Relevant and even prescient commentary on news, politics and the economy.

An opinion on University Small Business Political Survey

I was forwarded an early look at a survey that was produced by George Washington University’s School of Political Management in conjunction with As some readers know, I am an honest to goodness small business owner. Two business actually and they are as different as say a private practice physician and a florist. So…………I guess this is what has lead to a request of me to opine on this survey’s results.
I googled I had never heard of them. There is some controversy out their regarding their business model. Yet, claims 250K users. The survey was of 6000 plus of their members. They have taken some steps to assure their sampling represents the distribution of small business throughout the nation. I’m going to trust that GW’s school knows how to do and produce a scientifically valid survey. had teamed up with Ewing Marion Kauffman Foundation early this year. This work attempted to come up with a ranking of business friendliness based on the experiences of small business within a given state.
The headline, take away finding is presented as follows:
40% of all small business owners nationwide rate the economy and jobs as the most important factor in choosing a president. Ethics, honesty, and corruption in government is the second-most important factor for small businesses.
Considering ethics, honesty and corruption came in at 15% and the next item to be ranked the top issue was so ranked by 6% with the percentages becoming smaller to 2% for the issue of foreign policy I would say 40%ranking the economy and jobs the number one issue is kind of an intuitively expected finding because every other issue considered in the survey fell so far behind.  After all, we are talking business owners.

Employment and Deficits: A Tale of Two Administrations

Stan Collender notes that, for the first time in four years, the U.S. Treasury reported a surplus in the month of April.  It isn’t just that there was a surplus in April of 2008, though.  If you look back through Aprils (data here), the last time that month showed a deficit is 1983—the April less than six months after the last official “double-dip” of recessions.
Stan offers three reasons that the White House doesn’t want to point out this good news.  I consider the first two somewhat silly—the GOP never hesitates to take about the deficit, except to deny its responsibility, and no politically-alert Democrat will see the April surplus as representative of “the wrong fiscal policy” so much as an indication that employment last year was better than it has been.
It’s his third reason that is most interesting:

While that’s likely to be $200 billion or more less than what was recorded for 2011, the deficit will still be close to $1 trillion and that would be hard to defend.

I’m assuming the phrase “close to $1 trillion” means that Stan assumes the actual FY2012 deficit will be lower than $1T.  The original projection was just under $1.3T. Getting that down to $1T would be 23% better than the original projection, not to mention the psychological gain of being back down below thirteen digits again. Even $1.1T would be just about a 15% improvement over the original projections.  If a 15%+ improvement in the deficit over your projections isn’t worth saluting, then what is?
Stan concludes:

This is a little-understood part of the federal budget debate. Even if the 2012 deficit was half of what it was in 2011, and even if that reduction were applauded by Wall Street and the economic community, it would still be a painfully difficult political issue. In fact, long after the deficit has fallen to the point where most economists are comfortable with it, the political advantage will still be with those who criticize it.

Far be it for me to argue, but…just for the sake of argument, I decided to compare President Obama’s record with that of the last sitting President running for re-election on The Two Issues that Abide, The Deficit and Jobs.

First, Deficit:

dFYFSD Obama v Bush

We don’t, of course, have the data for the deficit at the end of this year yet. (We have data for subsequent years of debt for the Previous Administration, of course, but nothing that would have been public knowledge by the voting in November of 2004.)

The story here is a clear one: the previous incumbent increased the deficit significantly; the current one has reduced it from the baseline he inherited. (If the current year ends up with around a $1T deficit, Year 3 will be around +$400,000.)

So the current Administration has been taking the deficit in the “right direction.”  But, of course, that’s only good if you are in a growing economy (for the Democratic knowledgeable; see Stan’s second point) or because the Previous Administration was “priming the pump” for the Great Growth that would follow. (After all, what the 2001 tax regression didn’t solve, certainly the 2003 Hubbard-Mankiw version would.)

So let’s check how well that Growth Thing worked.  I’ve already pointed out that the post-recession public-sector employment between the current and the previous Administrations was about 600,000 jobs almost nine months ago.  So let’s be as nice as possible and compare Total Employment Gains since their respective Recessions, knowing that we’re spotting the Previous Administration when looking at total Non-Farm Payroll:


The Obama Administration got employment back to the end-of-recession level after sixteen (16) months; it took the previous Administration twenty-eight (28) months. Counting from the end of the recession, the Previous Administration produced just under 1.4MM jobs in the thirty-four (34) months to the next election (Dec 2001-Oct 2004).

The Obama Administration has produced more than twice that (2.825MM) in thirty-three (33) months.
In summary, if we compare the current Administration to the previous one, it has (1) produced twice as many new jobs, (2) produced budgets that reduced the annual Federal deficit instead of making it greater, and (3) reduced our troop presence in wars started by the Previous Administration while finding and eliminating Public Enemy #1.

And the only thing it wants to talk about is the third.

As I said chez Collender, If this Administration is afraid to run on its gains because there is less “political advantage” in highlighting the improvements your Administration has produced than in getting bashed for something for which you will perpetually get bashed, then the country is truly lost.

Santorum Surge, Part 144

Let’s ignore that three of his four wins (including two last night) have come in non-binding caucuses and take a quick look at The Size of the Santorum Surge.

Over at Skippy, Our Leader posted a link to a discussion of whether “Romney’s strengths” could beat Obama. I wisecracked, without looking at the data, that the total Republican votes in all three states were lower than the daily NYC subway ridership.

My bad. That’s not even a ballpark comparison. On its lowest day, the NYC subway averages more than 2,350,000 riders. (That’s a lot of elitists, Newt.) It averages more than three million (3,000,000) on Saturdays, more than four million (4,000,000) riders a day, and more than five million (5,000,000) every weekday.

By comparison, here are the number of votes cast yesterday in Republican primaries/caucuses:

Clearly, we need a smaller comparative to make the turnout appear more impressive. So let’s look at one of my favorite demographic measures, Metropolitan Statistical Areas (MSAs).

Keeping in mind that the MSA includes the areas around the cities named, the total voters in the three Republican elections yesterday would occupy…the 144th largest MSA,* just behind Eugene-Springfield, Oregon (351,715).

The Santorum Surge: Smaller than Peoria (#135), bigger than Kalamazoo (#148).

*I resist saying “Gross!” at this point.

Pandering to the Right Fringe

by Linda Beale

Pandering to the Right Fringe

This campaign season has revealed more clearly than ever the ultimate goal of today’s hard right, as manifested in campaign debates and the right-wing think tanks’ output. It is nothing less than dismantling the protections established under FDR–Social Security, Medicare, minimum wage and other safety net protections that are nonetheless thinner than most advanced democracies have–under the guise that these programs are too costly, do not require personal responsibility, and can’t be afforded under the new right’s ‘realism’ about the deficits.

The right doesn’t want to afford these programs. Now that it has managed to ‘starve the beast’ through the Bush tax cuts, the repetitive stalling on increasing the debt ceiling, and numerous other revenue reduction measures–especially in the corporate tax provisions–it will claim that there is simply nothing else to be done but cut the safety net away.

This is mere spin. Tax increases and judicious stimulus measures can allow us to recover. Removing the safety net will thrust the country into a deep recession, since it will impact seniors, dependent children and the most vulnerable. The poverty increase that we have witnessed over the last few years will continue. Surely this is not what Americans want for their country!

But the politicians continue to preach the failed approaches of Reaganomics, in the claim that their deregulatory and corporate tax cutting agenda will “revive” manufacturing.

Santorum is riding his near-miss in Iowa under the guise of a populist who understands the worries of the downtrodden labor class in America. The Wall Street Journal (Jan. 7-8, 2012) says that he “cast[s] himself as an advocate for blue-collar workers and their economically troubled communities, hoping to capitalize on differences with Mr. Romney, a wealthy former private-equity investor and son of a Michigan governor.”

Santorum once didn’t have much money and he has memories of a coal-miner grandfather. Is that enough to create ‘bona fides’ for his views on how we should manage the U.S. economy? Seeing poverty can help a person to empathize with those in poverty, or it can lead that person to denounce those who remain in poverty as lazy bums who are in poverty from their failure to take the steps the person took to rise above it. Seeing poverty doesn’t mean that person understands the kinds of gut-wrenching problems that much of middle America and especially those at the lower end of the distribution are experiencing today–small towns that are rotting off the map as manufacturing jobs vanish and farms have become corporate enterprises, extensions of Cargill and AMD and Tyson and the few others that dominate the American production of food from seed to harvest to grocer to table.

And the policies that Santorum favors will be extraordinarily destructive of the middle class: they favor the wealthy and corporate enterprises, not the little guy.

Some of the things Santorum is mentioning on the campaign trail might benefit some in the middle class–like the idea of tripling the exemption for children, though the proposal apparently isn’t linked to income level and so would not be focused on families that need the help. (And it would be widely available, adding significantly to the deficit).

The rest of Santorum’s tax proposals favor the wealthy–lowering corporate tax rates to half their current level, eliminating corporate tax entirely for manufacturers, eliminating corporate tax on overseas profits that are used to buy manufacturing equipment (not clear whether that applies even if the equipment is used overseas as well, since the current tax code is already too friendly to active overseas businesses), and eliminating taxes on capital income.

Those provisions are most favorable for the wealthy who own most of the corproate stock and other financial assets. hough the right likes to label these kinds of tax policies ‘pro-growth’, they are in fact a replay of the failed policies of the last 40 years that have resulted in stagnate wages for the middle class and dying small towns, while the beneficiaries of the tax largesse flourish in gated communities.

These tax policies will carve out huge holes in federal revenues, resulting in increased deficits that will be used as justification for decimating earned benefit programs (Social Security, Medicare, and unemployment compensation). A vicious circle of cutting revenues and then using the loss of revenues to justify cutting important federal programs will leave the middle class (and especially the poor and the near-poor) in even worse condition, as the safety net that is especially needed now is weakened or removed.

These ideas on the right, stale as they are, are getting the kind of attention that cements them in people’s views, no matter how wrong they are. In debate after debate, candidates vie with each other to pander to the right. See, e.g., Santorum Claims Romney’s Tax PLan Isn’t Bold Enough, Huff. Post (Jan 9, 2012). Romney wants to cut taxes and spending and thinks Government is too big, but he at least thinks we need taxes to cover core responsibilities that government should do. Santorum wants more–more tax cuts for the wealthy and large corproations.

And when you repeat something over and over, it tends to stick. The American people are hearing these same ideas from every Republican candidate, as they compete to win the radical fringe of the Republican party.

What is worrisome is that progressives are disengaged. They are miffed about the continuing degradation of civil rights under the continuing “war” on terrorism, Obama’s weakness in not being able to stand up to the Republican minority or even hold to his threat to veto (see, e.g., the pipeline problem) and the way corporate lobbyists are succeeding in causing agencies to weaken or delay important environmental regulations. They are miffed because they had projected onto Obama their specific dreams of revitalization and change, and there is no way that any one person could have satisfied all that. Much less this person, who was an inexperienced politico with a stable of advisers from Wall Street and past administrations who valued change not one whit.

But it seems fairly obvious that the only hope for progressives is to defeat the resurging right that intends to deregulate, cut taxes and privatize if it gains complete power through control of the White House, House and Senate.

What Brad DeLong Said.

The Obama Administration Is Making It Really Hard for Its Base to Mobilize.

Actually, the Obama Administration has been making it Really Effing Easy for Its Base to Mobilize since around the time Tim Geithner was appointed. That mobilization is just away from the voting booth and onto the streets.

Give You a Hint, Barry: When even Scott Lemieux, who will forgive you any inaction, takes you to the woodshed, you will deserve to lose.

That you’ll take the country down with you is not “collateral damage,” though.

Posts I Won’t Write

Buce sends us to Der Spiegel’s description of Barack Obama’s potential 2012 opponents (“You Think This is Bad?”)

John Kay in today’s FT (no link) tells us why letting economists pontificate about finance is a Mug’s Game. The mugging being of people who are stupid enough to believe economists. (If Brad DeLong or Mark Thoma links to this one, I’ll add a link to them.)

This (from Kaplan Daily of all places, but Valerie Strauss is one of the only Bright Lights there) is probably the most important general article about standardized testing and education.

This one tells the truth and shames the devil, as it were. Those fooling themselves that vouchers and charter schools will lead to improvement in anything other than excess rents going into the pockets of the people who are hired to run them (such as Christopher Cerf, President and COO and Christopher Christie, lobbyist) either have forgotten or are ignoring history:

Decades of research have shown that not only do the for-profit, corporate models being forced on school districts from coast to coast not work, they present a separate and unequal solution, and offer huge profits for investors.

Anyone stupid enough to believe the “anti-piracy” crowd has the best interest of Creators in mind needs to mark that belief to market. For another data point (via Dr. Black), see here.

On a more positive note—not to mention having grown up watching Bob Braun as a local, afternoon talk-show host—I want to note Mr. Braun being one of the only reasons to read The Star-Ledger, and especially highlight his series dealing with ICE abusing its power (nu?) and almost preventing a girl from saving her sister’s life.

This one has a happy ending.

Rick Perry’s 20-20 Vision

Charles Pierce sums up the true issue:

It is on days like this that I don’t envy political economists. They’re the ones that are going to have to take this Message from Goobertown seriously. They’re going to have to score it. They’re going to have to do the math, such as it is, and try to find a coherent formation in this unwieldy parade of hackneyed talking points (Kill the Estate Tax and Save the Family Farm!) and tired applause lines (The Job Creators Are Uncertain!). They’re the ones who are going to have to find a way to square the utter abandonment of the progressive income tax, a balanced-budget amendment to the Constitution, a return to explosively inflationary health-care costs, an unchained and undoubtedly newly amok financial-services industry, and the partial privatization of Social Security, all of which Goodhair has managed to wedge into “Cap, Balance, and Grow (!).”

(By now, I figure the political economists are going to be hopelessly drunk and firing rubber bands at each other.)

They’re the ones who are going to have to tell the family of the sad-eyed young intern in the corner that their son, a Wharton grad with a brilliant future, studied this plan for a couple of hours and then screamed, “But it doesn’t make sense!” prior to trying to feed himself into the fax machine in a vain attempt to get as far as possible from any place where this nonsense is taken seriously.

Personally speaking, I’m not bothering. When you’ve already lost Pete Davis, you can pretty much give up on anyone believing your economics will work:

Governor Rick Perry (R-TX) proposed his tax reform plan today and wrote this Wall Street Journal op-ed. Unfortunately, it’s just a slapdash of slogans. If this plan were enacted as proposed, it would lose a lot of revenue, reward the rich, and complicate filing for most taxpayers.

Giving taxpayers the option would also mean that only those who pay less would opt in, guaranteeing significant revenue loss. [OPENING QUOTE ADDED, sans original links; go read the whole thing]

And Andrew Samwick piles on with the politics:

And now we have another version of the flat tax, as if the crushing irrelevance of Steve Forbes to the primaries in 1996 and 2000 were not an indication of how unproductive the discussion will ultimately be. What are the prospects that a Republican President would actually be able to implement such a change if elected? They are equal to the chance that Republicans will both retain control of the House and secure a filibuster-proof majority in the Senate in 2012. In other words, absolutely zero.

Personally speaking, I don’t think the odds on that election scenario are “absolutely zero” (but I count people like Ben Nelson, who fellated George W Bush from the beginning, referring to him in interviews as “the King,” as part of that “filibuster-proof majority”). But the rest of the analysis is spot-on.

It’s A Miracle?

Scott Lemieux linked to an article that in turn referenced a BEA report on state GDP gains with this map:

or, if you just want to see the numbers,

“Growth only slightly lower than Michigan’s” should be a great campaign slogan.*

*And that’s ignoring that the second-largest contributor to that gain is Finance and Insurance. Rick Perry probably gives Jamie Dimon a big, wet kiss every time they meet.


Bachmann-Perry Overdrive, the Snag, and Other Notes

The real story of Michelle Bachmann’s “win” in the Iowa straw poll (not to be confused with the Iowa primary) isn’t that she got just over 4,800 votes—it’s that she paid for 6,000, proving at least 1,200 Iowa straw pollers are smarter than most of the reporters covering her “win.”

Late to the party mention: The Kauffman Institute’s Blogger Survey results are here (I hope).

The people who rant about 51% of Americans “paying no income taxes” are strangely silent about the fact that more than two-thirds of corporations don’t pay any—and they aren’t subject to Social Security or Medicare/Medicaid taxes either.

More Dr. Seuss is good, though “newly enhanced Seuss illustrations” sounds suspiciously like a step beyond even the later collaborations, such as The Butter Battle Book.

Robert (at least on his FB feed) is trying desperately to be nice to Matt Yglesias. I’m not, since Matt “I’ve never attended a public school so I know what’s wrong with them” Y. continues to fool himself about “the need for education reform” and refuses to pay attention to the research that shows most of those “reforms” his hedge-fund buddies are championing have been tried and failed. Jersey Jazzman does the heavy lifting here and (especially) here, while Bruce Baker notes the core of the Charterist argument.

Want a clear explanation for why people become writers or, if they don’t write well enough, bloggers? Jason Albert in, of course, Slate explains his own ego.

(The idea that maybe we need a third category of uncreative typist—Slate columnists—rises up when they try to make an economic argument without understanding sunk costs. But giving them any more pageviews would be a violation of the Douthat Rule.)

The Lens of the 2012 Election

People have been asking me what I think of the Obama administration’s budget for 2012, as well as Republican plans to cut government spending. My thought in both cases is this: it’s all understandable – even predictable – if you recognize that both sides have one primary goal right now: to win the presidential election in 2012.

The Republicans: Excellent Students of Political Economy

Republicans in Washington, it is clear to me, have no interest in deficit reduction. (There may be an exception to this generalization, but I can’t think of any off hand, and would welcome suggestions.) Why do I assert this? Simply because none of them have proposed a serious plan to significantly and realistically reduce the budget deficit. No, not even Paul Ryan.

Furthermore, they have no discernable moral or ideological position on the size of the federal government. True, many Republicans have talked a lot about “out-of-control government” since Obama became president, echoing and amplifying the wild-eyed ways many of them talked about the federal government’s excessive reach (black helicopters and all) under the Clinton administration. But when a Republican is president they have no qualms about increasing the size or responsibilities of the federal government. (Think TSA and Medicare prescription drug benefit, for example.)

My conclusion is that Republicans in Washington right now are driven by one very simple and clear objective: to recapture the White House in 2012. Everything they say or do must be interpreted in that context, and then it all makes sense.

Next, we must recognize that they are also excellent students of political economics. In particular, they have taken to heart the lesson that the state of the economy is probably the single most important factor in determining which party wins the election for President. (Though there’s some debate about whether the “state of the economy” in this context is the level of income or its growth rate.)

Well, the equation is then pretty simple:

(Desire to beat Obama in 2012) + (Obama is more beatable if economy is bad) = Do what you can to make the state of the economy bad.

Yes, the cynicism and cold-heartedness embodied in this equation is truly breathtaking. But it explains a lot.

Why propose dramatic cuts in government spending? Because they will help make the state of the economy bad. Very effectively.

Why not worry about the unemployment effects of spending cuts? Because that’s an inevitable part of helping to make the state of the economy bad. (In other words, increased unemployment is exactly the point, silly!)

Why reduce aid to states facing their own budget crises? Because that is also an extremely efficient way to help make the state of the economy bad.

It’s a simple equation, and once you understand that the Republicans also understand this equation, and furthermore, that it is the one thing they deeply believe in, then Republican behavior in Washington becomes explicable and even predictable.

The Obama Administration: It’s All About the Middle 20%

Meanwhile, the Obama administration has just put out its budget for 2012. The cuts proposed by the administration have mystified many on the left. But they’re easy to explain if you believe that, given Republican control of Congress, the budget is purely a political document. As anything other than a political document the budget proposal is irrelevant.

And therefore the main usefulness of the 2012 budget proposal (from the Obama administration’s point of view) is if can somehow help Obama’s reelection chances.

For the Obama administration, the calculus works like this:

1. The chance of reelection depends mainly on the state of the economy. We need to do what we can to prevent the Republicans from actively making the economy worse over the next year, they think to themselves, but that’s probably the limit of what is possible regarding the economy. So let’s move on.

2. Given the state of the economy, the Obama administration reasons, the primary goal of purely political acts (such as the preparation of the 2012 budget proposal) must be to do whatever else can be done to persuade the “middle 20%” of Americans to vote for Obama. (40% of Americans will vote against him no matter what, and 40% will vote for him no matter what.) Note that this is the opposite of the Roveian strategy of firing up and turning out the base to win elections, but it is clearly what Obama’s political advisors believe.

3. The middle 20% will be more likely to vote for him if they think he’s in the middle himself – compromising, striking a balance between left and right, etc.

4. The 2012 budget proposal is a very good way for the Obama administration to persuade the middle 20% that Obama is in the middle himself. It offers some real cuts – including cuts that the left hates. It makes some gestures toward deficit reduction. But it is not as vicious as the Republican alternative, and leaves the entitlement programs that are loved by the middle 20% completely alone.

This calculus suggests to me that the 2012 budget proposed by the administration has exactly accomplished their goal: it has generated howls of protest from both left and right, thus helping to persuade the middle 20% that he’s in the middle, too.