlands company that then reported back to the Texas headquarters.

This makes business sense? I cannot fathom how — except to escape taxes.

And because Dell publicly discloses its untaxed offshore profits and the expected tax rate upon repatriation of those profits, those numbers support the suggestion that the elaborate creation (and killing) of subsidiaries has one primary purpose–the reduction of taxes owed to the US.

Citizens for Tax Justice, in a report last year (Doc 2012-21457 , 2012 TNT 202-22), noted that Dell is one of the few multinationals that discloses how much untaxed profits it holds offshore and the expected tax rate if it brought the money back to the United States.

Dell said it had $15.9 billion of untaxed profits offshore on which it would owe a tax of $5.2 billion, or 33 percent. Since that is almost equal to the 35 percent corporate tax rate, it suggests Dell paid virtually no tax anywhere in the world on those profits, because Congress gives a dollar-for-dollar tax credit on corporate income taxes imposed by other countries.

So what, Johnston asks, is the public benefit of allowing this kind of corporate shell game?  He suggests that for shareholders, the question is whether they are being told enough to evaluate the risks and rewards of holding Dell securities.  And he concludes probably not.  For the IRS, it is whether regular audit techniques will miss what they should catch. And again, he wonders if the IRS policy of letting companies know what will be audited, sticking to those points, and completing audits in fixed time periods isn’t just a giveway to those who are manipulating their tax rates.  Dell’s tax counsel, he notes, would undoubtedly advise that they have reviewed each reorganization step and that they are perfectly legal. 

But Johnston wants an audit, and one that looks at the whay sophisticated companies are adept at working around audit policies.  Dell’s reorganizations, he says, are apparently timed at two-year intervals, injecting considerable complexity into the work of any IRS auditor trying to track their impact. And “the business purpose for this management structure is elusive”, he notes, on one set of slides showing a shuffle of entities that ultimately lands a company still located in Texas under a foreign sandwich of companies and ultimately avoiding US tax on the operating company income. He surmises that Dell owes a billion or more in US corporate income taxes that have escaped capture because of this endless restructuring.

cross posted with  ataxingmatter

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Billions for job piracy even as states cut budgets

According to Center on Budget and Policy Priority data cited by Louise Story, in 2011 the states enacted $156 billion of austerity measures, between budget cuts and tax hikes. Despite their budgetary woes, however, this did not stop them from throwing billions of dollars a year into the worst kind of corporate subsidy, relocation incentives that move existing facilities from one state to another without creating any new jobs. A new report from Good Jobs First documents their widespread use, which is far more common than most people would imagine.

One great aspect of this report is that it goes beyond the two examples of interstate border wars we hear the most about, New York-New Jersey-Connecticut and Kansas-Missouri. We learn about Texas and Georgia vs. the world, North Carolina-South Carolina (especially in the Charlotte metro area), Tennessee-Mississippi (particularly with Memphis as target), and Rhode Island-Massachusetts. In addition, we learn more about the flip side of job piracy, retention subsidies, of which Sears’ two in Illinois are the most egregious.

For example, Continental Tire moved its North American headquarters and 320 jobs from Charlotte to Lancaster County, South Carolina, in 2009. Georgia gave Ohio-based NCR Corp. (formerly National Cash Register) $109 million to relocate that same year. In 2010, Hamilton Beach received at least $2 million to move from Memphis to Olive Branch, Mississippi, while in 2009 McKesson received $4 million from Mississippi in addition to local incentives to move from Memphis to neighboring DeSoto County. Rhode Island, in a widely publicized move, gave Boston Red Sox pitcher Curt Schilling’s video game company 38 Studios a $75 million loan to move from Massachusetts in 2009, only to see the  firm go bankrupt in 2012. There are many more examples in the report, but you get the idea.

The existence of relocation subsidies makes it possible for companies to demand incentives to stay in a particular state, i.e., retention subsidies. Two of the three largest ones went to Sears in Illinois, $168 million in 1989 and another $275 million in 2012 when the 1989 deal expired. The second largest was $250 million to Prudential Insurance from New Jersey in 2011. But many more states have had to shell out retention subsidies on a regular basis.

The report notes that at least 40 states know how to write no-raiding language into their subsidy programs, because they already have such language banning intra-state relocations from receiving subsidies under various programs. However, as far as I know, far fewer states prevent their cities from giving relocation subsidies to in-state firms, though the report shows that Maine’s Employment Tax Increment Financing rules do provide that.

What is necessary, the report argues and I wholeheartedly agree, is that states need to tweak their program language to stop rewarding interstate job relocation as well. They need to stop efforts to directly poach existing firms, something Texas is heavily engaged in. The report says there is a “possible” federal role here, to withhold some Department of Commerce monies from states that engaged in job piracy. I, on the other hand, think that federal action is the only way it will happen. As I’ve written before, voluntary state efforts in the 1980s and 1990s to end job piracy have been utter failures, and the states clearly need an outside enforcement mechanism, which can only be provided by the federal government.

With such extensive documentation of how widespread relocation and retention subsidies are, hopefully more people can be mobilized to get the federal action we need.

Cross-posted from Middle Class Political Economist.

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Oh, No. David Brooks Thinks Social Security and Medicare Are State- and Local-Government Programs. Or Thinks We Do. Seriously. — APPENDED (twice)

The final problem is that, in an effort to reduce the economic concentration of power, the administration is concentrating political power in Washington. If the problem is that talent is fleeing blighted localities, it’s hard to see how you make that better if decision-making and resources are concentrated faraway in the nation’s capital.
This is not to make a partisan point. The Republicans do not have a better approach. It’s simply to say that the liberal agenda is not very good at addressing the inequality problem it seeks to solve. The meritocracy is overwhelming the liberal project.

The Great Migration, David Brooks, New York Times, Jan. 25

Brooks is right; that is not to make a partisan point.  It is to make a nonsensensical point. A point that Brooks makes again in his column in today’s Times, if in different words. 

It is, in any event, an inaccurate point.  

Okay, I admit it: I’ve become obsessed with David Brooks.  Or, more specifically, with the fact that a New York Times columnist who is regularly referenced by other big-name political columnists and bloggers, operates under a formula in which everything even remotely connected to politics/ideology–and I do mean everything, best as I can tell–falls within one or another breathtakingly broad factual category.  The placement into one or another of these categories depends not on whether the category placement is even remotely accurate as a matter of logic or even (sometimes) actual fact, but instead on which category whatever he’s talking about must fit in order to advance his preference for the decentralization of … well … everything, I guess, other than corporate power.  But especially of government functions.

This is so even when he’s arguing in favor of stronger centralization of government functions and of more government functions, but doesn’t realize it.  As, for example, his invocation of the public’s overwhelming support for Social Security and Medicare as … yup! … evidence that “Americans are still skeptical of Washington,” and so “[i]f you shove a big government program down their throats they will recoil.”  An accurate statement if the Americans you’re talking about are the ones who want the government to stay out of their Medicare!  Otherwise, though, there isn’t much evidence that there’s been an 80-year-long recoiling from Social Security and a 45-year recoiling from Medicare, and a populist push to privatize those programs or, to borrow a phrase from Mitt Romney (specifically when talking about emergency disaster aid and Medicaid, but, clearly, he had other programs in mind, too–like almost all federal programs that don’t directly aide, say, the oil and gas production companies–send them back to the states.  From which they didn’t come, in the first place.

The two indented paragraphs above come at the end of a column summarizing a new book called The New Geography of Jobs, by Enrico Moretti, with whom Brooks expressly agrees, point after point, paragraph after paragraph.  Until he adds a point of his own, the one he identifies as the final problem.  The one that Brooks thinks cannot be solved by federal money and decisionmaking, because that money would be concentrated in–by which he means, originates from–Washington, and because decisionmaking about how to turn this dynamic around, so that localities other than the big tech and finance centers prosper too, would, if the liberals have their way, be concentrated in Washington.  

Brooks sums up the problem. Sort of:

The highly educated cluster around a few small nodes. Decade after decade, smart and educated people flock away from Merced, Calif., Yuma, Ariz., Flint, Mich., and Vineland, N.J. In those places, less than 15 percent of the residents have college degrees. They flock to Washington, Boston, San Jose, Raleigh-Durham and San Francisco. In those places, nearly 50 percent of the residents have college degrees.
As Enrico Moretti writes in “The New Geography of Jobs,” the magnet places have positive ecologies that multiply innovation, creativity and wealth. The abandoned places have negative ecologies and fall further behind.

This sorting is self-reinforcing, and it seems to grow more unforgiving every year. One small study caught my eye. Robert Oprisko of Butler University found that half of the jobs in university political science programs went to graduates of the top 11 schools. That is to say, if you have a Ph.D. from Harvard, Stanford, Princeton and so on, your odds of getting a job are very good. If you earned your degree from one of the other 100 degree-granting universities, your odds are not. These other 100 schools don’t even want to hire the sort of graduates they themselves produce. They want the elite credential.

Brooks is good at using other people’s fact-based arguments.  He just isn’t good at figuring out what they mean.  Or at least what they don’t mean.  Butler University is in Indianapolis, Ind. Presumably, Oprisko and all his colleagues live nearby.  The University of Michigan has a large branch in Flint.  The members of its political science faculty probably live within a relatively small radius of Flint.  So this wasn’t a good example of Moretti’s point, an all-too-valid one that highlights a huge national truth.  A truth that surely cannot be solved by removing whatever funds and help the federal government might offer.  

The federal government is not keeping Flint and the other, similar localities around the country, from doing things that might change the economics dynamic so that their young people will be better educated and will want to return there after receiving their degrees.  The federal government is being concertedly demonized as a beast, and starved–the result of the Republican dominance of Washington policymaking for so long.  And, for the same reason, the federal government’s entire fiscal policymaking apparatus has been prevented from attempting to deal with the problems Moretti discusses (and Brooks purports to discuss) by the capture of the public policymaking dialogue by people who want to end or prevent the federal-government’s role in, among many other things, the very sort of problem-solving that Brooks says is needed, except by … who?  Or by what?  Corporations? Local governments? Rush Limbaugh?

Brooks, as is typical of him, doesn’t say.  He just says, as always, that “centralized”–by which he means, federal government–power is bad. He doesn’t like it.  Too much like Europe, you know.  Very bad.

Brooks didn’t write a Sunday column this week.  I figured he just didn’t want me to mock another of his mindless rants about liberal/Obama government/centralized-headquarters-controlled operations that would undermine creativity and initiative–such as student-loan programs and public universities–so he took the day off.  But instead it turns out that he didn’t write a Sunday column because he was too busy attending various luncheons, dinners, and other meetings at this decade’s National Review review this past weekend about what the hell went WRONG last November, and what the hell can BE DONE to avoid such unfortunate turns of fortune from recurring repeatedly in the coming, say, century.

Brooks recounts pieces of arguments of speakers at the conference, and he concludes, surely accurately, that the Republican Party can’t win unless it develops what he calls a “Second GOP,” lead by new politicians who are not anti-government. These folks would develop federal programs that would address the country’s and individuals’ actual problems.  The quest for actual solutions, in other words, would trump anti-government ideology.  It’s just that, as standard bearers for the GOP, albeit the Second one, they would have to pretend that federal programs, like Social Security and Medicare, aren’t big government programs.  Or even small government programs.  They would pretend, I guess, that federal government programs aren’t federal government programs. State programs, maybe? Local-government programs? Chamber of Commerce programs?

This would work, remember, because most Americans “recoil” from big (i.e.., federal) government programs. Which is why they “cherish” Social Security and Medicare.  Just so you don’t think I’ve removed a sentence or clause from its context, here’s the full paragraph:

Americans are still skeptical of Washington. If you shove a big government program down their throats they will recoil. But many of their immediate problems flow from globalization, the turmoil of technological change and social decay, and they’re looking for a bit of help. Moreover, given all the antigovernment rhetoric, they will never trust these Republicans to reform cherished programs like Social Security and Medicare. You can’t be for entitlement reform and today’s G.O.P., because politically the two will never go together.

The Second GOP, Brooks says, “would be filled with people who recoiled at President Obama’s second Inaugural Address because of its excessive faith in centralized power, but who don’t share the absolute antigovernment story of the current G.O.P.”  People who, for example, live in Merced, Calif., Yuma, Ariz., Flint, Mich., and Vineland, N.J., and would be outraged if the Obama administration offered programs and federal financing to try to assist their cities in upgrading their education and infrastructure systems enough that they again become attractive to companies and startups and young professionals. Some of whom, recall, cherish Social Security and Medicare because of their lack of centralized power.

What exactly does Brooks think is an example of Obama’s excessive faith in centralized power?  The operative word here is, example. Even just one or two specific ones, please.  He doesn’t say; after all, generalization and sweeping categorization is his stock in trade. But if he can, and does, eventually provide an example, he might, while he’s on a role, consider identifying a couple of decentralized-power success stories, and explaining why Merced, Calif., Yuma, Ariz., Flint, Mich., and Vineland, N.J., don’t seem to have had similar options.  

Or maybe he can persuade the Second GOP to explain it. Without making too many of us recoil.  

UPDATE: Reader Jack and I exchanged the following comments in the Comments thread below:

Believe me when I say that I share your feelings about Brooks. He is one of the worst of the sycophants of the upper crust, and he is little more than the crumbs that make up that crust. However, the nearly total lack of response to your long post in the past several hours is the best response of all. He is not worthy of criticism. Posting anything he writes is like disposing of feces with your bare hands. Don’t dirty yourself by acknowledging that you’ve actually read some of his deceitful meanderings. When you see his column in print take that page and clean some crap off the sidewalk so that at least that page will serve a useful purpose.

If you must write about him then do so in a brief letter to the managing Editor of the Times and note that the Times should find a more fact based apologist for the takers in our society. Don’t multiply his words through the process of criticism. It serves no useful purpose because criticism is meant to correct or improve a point of view. He has no capacity for either.

My instinct is to just say, “But, Jack, you don’t understand.  This is an obsession!”  But I think it’s not a trivial matter that a very high-profile, self-styled “center-right” (as opposed to just plain rightwing), political columnist–someone whom politicians and other political journalists read and take seriously–keeps pushing a flatly nonsensical supposedly-factual, but generic “narrative”–over and over and over again–while never actually identifying specifics to support his claim of fact: that Obama and the congressional Dems are pushing for federal programs that would undermine creativity and initiative because they would be federal programs rather than state or local programs–or something–and that ongoing government programs such as student loan programs and state university systems do the same because they are government rather than private programs–or something.  

These are representations of fact, not statements of opinion.  They either are unpinned by empirical evidence or they are not.  And of course they are not.  So why does the New York Times allow him to keep asserting these things, in column after column, without finally asking him to identify specifics that support his generic claims of fact?  Yes, he’s an opinion columnist.  But these things aren’t opinion; they’re either fact-based or they aren’t, and if they aren’t, why is he allowed to use the Times as his forum to keep saying that they are, without ever actually identifying any empirical evidence to support them, or even specifying rather than merely implying) what programs he’s talking about.  

Two weeks ago, New York Magazine writer Jonathan Chait wrote a delicious article there titled “David Brooks Now Totally Pathological,” hilariously deconstructing Brooks’s then-most-recent column in which he angrily blamed Obama for the Republicans’ fiscal-cliff and debt-ceiling embarrassments because Obama didn’t cave to them.  But that column of Brooks’s was, clearly, just opinion.  Hilariously and flagrantly ridiculous opinion.  It wasn’t a misrepresentation of fact. Quite the opposite; it acknowledged that the Republicans lost the substantive and political endgame on both.  It just said it was Obama’s fault.  Which is true.

Chait’s article is … a don’t-miss.
FOLLOW-UP: In response to Jack’s reply to me in the Comments thread in which he criticized the New York Times as basically a shill for the wealthy, I wrote:

I like the New York Times, generally. That’s where Paul Krugman’s column and blog are published, after all. And I’m not suggesting that the editors should censor their columnists’ opinions. But when a political columnist repeatedly makes sweeping conclusory statements of fact without ever actually specifying the supposed factual basis for the claims, and when it’s patently clear that no factual basis for the claims exists, it does seem to me that that crosses a line. …

I want to be sure that my criticism of the Times on this is not misunderstood.

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