Mark Thoma puts Holtz-Eakin on (figurative) hot seat

by Linda Beale

Mark Thoma puts Holtz-Eakin on (figurative) hot seat

As most of the Angry Bear and ataxingmatter readers know, I do not frequently applaud the economic punditry of those freshwater economists who think the way to deal with the problem of failed market fundamentalism policies is to double-down on those failed policies.

I’ve noted that we tried that already.  We doubled down on  reaganomics policies of tax cuts/militarization/deregulation/& privatization throughout the Bush regime, and that got us into a witch’s brew of problems.

Because of that double-down mentality, where the neos told us war was good and greed was good and where we applied the laughable, made-up-out-of-whole-cloth “Laffer theory” that told us there was no evil that tax cuts (especially for the rich and big corporations) couldn’t conquer, the Bush regime very ably turned a budget surplus into a staggering deficit and a financil crisis that would guarantee more deficits and debt before we were done with it.

We ended up with failed (de)regulatory policies.  They allowed Big Banks and their big moneymakers to speculate their way into phantom billions of profits (all soaked up by the big jefes/big moneymakers).  But instead, we got a near-breakdown of the financial system, that forced all us ordinary taxpayers to subsidize the Big Banks’ losses without getting recompense from the banksters’ earlier oversized payouts.

We ended up with failed tax (cut) policies.  They cut taxes on big multinational corporations and the ultra rich, based on the claim that those are the “job creators” that we should reward.  But instead  they only ended up siphoning off needed revenues from programs that could build infrastructure and support quality education and research.  They privatized education by providing lots of federal loan money to students that went to for-profit schools, only to learn that those schools tend to be traps that don’t educate but just take money for the profit of the “education” business.  They quit funding the stuff we need, so they could subsidize those that didn’t need it.  And they kept the subsidy up–for Big Oil, for wealthy decedents–even when the money was just piling on for those that already had lots of it.

That’s what makes the current ultra-partisan Congress and the constant right-wing talk of deficits and debt as justification for stripping the safety net (while still conferring outsize gains on the ultra rich and Big Business) so disgusting.  The right still  refuses to pay attention to facts and justifies this oft-discredited, clearly wrong-headed market-fundamentalist and class-warfare orthodoxy as “plain as day” correct thinking.

ASIDE:  This seems sort of like the GOP’s plans for gaining the loyalty of our increasing diverse electorate by being careful to package their mostly white, Friedman-orthodox, oligarchy-favoring policies in the sheep’s clothing of multicultural spokespersons who avoid the “tell” of who they really are and use words that talk about ordinary people as though the policies were actually aimed at benefitting them.  Meanwhile they double-down on their claims that redistribution upward is all about job creation, and condemn those who talk about preserving the safety net by NOT reducing benefits as “socialists” who don’t understand the American way.

The American way they seem to be harking to is the era of the corporate titans of malfeasance that Teddy Roosevelt warned us against, who grabbed the gains of the market place well in excess of their productivity merit and didn’t give a damn about the rest of us. (Take Leland Stanford and the building of the great western railroads, subsidized by vast land grants and other programs from the federal government.  Stanford was quite willing to let the Chinamen he hired to use their explosive expertise to carve out railroad tunnels live in hunger because he withheld their pay and die because of inadequate safety , but meanwhile he lived a life of luxury supported by his corporate structure that sent all the money supported by the government subsidies his way and none of it theirs.)

Douglas Holtz-Eakin is a prime example of doubling down on failed policies by ignoring the facts of recent experience.  See Holtz-Eakin, We have to get US government spending under control, (Feb. 14, 2013).  Mark Thoma does a good job of putting him on the hot seat and telling it like it really is.  Read it at Holtz-Eakin Tries to Scare You. Don’t Let Him, Economist’s View (Feb. 14, 2013).  Here’s an excerpt:

Holtz-Eakin (in the Guardian essay): “Debt reduction produces jobs and better economic growth.”
Mark Thoma (in the Economist’s View take-down): “[R]eading that last line, he has learned nothing from the failure of the confidence fairy to appear.  Waiting to fix the debt–a problem driven mainly by health care cost escalation that won’t become severe for many years–is not risky, but his advice certainly is.”
Holtz-Eakin (in the Guardian essay): “Down with the orthodoxy.  It is time to get the deficit under control.”
Mark Thoma (in the Economist’s View take-down): “The notion that we are responding in the same way as in the 60s and 70s, and that we are faced [with] the same type of shock (that require[s] the same types of policies)–an oil price shock and other large supply-side distrubances from demography that we faced then–is wrong and he ought to know that.”…..”The ‘pundit orthodoxy’ he disses is from Paul Krugman.  Kind of funny, given how wrong Holtz-Eakin has been relative to Krugman … but Krugman can speak for himself, and has, on how wrong the ‘we’re about to become Greece!!!’ crowd has been.  There is, however, one thing he [Holtz-Eakin] is correct about.  Holtz-Eakin is right to say we shouldn’t listen to some pundits, especially those like himself who have been so wrong about how events would unfold at every step along the way.”

Holtz-Eakin does a lot more in the Guardian article that is just plain bad, such as claiming that the so-called  Affordable Care Act “entitlement” will contribute to the so-called “entitlement problem,” which will contribute to the “serious” problem that the “deficit orthodoxy” won’t acknowledge.  He then hammers on the right-wing orthodoxy’s pet do-away-with-it-if-we-can projects–Social Security, Medicare, and Medicaid, suggesting that “serious debt reform” requires “serious entitlement reform.” 

As I noted in another recent post, right-wingers like Holtz-Eakin love to talk about safety net programs as “entitlements”, whereas they talk about entitlements for the rich and MNEs, such as the percentage depletion allowance, the preferential capital gains rate, and the various subsidies that have handed outsize profits to big banks as though they were rightfully merited acknowledgements of the good those institutions do the rest of us! The talk about these safety net programs, when entering into a right-winger’s discussion of fiscal issues, is always lopsided.  It is always how we need to cut back on them, and never about how we need to consider if the programs are worthy, the funding currently provided needed or even currently inadequate, and, if the answer is yes, what means make sense, in a sustainable democracy to serve the people, to ensure the ongoing viability of the safety net.  Not reducing benefits but increasing revenues and decreasing rent-profit-taking.

So  Holtz-Eakin fails to acknowledge that actually the Affordable Care Act is a first step in addressing otherwise mushrooming health care costs which occur because we treat health care as a ripe field for rent-seekers to make rentier profits rather than acknowledging (like other advanced countries) that health care is at least a quasi-public good that must be heavily regulated to ensure accessibility.  And like all the right-wingers pushing the hand-wringing worry over deficits for which their own policies are the primary cause, Holtz-Eakin suggests that the core of what we have to do is, quelle surpise, “spending cuts and deficit control”, since “doing nothing or worse, increasing spending, is a profoundly anti-growth strategy.”

This is the doubling-down on failed policy orthodoxy that Americans should reject out of hand.  Spending cuts and efforts at “deficit control” that focus on taking away health care and pension benefits from retirees and others dependent on the safety net are perfect prescriptions for disaster.  We aren’t Greece.  But if the right-wingers like Holtz-Eakin get their way, we will be.

cross posted with ataxingmatter