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Further to yesterday’s post about the respective economic acumen of the Wall Street Journal editorial page vs. Prof. Paul Krugman:
My conservative friends argue that the policies of Barack Obama are responsible for the horrifying length and depth of the economic crisis.
Question: Which policies?
Obama’s only tax increases – those contained in the Affordable Care Act – do not go into effect until 2014. Personal income tax rates and corporate tax rates are no higher today than they have been for the past decade. The payroll tax has actually been cut by 2 points. Total federal tax collections have dropped by 4 points of GDP since 2007, from 18+% to 14+%, the lowest rate since the Truman administration.
If so minded, you could describe Barack Obama as the biggest tax cutter in American history.
We have not seen a major surge in federal regulation, at least by the usual rough metrics: the page count of the Federal Register has risen by less than 5% since George W. Bush’s last year in office. Trade remains as free as it was a decade ago.
While the Affordable Care Act itself will eventually have major economic consequences, most of its provisions remain only impending.
Energy prices have surged, but that’s hardly a response to administration policies. Conservatives complain about restrictions on drilling in the Gulf of Mexico, but on a planet that produces 63 million barrels of oil per day, a few thousand more or less from the Gulf will not much budge the price of oil. Rising oil prices are a story about Chinese and Indian consumption and Middle Eastern political instability, not about US drilling or lack thereof.
The Dodd-Frank bill does somewhat curtail the activities of some banks and investment firms. But is it seriously argued that this could be the cause?
Conservatives complain about excess government spending. Fine. But isn’t the evil of excess government spending supposed to be inflation rather than recession? And where’s the inflation?
There’s a strong case for condemning Barack Obama for the things he might have done, but did not do. He might have cut payroll taxes more and faster. He might have pushed for more expansionary Federal Reserve governors. He might have designed a better stimulus. All true. But the things he did do? Texas Gov. Rick Perry today urges us to believe that the economy is gripped by the worst slump since the Great Depression because Obama spoke disrespectfully of the owners of private jets. To which I can only say: Really? That’s the indictment? Really?
Gus // Aug 4, 2011 at 1:21 pm
cdorsen give you the “conservative” talking points you obviously missed, Mr. Frum. See, now that you’re not in lockstep with GOP talking points you’re a liberal. I’m sure that’s news to you, as it no doubt is to Bruce Bartlett.
RightKlik // Aug 4, 2011 at 9:38 pm
Frum fancies himself a sane, independent conservative, but from here, he just looks stupid…
“While the Affordable Care Act itself will eventually have major economic consequences, most of its provisions remain only impending.”
Businesses prepare for the future. “Impending” legislative doom is no exception.
planetirving // Aug 4, 2011 at 1:24 pm
Thank you David for you honest and sober statement. I just wrote a long reply about the the terrible situation with political discourse in our country working against our best interests. The site crashed and I lost all I wrote (must always cut and paste, cut and paste!!!!!). Suffice to say, never ending campaigning and political bloodsports are becoming an end in themselves. We need statesmen and those who are willing to legislate and govern for all, not political purists and cowards afraid of their own shadow or the hint of a primary challenge.
Raskolnik // Aug 4, 2011 at 2:22 pm
@Chris (and Carney, and Churl, and those skeptical of “Keynesian” solutions in general):
How do you feel about an “Infrastructure Bank” with very small Federal funding, used to leverage private capital, e.g. the nearly trillion dollars in cash that utilities companies are sitting on?
armstp // Aug 4, 2011 at 2:24 pm
David,
They got nothing. All they fall back on is the catch-all of “uncertainty”, which anyone with any balls to talk the truth knows is BS. How do you explain the record corporate profits?
And how can the economy have been made worse when we went from -10% GDP growth to +2%?
Rising oil prices are as much a result of oil speculation by investors, as they are about fundamental demand.
David Frum: "Were Our Enemies Right?" // Aug 4, 2011 at 2:28 pm
[...] of posts by David Frum have been making the rounds and generating quite a bit of discussion: If Conservatives Were Right About the Economy | FrumForum Were Our Enemies Right? | FrumForum Krugman crows: Wrong And Right – NYTimes.com Reply [...]
Rob_654 // Aug 4, 2011 at 2:42 pm
John Boehner said that Republicans got 98% of what they wanted in the debt ceiling deal.
Looks like Wall Street doesn’t think much of what Republicans wanted!
Smargalicious // Aug 4, 2011 at 3:00 pm
Indeed–it’s all Bush’s fault.
armstp // Aug 4, 2011 at 5:44 pm
Yeahhh. It is all fuckin Bush’s fault. That asshole destroyed this country. It will take years to dig out of the Bush disaster. All Obama has done is try and solve all the problems that Bush handed him and this country. Bush’s impact on this country will be felt for years. Even Romney admits it is all Bush’s fault. By saying the Obama has made things worse (which is not true), he is admitting that they were pretty bad in the first place.
jakester // Aug 4, 2011 at 8:12 pm
It wasn’t all Bush’s fault either, The economy in general and government policies were going in a bad direction for a long time. While blaming everything on Congress who “forced banks to make bad loans for 600K mortgages to minority janitors” is a bit of a stretch, this kind of stuff had been coming to a head for a long time. Also, lowering taxes just before a war is the kind of blase fake patriotism and bad economics the right is noted for too.
Smargalicious // Aug 5, 2011 at 7:31 am
army, you are delusional. 45+ years of massive Democratic entitlement programs and a non-existent immigration policy enforcement destroyed us. Only 49% of us pay taxes and don’t suck the life out of communities.
Lonewolf // Aug 5, 2011 at 2:41 pm
That’s because the millionaires to whom SCOTUS and you conservatives have handed the nation are firing millions of American workers and giving the jobs to shoeless Indonesians and Indians, who spend their new wages buying knockoff goods and ripped-off American software from the Chinese.
LFC // Aug 4, 2011 at 2:43 pm
cdorsen said… He left office as the housing bubble burst that was caused, with some conservative support, by liberal affordable housing policies
So “liberal affordable housing policies” somehow took high-end real estate like Florida condos and California McMansions and drove their prices up more than 100% in a handful of years?
And how are you able to completely ignore the Republican policy of allowing the five largest investment banks to increase leverage to 30:1. How about the Phil Gramm created policy of not regulating derivatives, which ended up being “valued” at roughly 8:1 over the debt that actually secured them? What liberal policy precipitated a massive increase in sub-prime loans, only 28% of which were backed by Fannie and Freddie? What liberal policy caused 100% of the liar loans to be written by private mortgage companies? What liberal policy caused that crap debt to be bundled and packaged into derivatives and get shiny, strong bond ratings?
You, sir, are full of it.
LFC // Aug 4, 2011 at 2:45 pm
If conservatives had been right about the economy in the past, Reagan’s tax hikes, HW’s tax hike, and Clinton’s tax hike would have all collapsed the economy, and Bush’s tax cuts would have boosted it. Yet more notches on the right-wing “Economic Wall of Wrong”. That tote board has gotten pretty heavy in the past several decades.
NRA Liberal // Aug 4, 2011 at 3:11 pm
It’s nothing Obama has actually done, dont’cha’know…it’s just that his well known anti business bias has created an atmosphere of uncertainty! How can capitalism function when CEOs never know if they might be swinging from the parking lot lamp posts the following day?
It’s rather noble of Frum to insist on going down with this ship, like an old sea captain at the helm of a torpedoed frigate.
jakester // Aug 4, 2011 at 3:24 pm
” How can capitalism function when CEOs never know if they might be swinging from the parking lot lamp posts the following day?”
Got any more right wing paranoia and hype?
overshoot // Aug 4, 2011 at 4:00 pm
[quote]Got any more right wing paranoia and hype?[/quote]
We’re not in any danger of running out.
Ability to recognise sarcasm is something else again.
NRA Liberal // Aug 4, 2011 at 6:29 pm
+1
balconesfault // Aug 4, 2011 at 3:29 pm
How can capitalism function when CEOs never know if they might be swinging from the parking lot lamp posts the following day?
You mean there’s a business out there that the Federal Government didn’t have to buy out to avoid bankruptcy that had its CEO cashiered?
I have an idea – how about a CEO never get into the position where he has to ask the Federal Government for a bailout!
Smargalicious // Aug 4, 2011 at 3:52 pm
^Bingo.
valkayec // Aug 4, 2011 at 4:16 pm
I’d definitely go along with that idea. And ask Boards to change compensation and those “golden parachutes” too.
ram6968 // Aug 4, 2011 at 11:50 pm
Why don’t Republicans like Obama?
1. Corporations having their second best year EVER
2. Stock market up 50% since inauguration day
3. Wars still rolling along
4. G-Bay still open
5. Free trade agreements still going strong
6. Tax cuts extended
7. Offshore drilling resumed
8. Wall Street mostly untouched
If Romney pulled this off in his first term in office, he’d be the second coming of RReagan.
Heroic velvet paintings would be springing up everywhere!
So why don’t more Rebublicans like Obama?
BooksMoore // Aug 4, 2011 at 4:21 pm
Mr. Frum, I am so sick of the modern GOP. It is on the whole a faithless opposition–no it is much worse. It is a lying, deceitful, unethical den of vipers. I can’t see how anyone in good conscience can reward them at the polls, even if it would mean holding one’s nose at a Democratic option.
LHB // Aug 4, 2011 at 5:25 pm
Another potential evil of expansionary fiscal policy is “crowding out,” which is when increased government spending and/or tax cuts that increase the budget deficit cause private spending to decrease. The causal mechanism by which this occurs is either through increases in the price level, or – more in keeping with the technical details of economic theory – rising interest rates (which could also cause an appreciation of domestic money relative to foreign money, which could reduce foreign spending on US exports).
Given that the economy is at far less than full employemt, and that interest rates on government debt of any maturity are at lows not seen since the 1950s (largely, back then, as as result of the Fed-Treasury Accord) it is difficult to understand the causal mechanism that is thought to underlie the Republican talking point that “A dollar of government spending is a dollar of private spending that never takes place.”
The idea is based on an accounting identity: S=Y-C-G=I+NX. But this presumes that increased government spending or tax cuts cannot cause Y (GDP) to increase (because the economy is assumed to be at full employment), and can therefore not increase S (National Saving). When the economy is at less than full employment, you have to specify a causal link that would keep National Saving from increasing when spending increases to maintain the premise that crowding out is complete.
Under current circumstances, there is no plausible mechanism that could cause even moderate crowding out.
think4yourself // Aug 4, 2011 at 6:13 pm
Sorry for the long post.
It’s for these reasons, that I can’t deal with the Conservatives. Paul Gigot used to have a spot on McNeil/Leher for Friday night political wrap (Shields and Gigot). In that, he was the voice of reason and moderation with the hyperbolic Shields. Now as WSJ Editorial and his own WSJ show, he parrots GOP talking points.
As a small business owner who believes in spending less than you take in, and would prefer that individuals take more responsibility for the issues that effect their lives, I want to be a Conservative. But I can’t be what these folks are. Not just the Becks, Hannity’s, Limbaugh’s, etc. The supposed mainstream ones also appear to be blind to the facts.
Is Obama responsible for the recession? Not a chance. Did the GOP offer anything of substance that would have been better for the economy? Not that I saw. Lowering taxes below what they are currently wouldn’t appear to make things much better and frankly we did that in the form of payroll tax deductions, stimulus money was 3/4 tax rebates, homebuying credits, car buying credits, etc. These were all versions of tax relief. Companies are sitting on the largest cash hoards in history (Apple more than the US Gov’t) and banks are not lending – and customers and businesses are not ready to borrow as they are still working through the bing borrowing of the 2,000’s.
In a previous post I asked to hear Conservative solutions to creating economic growth and I didn’t get any responses. I’d love to hear some creative solutions now.
Are there things Obama could have done differently? Sure. But aside those ideas that come from our own particular political bent, once you remove that, most honest people would probably say he has done the best he could under the circumstances.
As far as the politics of it. I wasn’t politically aware much before Clinton in ‘92. Seems to me that the GOP found the issue of personal attacks and investigations a winner politically. Whitewater, the Vince Foster suicide, Monica Lewinsky; none of these had anything to do with Clinton’s execution of his duties. In general he governed as a moderate, some because of his own bent and some because the GOP Congress forced that. Welfare to work, balancing the budget (he gets a little credit for that, but not all), Paygo rules, etc.
The Democrats took a page from the GOP and did the same thing to Bush (but in my opinion they were (a) not as bad on the personal stuff as the GOP on Clinton and (b) had lots of targets to go after regarding Bush’s personal duties including Cheney setting energy policy with only the consultation of the energy companies including Enron, changing foriegn policy from we respond to threats to one of we initiate action on those who might threaten us, deliberately crafting a definition of tortue and “enemy combatant” to flout the Geneva Conventions, and outing a covert CIA agent for political reprisal.).
When Obama was elected the GOP took a page from their Clinton book; birther movement, overt and non-overt racism, going after Michelle Obama for working on healthy families (Nancy Reagan got some ridicule for “Just Say No”, but nothing like this). Add to that the lies and half truths on policy and it makes me want to disengage. Maybe that’s what they want.
I’m happy to listen to Conservative and Libertarian ideas, so long as they are willing to consider the effects on America as a whole, not hide behind the ideology and also be willing to honestly consider other ideas. Will crafting gun laws so you can take your guns into a bar create fewer gun deaths? Will lowering tax rates on individuals and companies that already have lots of money cause them to invest that money in ways that create more jobs and spur the US economy?
I’d like to see more people like Frum, engage more moderate Liberals to craft better policy.
Argy F // Aug 4, 2011 at 6:45 pm
@think4yourself
Thanks for the thoughtful post.
While I probably have a different ideological bent than you – I agree with much of what you say.
I would prefer the last sentence to read “pragmatic Liberals” rather than “moderate”. I think the term moderate implies that moderation is more likely to be correct.
To my mind objective truth (about what works or doesn’t work) isn’t necessarily a blended cocktail of the full spectrum of opinion – but rather something deduced from evaluating evidence. The degree to which one evaluates evidence correctly is the degree to which one is correct – therefore an extremist could very well be correct. The “proof is in the pudding” as is said.
Currently, the Republican pudding falls flat – imo.
jakester // Aug 4, 2011 at 8:46 pm
think4yourself
Well put!
ChallengingFrum // Aug 4, 2011 at 9:04 pm
think4yourself,
is it really thinking if you create strawmen and then knock them down? cash for clunkers and the home buyer tax credit were the worst tax ideas…all they did was push demand forward and create more debt. it is not the same thing as getting long term spending under control and permanently lowering marginal rates.
Spending is the REAL tax burden. Eventually we have to pay for this stuff. If spending increases to 25-26% of GDP this portends FUTURE tax increases. There is too much debt. Too much regulation. And too much spending which will eventually lead to more taxes. This is what is prolonging the recession and this is the democrats solution…..live with it.
Plus I didn’t even mention the hidden healthcare tax.
TerryF98 // Aug 4, 2011 at 9:20 pm
You are just one giant talking point.
planetirving // Aug 4, 2011 at 10:28 pm
Once again, GOP talking points devoid of the real world. Yes, we all know about tax incentives for big industry and hedge fund managers but heaven forfend against Cash for Clunkers or the Home Buyers Credit aimed at the middle class. What does it matter if people wait till things are better to make purchases? Now is what matters. Ever try to start a stalled engine? Ya gotta give it some gas while trying not to flood it out, get it reaving, put it in drive and come hell or high water, get it moving agin. So you waste gas in the git go, but you get the car back on the road. Enough quoting Norquist and Rand like the Communists quoted Marx and Lenin.
WardMD // Aug 4, 2011 at 10:49 pm
You’ve got a point!
BUT have you considered that INSTEAD of spending BILLIONS of dollars to build subways (say, in Los Angeles, through earthquake fault lines and natural gas pockets), like the so-called “Subway to the Sea” extension (not ALL subways already built, but just this EXTENSION) – which, by the way DOESN’T actually go TO the sea (which we didn’t find out until AFTER the voters approved the measure to build the damn thing), we could take that $4.2 BILLION dollars and purchase BRAND NEW CARS for each and every person expected to RIDE the Subway, and have MONEY LEFT OVER?
Look, we can buy a decent car for $10K. $4.2 BILLION gets 420,000 cars. The “Experts” predict 80,000 to 120,000 riders (daily) – so EVEN if you give them the benefit of the doubt (and use the HIGHER figure), we could SAVE $3 BILLION by NOT building this extension (AND think of how all those car purchases would stimulate the Auto Industry)!
BUT NO!
We’ve got to WASTE that $3 Billion to tear up the streets, disrupt traffic for YEARS, piss-off the residents of the areas impacted by the subway (who, oddly, seem UNIVERSALLY OPPOSED to the construction of the subways), put up with the CRIME, noise, and trash from these “stellar” citizens who will be riding the subways.
FOR WHAT? So the Mayor can have something to point to as an “accomplishment”?
WardMD // Aug 4, 2011 at 10:31 pm
You and your bumper-sticker mantra!
Can you cite an example of CONSERVATIVES’ “Talking Points” (something akin to how Liberal Talking Heads “magically” seem to have the SAME epiphany on what to say? Like when the term “gravitas” just HAPPENED to be flowing out of the lips of just about EVERY Liberal “NEWS” spokes-hole on the air a few years back)?
Where is the audio clips of Conservatives doing that?
Limbaugh has montage after montage of Liberals spouting the SAME “talking points” (almost verbatim), yet YOU want to accuse Mr. Gigot of regurgitating “GOP Talking Points”?
Has it ever occurred to you (no, of course it hasn’t) that Mr. Gigot happens to hold GOP viewpoints, and, as such, is ofter heard espousing them?
flangler // Aug 5, 2011 at 1:00 pm
http://www.rollingstone.com/politics/news/distort-attack-repeat-20110524
rigos4 // Aug 4, 2011 at 8:22 pm
Has anyone considered that when you hollow out the real economy by outsourcing a good portion of it and expand the financial services sector to 45% of GDP, you get jobless expansions like the Bush 2003-2007 era and anemic recoveries as we have now.
Add to the above a lopsided globalization and free trade policy that favors the cheap labor nations and you have the mix that keeps the economy stalled. Governments are caught unable to impact the economy except through slow restructuring of the job market (education and retraining needed). But when a political hysteria curtails that effort, you are stuck in slow or non existent growth. Moreover there’s a vicious cycle effect in that as the economy remains anemic, the political reaction reinforces the hysteria which takes the form of more cuts even in education, research and training.
Business elites have no incentive to intervene, wages keep getting lower and the profits can be reinvested in China or in what someone (see the Guardian) calls the “feral” economy; the economy of financial instruments that moves from country to country creating fiscal emergencies and lucrative bond rates.
Only an impending disaster like the recent and on going debt ceiling fight gets them to intervene, but not in a sustained comprehensive effort. CEO’s from Google, PIMCO and Pepsi are often seen making suggestions as to how to fix the economy but they don’t dare venture to give their ideas a political presence …It’s considered taboo and besides the Limbaugh FOX machine would tear into them. So new ideas remain on the shelf.
ChallengingFrum // Aug 4, 2011 at 8:57 pm
SPENDING is the tax burden. If you are smart enough to start a business, you are smart enough to look to the future. Plus regulations.
What the Hell is Frum’s Problem? by Macsmind // Aug 4, 2011 at 9:59 pm
[...] I know all his conservative “bonifides”, but you’re only as good as your last Here he is again trying to get hits from Rush Limbaugh by writing the most incredibly ignorant post …. “My conservative friends argue that the policies of Barack Obama are responsible for the [...]
WardMD // Aug 4, 2011 at 10:23 pm
Last time GOP held the White House and both houses of Congress, Deficit was $269 Billion, Obama/Pelosi/Reid gave us $1.65 TRILLION (a 513% INCREASE).
But to YOU that has NO BEARING on the Economic cliff we’re heading for?
Sure this “deal” down-shifted, but Obama’s still behind the wheel, and he’s still got his foot on the pedal, and with Reid as his navigator, and people like YOU telling the “Tea Party” folks to shut up and don’t bother the driver! WOW, now THAT’S a recipe for economic growth!
As Einstein said, “Insanity: Doing the same thing over and over again and expecting different results.”
YOU seem to be promoting doing the same thing over and over again… Einstein was RIGHT!
planetirving // Aug 4, 2011 at 11:05 pm
Funny thing, the recent downturn and uncertainty in our fragile economy seems to have coincided with the ascendancy of the new Republican House majority. How’s that for irony? Coincidence? I think not. Shrinking the Federal workforce (and State and Local) means more unemployed, less spending, less tax revenue (both local and Federal), bigger deficits, and more demand for services already under pressure. Yes, a Federal Worker is a person too. They buy groceries, go to movies, attend PTA meetings, buy homes, and put their pants on one leg at a time. Some even vote Republican. And speaking of expecting different results from the doing the same thing over and over again: “Trickle Down” ring a bell? Tax increases and deficits under Reagan, Bush, and Clinton did not seem to hurt but the Bush Tax Cuts and the Surplus of 2001? Better try hitting that wall again, I think I see the brick blemishing. And forgive me, but since when is Harry Reid the Navigator? The President and the Senate have been pushed increasingly rightward for months now, kicking and screaming. As for the poor little ignored, but soft spoken Tea Party (essentially all the late Baby Boomers of the “Me Generation” now becoming the “All Mine Generation), it is find for them to tell us how we should live and how we need to do more for ourselves and not demand so much from the State, not to mention demeaning the political process and showing complete contempt for engagement and compromise (my way or the high way; No trust me, I read Atlas Shrugged; bla, bla, bla, Anti Western European Socialistic Kenyan Dictator Herbert Hoover Jimmy Carter Anti Christ Anti Pasta Anti Up qwertyu). Etc, Etc.
David Frum is right. And while Rome is burning and we are all fiddling, blood sport politics and rigid ideology will be our downfall.
Bunker555 // Aug 5, 2011 at 12:06 am
Paul Gigot is not an honest journalist. He’s a pimp for Fixed News and the Tea Cons.
Kalb to Gigot: WSJ “dead wrong” for publishing editorial attacking NY Times on bank-tracking story
July 10, 2006 3:38 pm ET
SUMMARY: On Fox News’ Journal Editorial Report, Marvin Kalb described a Wall Street Journal editorial as “dead wrong” for criticizing The New York Times and defending the Journal over their reports on a U.S. program designed to monitor international financial transactions. Kalb, who is a senior fellow at the Joan Shorenstein Center on the Press, Politics and Public Policy, told Wall Street Journal editorial page editor Paul Gigot: “I think you declared war on another American newspaper without due cause. It is mean. It is mean-spirited.”
SOURCE:
http://mediamatters.org/research/200607100004
Thingumbob // Aug 5, 2011 at 7:23 am
This article (like so many others) misses the simple fact that we are at the tail end of the chimerical post industrial/consumer society hoax. The build up over some fifty years of ruinous speculative forms of illegitimate debt, a.k.a. derivatives securities, is like a terminal cancer on our system. The Federal Reserve and Treasury’s bailout mania has only worsened this monstrosity by feeding that cancer… The only solution is to cut loose this muti-trillion anti-productive succubus in a similar fashion to what FDR did. First we must re-enact Glass Steagall and let the so called financial houses on Wall Street choke on their useless gambling derivatives. Secondly, the government must issue credits to be used in physically productive, high technology, long term investments. That is the only basis upon which our nation will ever return to prosperity and a decent future.
Biped // Aug 5, 2011 at 9:02 am
It’s not that Krugman is infallible. He would be the first to admit that he can be wrong. The perversion in our arena of public discourse is that people who have valid credentials, who DO know what they’re doing, i.e., Krugman and others of whatever political bent who are trained professionals, are pitted in the media on equal terms against the veriest ignoramuses with idée fixes. There is no guidance given the citizenry as to the relative worth of the opinions and prognostications emanating from sources with wildly varying claims to intellectual honesty, objectivity and reliability.
On the same ABC Sunday morning panel last week we had Paul Krugman, and in ludicrous proximity, the bottom-of-the-barrel scraping brought in by the the network for political balance, Grover Norquist.
Obama ’12: Man Without a Plan « The Greenroom // Aug 9, 2011 at 6:01 am
[...] lefty that he is, recommends the “fiscal equivalent of war.” Similarly, David Frum, seemingly having taken Paul Krugman as his economic guru, declares that conservatives do not have [...]
» Blog Archive » Obama ’12: Man Without a Plan // Aug 9, 2011 at 7:08 am
[...] lefty that he is, recommends the “fiscal equivalent of war.” Similarly, David Frum, seemingly having taken Paul Krugman as his economic guru, declares that conservatives do not have [...]