Bidenomics Works

From Philipp Plein's Billionaire clothing line, via Yahoo Sports. 

Heather Cox Richardson puts together a couple of things I really should have put together myself: Bidenomics, seen as a definitive turn from Reagan-era neoliberalism, and the amazing character of the US economy at the moment, as reflected in the current numbers on growth, unemployment, and consumer spending:

with the election of Republican president Ronald Reagan, lawmakers claimed that concentrating wealth on the “supply side” of the economy would enable wealthy investors and businessmen to manage the economy more efficiently than was possible when the government meddled, and the resulting economic growth would make the entire country more prosperous. 

The problem was that this system never produced the economic boom it promised. Instead, it moved money dramatically upward and hollowed out the American middle class while leaving poorer Americans significantly worse off. 

Hard Times for Tax Evasion

 

Drawing by Bruce Eric Kaplan.

Here's a little gratification, from John Cassidy at The New Yorker: 

at the start of this week, the EU Tax Observatory, an independent research laboratory based at the Paris School of Economics, released a new report on global tax evasion, which contained some positive news. “We estimate that offshore tax evasion has declined by a factor of about three over the last 10 years,” the report says. “This success shows that rapid progress can be made against tax evasion if there is the political will to do so.”

That's literally a factor of more than three: before the 2010 passage of the Foreign Account Tax Compliance Act (FATCA), 90 to 95% of offshore wealth went unreported to the tax authorities, and the US government alone was losing $100 billion a year to rich Americans parking their gains out of reach. Now it's more like 25%. Other countries, including the members of the OECD, followed suit in 2014, adopting a Common Reporting Standard for accounts opened by foreign residents:

This agreement effectively set up a global system of exchanging private banking information. As of October of 2022, the new report notes, more than a hundred tax jurisdictions, including many offshore tax havens, have applied the new rules, and countries have reached nearly five thousand bilateral agreements to exchange financial information: “This revolutionary development shows that new forms of international cooperation, long deemed utopian, can emerge in a relatively short period of time.”

Sadly, the US has refused to join the CRS, making it easier for the ultra-rich from elsewhere to use our country as a haven from their own tax obligations. This doesn't seem to be entirely the fault of the Trump administration (it has a good deal to do with the problem of reconciling federal law with the laws of bank-loving states like Joe Biden's Delaware and Donald Trump's Florida, along with Nevada and Wyoming), but it was in March 2017 that the European Parliament announced the refusal, so I figure that's when negotiations broke down. And guess whose very large real estate business hugely depended, and I imagine still does, on laundered money from plutocrats in petrostates like Russia and Saudi Arabia.

To me, this is the kind of issue that really matters in the core struggle between those who own almost everything already and aim to have it all, and the rest of us. It's not as exciting to talk about as abortion, or book bans, or even voting rights, but this is what those people truly care about—the other "conservative" stuff is to keep their voters engaged, and is changing all the time as the situation changes—and it looks like a victory for our side.

Did the special craziness of the right start, in point of fact, with the 2008 financial crisis and the efforts to fix the situation, such as they were, of the incoming Obama administration? The Astroturf Tea Party certainly did. Is there a new vulnerability among the incredibly rich, dating back there, making them more irrational than they were before? Between Elon Musk (Wall Street Journal reports that seven banks that loaned him $13 billion for the Twitter purchase can't sell the loans, and are expecting to lose at least 15% of their investment)

and the Republican majority in the House of Representatives, which seems unable to elect a Speaker. These people are not well.

The Zinger That Wasn't

 

Some effort to award young Doocy a point over the new White House press secretary, Karine Jean-Pierre on Monday, in her official debut, on the part of this RealClear reporter:

I don't know whether the story is going to have any legs or not, but in the first place, everybody but billionaires and MMTers recognizes that raising taxes is a way to reduce inflation—inflation is when there's too much money circulating, and taxation pulls the money out of circulation. Though its effectiveness must depend on who or what is getting taxed, and what possible side effects it might have; some Bloomberg idiot at WaPo writes, for instance, that it can cause an overtime rejection crisis among the fed-up workers

The Mustache of Conciliation and Compromise

Via.

Old Tom Friedman bothsidesing the Democrats internally ("Do Democrats Have the Courage of Liz Cheney?"):

I have only one question for them: Are you ready to risk a lot less than Liz Cheney did to do what is necessary right now — from your side — to save our democracy?

Because, when one party in our two-party system completely goes rogue, it falls on the other party to act. Democrats have to do three things at the same time: advance their agenda, protect the integrity of our elections and prevent this unprincipled Trump-cult version of the G.O.P. from ever gaining national power again.

It is a tall order and a wholly unfair burden in many ways. But if Cheney is ready to risk everything to stop Trump, then Democrats — both moderates and progressives — must rise to this moment and forge the majorities needed in the Senate and House to pass the bipartisan infrastructure bill (now scheduled for a Thursday vote in the House), a voting rights bill and as much of the Build Back Better legislation as moderate and progressives can agree on.

I guess Rep. Gottheimer (leading the tiny rump in the House who say they won't vote for the human-insfrastructure bill unless they get to vote for the structural-infrastructure bill first, but refuse to say whether they will vote for the former if they get their way on the latter) might think he's already doing the same kind of thing as Cheney when she voted to impeach Big Donald—fearlessly bucking his party.

Literary Corner: Vulnerable to the Reliability

I call this his "deer in the headlines" look. Via Fox News.

If the Supreme Court really comes up with a way of finding the Texas Posse Postcoitum Act constitutional, I'm going to demand that New York State enact a bill deputizing private citizens to enforce libel law by filing suits against liars on behalf of reality itself, and spend the rest of my life hunting bounties, $10,000 at a clip from all the Republicans I can catch. 

I'm not sure I'll go after Senator Manchin, because his stupid act is getting so convincing I'm not at all sure he's lying, as in this interview with Dana Bash at CNN:

The Urgency That We Have

by Joseph Manchin III

What's the urgency? What's
the urgency that we have? It's not
the same urgency that we have
with the American Rescue Plan. We
got that out the door quick, it was
about $2 billion — $2 trillion. And
on top of that, all the things we
have got with the CARES package,
everything leading up to that. So,
we have done an awful lot and there's
still an awful lot of people that need help.

But you have 11 million jobs that aren't
filled right now. 8 million people are still
unemployed. Something's not matching up.
Don't you think we ought to hit the pause
and find out? The vulnerability that we have,
Dana, right now, we don't know what is happening
with this COVID. It's awful, coming back
the way it is with a vengeance. And
we don't know about inflation. We know
it's running rampant right now. I can tell you,
in West Virginia, inflation's running rampant.

And, on top of that, the challenges we're
going to have, geopolitical challenges.
Shouldn't we be prepared?

Playing Position

 

Via.

Shana Tova and happy Labor Day! I'm upstate enjoying some R&R including some woods (lovely, dark, but fortunately not that deep), and trying not to worry about the Wall Street Journal story, of which I've only seen Steve's report, suggesting that the Democrats are going to give up on tax justice as they work through the reconciliation instructions to spend that $3.5 trillion, which I'm guessing (see above) wouldn't make them feel too sad over at WSJ. 

Nobody else seems to have been picking up on it—I mean, within our own bloggy circle, or out there in the magazines we read—and it's consistently remarkable how little discussion there is anywhere of the tax side of the Biden program, which I myself, as you know, am obsessed with. That is, I get why Democrats might be leery of talking about it, knowing how Republicans would be inclined to manipulate the discussion, as they normally do, making it sound like everybody's taxes are set to go up, as opposed to a relatively small portion of the top 2% (an individual earning $387,116, where the 98th percentile starts, won't see a rise in income tax, nor will a couple in the 99th percentile at $531,020; and you have to be earning $1,000,000 to get hit by the rise in the capital gains tax to a marginal rate of 39.6%). But Republicans aren't on the whole talking about it either, not the politics of it, neither concern trolling ("our Democrat friends will regret this gigantic assault on the middle class") nor handicapping its chances in Congress in the way WSJ just broached.

For the Record: Manchin (with bonus rantlet)

 

Via.

And keep in mind that it's not a one-off like the $6 trillion in debt-ballooning Covid relief that Manchin has unhesitatingly voted for in the past 15 months: it's $350 billion per year over a 10-year period, designed to be entirely paid for.

— Wiggles of Weimar (@Yastreblyansky) September 3, 2021

Joe Did What? Glass Half Full

 

Image via African Skies.

We've finally got some text on the Human Infrastructure budget reconciliation package, in the form of a one-page summary of budget topline items under four headings of spending categories (Families, Climate, Infrastructure and Jobs, and Healthcare), and a nine-page Memorandum addressed to Democratic senators, organized by committee, with very broad numbers for how much spending each committee is instructed to approve. Or saving in the case of the Finance Committee, which is instructed to come up with a plan to cut the deficit by "at least one billion dollars", which reminds me enough of Dr. Evil to make me laugh, but is evidently standard procedure in these matters, for reasons I'm not grasping:

There is ample precedent over the past fifteen years for using a nominal reconciliation instruction as a mechanism to allow a committee to bring forth legislation with larger budgetary implications than such an instruction suggests. Republicans used a nominal instruction amount to both the Finance and the Health, Education, Labor, and Pension (HELP) Committees to move forward with their efforts to repeal the Affordable Care Act in 2015 and 2017. The instruction to each committee in each case was to reduce the deficit by $1 billion....  In addition, Democrats used nominal reconciliation instructions in 2010 and 2007 to achieve important changes to health care and education programs. The 2010 example, the Health Care and Education Reconciliation Act (HCERA) included a nominal instruction of $1 billion in deficit reduction to both the Senate Finance and HELP Committees. According to CBO, That bill impacted hundreds of billions of dollars in meeting those targets.

But it seems to be about "flexibility", and connected to the fact that they won't be asking the Congressional Budget Office to score the programs before the vote:

Stupid Economist Tricks: Sex, Lies, and Deficit Terror

Tom Toles did not cite a source for that 97% figure. Then again, unlike Michael Strain, he is paid to be a cartoonist.

Actually, no, no sex, just Michael Strain of the American Enterprise Institute, warning readers of The New York Times that

Biden Is Asking for $4 Trillion. Congress Shouldn’t Give It to Him.

He seems to like this headline format. Last time I had reason to deal with him, in 2015, it was with reference to a WaPo piece recommending the repeal of the Affordable Care Act:

End Obamacare, and people could die. That's okay.

Spoiler: my commentary concluded that it was not okay. And the GOP Congress, failing to end Obamacare, sort of agreed! I mean not exactly, but we won.

Anyway, the reason Strain would like Congress to refuse Biden the money, or at least the $3.5 trillion of it to be appropriated through the budget reconciliation process without requiring any Republican votes, is ostensibly the raging inflation he (Michael Strain) sees and expects to see continuing through next year even without this extra spending, and which would surely be aggravated by the increased demand for stuff (where "demand" means, as it usually does in this style of economics, "ability to pay for things you really need that you couldn't afford before") that the spending on the expanded child tax credit in particular will bring on by yanking people out of their God-appointed poverty, while the Biden administration makes no plans for increasing the supply of stuff, other than by PROVIDING THE UNIVERSAL FREE PRE-K EDUCATION that recipients of the child tax credit are most likely to be spending it on, but you can't expect Strain to make that connection.

So in the course of his argument he gives a lot of attention to an analysis of the Biden program by Moody's, in which for some reason he doesn't offer a link to it:

Class War Comix

 

Class War Comix 1, by Skip Williamson, ca. 1970

Eric Levitz at New York informs us:

In a 2019 report, the consulting firm Cerulli Associates projected that, over the next quarter century, roughly 45 million U.S. households will collectively bequeath $68.4 trillion to their heirs. This transfer will constitute the largest redistribution of wealth in human history. Generation X stands to inherit 57 percent of that $68.4 trillion; millennials will collect the bulk of the rest.

Millennials, in other words, are one day going to be a lot richer (or at least, some millennials are). In the coming years, that reality is likely to heighten the generation’s class contradictions – and just might redraw the dividing lines in American politics.

How many millennials, exactly? Not too many, apparently. Levitz calls it about 10% who will be getting all that money, while the other 90% will continue being "one of the the poorest generations ever", crippled by debt and largely unable to build wealth, unstable in employment, often deprived by employers (in the gig economy) of benefits, and delayed in starting families. The typical Millennial holds 41% less wealth than an adult of similar age did in 1989, according to one report in 2019, and these meager holdings are very unequally distributed, especially on ethnic-racial lines:

Joe Did What? Access Journalism

Andrea Pozzo, anamorphic ceiling fresco in the Church of Sant'Ignazio (1690), Campus Martius, Rome, photo by Anthony Majanlahti, 2005.

Weird spectacle in Politico in a lengthy piece by Laura Barrón-López: a bunch of old more or less rightwing Democratic retired senators, Ben Nelson, Kent Conrad, Bob Kerrey, coming out to say that Biden seems to have become a completely different political thinker since he was in the Senate himself, but they're mostly pretty OK with that:

Current and former Democratic lawmakers who’ve known Biden through the years describe his current spending initiatives as an evolution. But none see his presidential agenda — cast in the face of the historic pandemic — as a misstep or simply the result of liberal pressure. Conrad, a self-described conservative Democrat, said Biden’s $2.3 trillion infrastructure plan was “not out of the Biden playbook of the past.” But he said that he’d support it if he were still in the Senate today.

What's that about? I mean, not why is Kent Conrad thinking that way, though that's an interesting question, but why is a story about him expressing a positive view of Biden popping up in Politico? Do you suppose it's possible Democrats could be learning how to use Politico-style access journalism?

Because this story is putting out a kind of specific narrative with a kind of specific purpose—

Joe Did What? Not Deficit Hawkery.

 

Bathtub boats, via Walmart.

So, as promised earlier in the week, to the Biden program: one reassuring thing we've learned over the pandemic year is that the federal government has a lot of fiscal and financial tools for dealing with an out-of-the-blue emergency. We may not be totally able to rely on the people, in Congress, in the White House, at the Fed, but the tools are really there—we don't need to devise a whole new system, the way the Union did (and the Confederacy failed to do) at the outset of the Civil War. The Federal Reserve Bank can keep interest rates near zero for years at a time, it seems, and Treasury can borrow more or less unlimited funds to deal with it, if Congress allows them to. And indeed, they've borrowed $4.3 trillion for Covid relief since March 2020, the last $1.9-trillion tranche signed by President Joe Biden, in a bill passed without a single Republican vote.

Which is a sign that Democrats may not be simply reverting "back to the days of paygo politics," as David Dayen complains, when they propose they propose some $4 trillion in tax hikes, all of it on the top 0.3% earners and on corporations, to "pay for" the planned new spending of the American Jobs Plan and American Families Plan:

“So, how do we pay for my Jobs and Family Plan?  I made it clear, we can do it without increasing the deficits,” Biden said last night. “What I propose is fair, fiscally responsible, and it raises revenue to pay for the plans I have proposed.” This was in a section where Biden attacked trickle-down economics, but even there, he condemned Trump for adding “$2 trillion to the deficit” with his tax cuts.

Rarely Asked Questions: How Does Government Pay Its Bills?

Winner of my "Best Visual Illustration of Rarely Asked Questions" contest, via EntheoNation.

I'm crazy about the Biden proposals introduced in Wednesday's Joint Speech, or as Susan Glasser/New Yorker says, in what seems to me like the most accurate summary I've seen,

To anyone who remembered last year’s Democratic primaries, the President’s first address to a joint session of Congress sounded as if Elizabeth Warren, and not Biden, had won.

and I'm going to want to take issue with scoffers, not necessarily representing "Modern Monetary Theory", including the generally very estimable David Dayen at The American Prospect, complaining of "that old deficit hawkery" in the way the plan is being sold.

I don't think it's that at all. But before I get there, I'd like to lay down some basics on the nature of government spending in a modern state that I think aren't well understood. because most of us think we already know, and as I've been learning recently we don't:

Rarely Asked Questions:

Q: How does the government pay its bills?

A: It has a checking account, known as the Fund Balance With Treasury (FBWT).

Q: Where does the money come from?

A: Everyplace that gives the US government money, including tax collections by the IRS and other agencies, fees it collects from various enterprises (think parking at national parks. but there's lots more), and of course money it has borrowed from the private sector by selling bonds and other kinds of federal paper. Unlike your checking account, it also includes all the assets the government owns that it can't easily convert into cash, generally inventory, and isn't supposed to sell, like stocks of toilet paper and paperclips and nuclear weapons and land, plus the loans it issues to veterans, students, small business owners, etc.

Q: So that's a lot of money, right?

For the Record: Biden's Corporate Tax

Cartoon by Clifford Berryman, June 1933, via Wikipedia. More material on the issues being faced then here, but (spoiler) it wasn't Roosevelt's idea to replace income tax with a sales tax..

 

Bos sent me this thread from Stephanie Kelton offering suggestions for forgetting about a hike on corporate taxes (or living with Manchin haggling the hike down, I'm not sure which). Also some corroboration for my hypothesis that she lacks clear concepts of how the budgeting process works and what Biden and Yellen are planning for the tax system. Both her ideas are pretty good, too, I hafta say, but don't offer good reasons for giving up on the tax hike:

@Yastreblyansky any thoughts on this? If the Dems can’t get the 28% incr. on Corp. taxes, what happens to the infrastructure bill? Reduce programs? Get other taxes? Or her 2 suggestions. https://t.co/IbbaCwh5bX

— Boswood - for a Job Guarantee (@Bosengood) April 14, 2021

Back to Piketty

 

Green Lantern Corps Quarterly 2/47.

One last word (I hope) on my economic views, and where they come from, and why I'm so dogged on the point, and then I'll try to stop.

I grew up in the belief that capitalism—the arrangement that divides society into two (slightly overlapping) groups, the very small group of the owners of capital, who control the economy for the purpose of profit, that is of increasing their capital stock, and the very large group of the rest of us, who are controlled by it, and must surrender to the demands of capital to survive—is a problem: unleashing astonishingly creative and transformative forces, as Marx and Engels put it in the 1848 Manifesto,

The bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together. Subjection of Nature’s forces to man, machinery, application of chemistry to industry and agriculture, steam-navigation, railways, electric telegraphs, clearing of whole continents for cultivation, canalization of rivers, whole populations conjured out of the ground – what earlier century had even a presentiment that such productive forces slumbered in the lap of social labor? 

but doling out the rewards of this extraordinary progress in unequal fashion, keeping most of the "surplus product" for the owners, and giving everybody else just enough to keep them more or less quiet and docile, and creating disparities between them that have and them that have not that could only grow, and grow, and grow inexorably worse. 

Reaganomics With a Human Face

 

Free lunch, photo by Bob Pennell, the Medford Mail Tribune, via USA Today.

I think I need to say something about "Modern Monetary Theory", in particular in its vulgar form, as the idea that, caricaturing a bit,

• since we now know that deficit spending does not necessarily cause hyperinflation (at least since the gold standard for the US dollar was somewhat inadvertently dumped in decisions of the Nixon administration in 1971-73),
• therefore, there is no reason to think about deficits at all, in planning increased social spending for the purposes of doing economic justice, and—oh, also, cutting, or not raising, taxes on the very well-to-do, no reason to worry about that either.

It's that last bit that got my attention, because I'm not an economist, like most of you, but an amateur human with some training in social science in general, who sometimes thinks about political economy and political morality, and my fondest dream has long been to work toward equalizing our situation, through the tax system, by getting the very rich to pay more. Lots more. Ever so much more, since the appearance of Thomas Piketty's Capitalism in the Twenty-First Century in English in 2014 gave me the courage. I told some relatively liberal online advocates of MMT about it, over the Twitter, some time ago: if there's no good economic reason for raising their taxes, how am I going to get it done? And they said, Don't worry about it! There are other reasons for taxing the rich! But they didn't offer me any reasons that would have any political weight.

That is—in other words—I started feeling as if the idea was being pitched as a justification for unlimited government spending on the poor, but was in fact a justification for not taxing the rich, a kind of Reaganomics with a smiling, liberal face, and I didn't want the economics to work out. And I really didn't like the thought that progressives like Senator Sanders and Rep. Ocasio-Cortez were looking warmly at it.

Up Next: Reconciliation II

Drawing via TaxmanComix.

While everybody's talking about Manchin and the filibuster, I'd like to note that there should be more good news for Democrats and other Americans working its way through the pipeline, in the form of a sequel to today's $1.9-trillion BFD: because the current bill is actually last year's budget reconciliation (fiscal year 2021), the thing Mnuchin and McConnell and the Speaker weren't able to do; there's still FY 2022 to go, and it is likely to be a fairly BFD in its own right.

Not that it will include a minimum wage hike or paid family leave or the election reforms we need so badly—these aren't eligible for reconciliation because they're regarded as "extraneous" to the budget. But you know what isn't? 

For the Record: Debate Takes

 

The Debate (2017), by the Filipino painter Gerry Joquico, via ArtAnton.

Earlier in the evening, I had a kind of kerfuffle with our dear friend Bos over the framing of our attack on Trump's China business, where I think the prevailing rhetoric emphasizes the points that aren't important at all for the sake of a sound bite that really doesn't end up meaning anything:

Hard to say how it means something important. Certainly the one thing he did with the account deserves a lot of investigation, but it's not ready to publish. pic.twitter.com/G7DmBxi9ao

— Ghastreblyansky (@Yastreblyansky) October 22, 2020

I don't know. Many people have foreign accounts. He disclosed it to IRS. He pays more in taxes because Chinese law is more effective against tax dodging.

He doesn't keep a lot of money in it. Except that one time he seems to have laundered $15+ million. That part is interesting.

— Ghastreblyansky (@Yastreblyansky) October 22, 2020

I had a Singapore checking account for a couple of years after I came back to the States, and I really didn't mean any harm.

My Unpopular Opinion: In favor of Paygo from the left

It looks as if the new House of Representatives is going to adopt what is known as a "Paygo" rule for legislation, short for "pay as you go", which reminds us all of deficit-busting hysteria from 1990 through 1997 and the worse that came after, and is going to cause a lot of howling out here in the peanut gallery, and I've been reading around a little bit about it, and I'm afraid I'm going to ask folks to calm down a little bit—not that congresscritters who have promised constituents to vote against it should go back on their word (if only because I'm sure Speaker-to-be Pelosi knows who she can spare in the vote), though Progressive Caucus chairs Mark Pocan and Pramila Jayapal will in fact be voting in favor

In good sign for Pelosi/Dem leadership, Congressional Progressive Chairs Reps. Mark Pocan and Pramila Jayapal will vote for the rules package despite including PAYGO

Makes path to 18 much more difficult for Khanna and AOC

Read @mikedebonis https://t.co/BG8l7d3dkl https://t.co/JZUPgWP3Sd

— Jeff Stein (@JStein_WaPo) January 2, 2019

—but that persons of progressive views in general need to understand that there are a lot of serious misconceptions going around about what Paygo is and what it isn't: and that it is not a neoliberal conspiracy to privatize Social Security, as I've been learning from a piece from early December by Robert Greenstein for Dean Baker's Center on Budget and Policy Priorities suggesting that "Paygo" is a tool that can further progressive goals, especially if you're among those of us who believe the reduction of economic inequality entails taking away wealth from those who have too much, in the very stern terms laid down by Anand Ghiridaradas:

For the Record: When Republicans were Radicals

Via.

Dinesh seems to have heard me telling him that the 1850s Republicans were the most radical party in US history, and he's not buying it.

The parties have flipped flopped since then. Know your facts cause they matter.

— Arash Ghaneian (@VegasArash) October 10, 2017

THAT'S NOT WHAT I HEAR about Lincoln's day. https://t.co/Bj56JuBwUp pic.twitter.com/WpWo7jBKe6

— TalesFromTheCryptic (@Yastreblyansky) October 12, 2017

Looks like he's reading me, but a little frightened to respond directly. He issues the following, to nobody in particular: