Election Dreamscapes

Scary but true: we are about to enter the next presidential election process. Yes the election is way off in the future, but the American electoral process is so cumbersome and expensive we have to get a good running start. Our bevy of candidates all have a lot of fund raising and jockeying to do. This cycle will be dominated by a race to the right. The Republicans are all hell bent on staking out extreme positions. With the possible exception of Mitt Romney that is. He seems to be the chameleon candidate moving deftly from one position to its opposite just enough times to satisfy the red meat eaters that dominate the Republican primary election process, but still allow him to appear centrist enough for those not fully infected with Tea Party mania.

I had thought that the Ryan economic plan would become the yardstick by which we measure right wing lunacy this time around. His positions are extreme enough to make him look tough enough to the crazies who fill the right wing caucus and primary audiences he has to appeal to. Plus his plan to eliminate Medicare and redistribute income upwards to the top 1% of wage earners – they are having such a hard time of it at the moment they need all the help they can get – is straight out of the dreamscape playbook that modern Republicans carry with them.

The central themes of contemporary Republicanism are all too familiar: government is too big, which means taxes are too high; if we lower taxes this will put more money in people’s pockets and unleash a wave of growth fueled by investment; this wave of growth will generate jobs and thus cure all our lingering post-crisis ills. Meanwhile, so the story goes, the massive amount of debt we have accumulated as we fought off depression is justification for severe austerity at both the Federal and State levels. The focal point of austerity being the need to get rid of all our safety net programs and thus free people up to decide for themselves how poor they want to be in retirement, and whether they want to afford health care or forgo it as being just another consumer item.

These themes are simply the result of collecting together all the sacred free market nostrums of conservative movements around the world and cobbling them together into a right wing narrative. It is the Reagan legacy writ large. The motto is simply: “the government is the problem”.

In other words, there is nothing new in any of this. Most of it has been tried piecemeal and has failed. But the truly committed seem to think that if they implement it all at once it will work its magic. For instance the Bush era was one of experiment with low taxes. It was a total flop. The economy grew, but at well below its historic trend rate of growth, employment was well behind that trend, and only profits boomed. Oh. And we rushed headlong into the mother of all asset bubbles as we obsessed over real estate.

Nor did Reagan fair any better. His supposed triumph is invisible in the context of the economy’s long run trend line. The economy merely maintained itself at around the average rate of growth. His only long term legacy was the onset of our current deficit problem, and his record as being the first peacetime president to advocate deficit spending as a way to finance the build up of government. Both Reagan and Bush left government larger than they found it, so neither can claim to be true right wingers in today’s parlance. And both increased our debt, which presumably tarnishes their right wing credentials too.

OK. I am making this last bit up.

Both Reagan and Bush occupy hero status in the whacky non-fact based world of contemporary right wing politics: apparently their reckless fiscal policies are acceptable to the loyalists even though they claim to bash fiscal recklessness. After all they laid the foundation for the current attack on the safety net. If we didn’t have those huge Reagan/Bush deficits the notion that the safety net is simply too expensive for poor old America would ring more than hollow.

So. The election is set up. The Ryan plan was looking good as the establishment right wing economic policy.

But no.

It turns out it wasn’t extreme enough for the party loyalists. It simply wasn’t whacky enough.

Enter Pawlenty.

His plan is now available for us to critique. It is patently absurd. Which means it will garner a great deal of enthusiastic support and admiration from our clueless media.

The central theme of the Pawlenty plan is the declaration that we have not been upbeat enough. We need to shoot for higher growth. He says we should build our policies around a target of 5% per annum GDP growth. Since the US has never, ever, sustained 5% growth for a decade – as Pawlenty advocates – his plan is ambitious to say the least. I agree that were we to sustain a non-inflationary GDP growth rate of 5% per annum for a long time most of our debt problems would melt away. That bit is OK with me. It’s just that his plan doesn’t get us there. It’s just a pile of the usual right wing stuff – all tried and failed – with the big difference that he doesn’t even try to pull it together into a coherent whole.

Pawlenty wants a radical overhaul of our tax code. So do I. But his overhaul is just code for slashing the top rates of personal tax, reducing the corporate tax rate, and abolishing all tax on dividends, interest payments, and capital gains. This will, he argues, be sufficient to unleash that investment boom the right wing always argues is just around the corner were we only to set capitalists free. So if you’re rich: clap your hands. If you’re poor: emigrate. The Pawlenty plan is a naked attempt to shift income upwards from the middle and poor income earners to the top. It moves money from those most likely to spend it to those least likely to spend it. So it drains demand. And there is no evidence that the rich would invest it in anything remotely useful. You can almost smell the next bubble brewing. Since the economy is not supply constrained right now: we have excess capacity, and business investment has risen from the lows it flopped to during the crisis, it is hard to see how shifting more wealth upwards would have anything other than a depressing effect on activity.

Nothing daunted, Pawlenty then doubles down on the lunacy. He advocates a constitutional cap on government spending. So any spending over that cap would be illegal. This is analogous to the balanced budget laws that are forcing states all across the country to slash services and fire teachers, policemen, and firefighters in order to restore their budgets to a balance. Only instead of slowing the economy at the local level Pawlenty wants to doit on a grand scale at the national level. Pawlenty’s goal is to cap spending at 18% of GDP. That’s lower than it has been in any recent decade. So the implication is severe Federal spending cutting. That implies a draconian reduction to GDP. Gulp.

Plus, this cap is truly absurd when we are about to enter a period of increased spending as our population ages and moves large numbers of people into their safety net years. Our per capita spending may not go up, but our aggregate spending will. We have more people to spend on. By the way the sophisticated reasoning I use to reach that conclusion is called arithmetic. So: we get rid of our programs for the elderly just as we have a huge bulge in our population of elderly. That makes sense. Conversely: we could accommodate those folks by getting rid of everything else to keep spending under that 18% cap. We certainly couldn’t afford any wars, which, surely, would upset the right wingers. And we would have no dry powder to fight off a new depression. So we would be reduced to passive onlookers were the banks to blow the economy up again. Somehow they’d have to bail themselves out next time.

The Pawlenty plan would be hilarious were it meant as a spoof of the Ryan plan, which was merely ridiculous. Unfortunately I fear that it is meant a serious entry into our political discourse. In which case we can expect other Republican candidates to try to one-up it by being even more outrageous. I expect Bachmann to pray to ask for divine guidance as to what her GDP target rate of growth should be. I also expect it to be insane. As for the rest: they are such a motley crew of free market magic and libertarian advocates, that I shudder to imagine what they will offer up.

Meanwhile Romney will flip flop furiously in order to confuse us such that none of us understands what his policy is. I expect him to have advocated everything and nothing all at once by election time.

Such is our political malaise. We seem headed into the most vacuous, policy bereft, campaign in living memory. The right wing has wandered so far off the reservation that nothing remotely sensible is likely to emerge to challenge the pablum that Obama serves up.

That’s a shame.

Obama needs to be held accountable for his timidity and overly bureaucratic response to the crisis.

One last point: if there is a discernible theme emerging on both sides of the political aisle, it is that we need supply side solutions. That’s unfortunate, since we have a demand side problem. This means we will not be making any attempt to fix what truly ails us.

Hence my continued expectation for a long period of stagnation