What Happened to Serious Economic Policy Debates?

Economic policy determines whether economies, and hence citizen real income grows nationally and how that income is distributed. The invisible hand of a market economy guides investment to its most profitable, hence most productive uses. Not so for the heavy hand of the state. The Soviet Union saved and invested five to six times as much as the US, but productivity lagged and the economy eventually collapsed. Taxpayers have some control over “public” investment performance at, e.g., the small private level (condo, coop) but voter influence declines as the distance and size of the governing body increases. Making national investment policy even more difficult is the fact that even highly productive public investment may not pay off until well into the future. While rational economic policy would devolve decision-making and funding to the lowest possible level, the federal government’s lack of a hard budget constraint allows it to fund without accountability. The Constitution’s enumerated powers has proven an insufficient constraint on this perverse political incentive.

 

During President Trump’s term, pre-pandemic, real wages rose steadily at about 2% reflecting the steady real economic growth, but fell under Biden by over 2% due to inflation. Black unemployment and poverty fell under Trump, and continued to fall under Biden. While Trump proposed deep budget cuts, the Congress passed essentially the Democrats’ budget under both Ryan and Pelosi. Trump passed what in the ’60s under Kennedy was called a Keynesian tax cut, now called a “voodoo economics” supply-side tax cut for the rich to spur business investment, that worked essentially as planned.

 

Trump takes undue credit for the good performance during his term, for which the main stream media (MSM) accuse him of lying. Biden does the same, for which the MSM cheers. Independent voters favor Trump over Biden by 45% to 34% on the management of the economy. Numerous Democratic commentators have speculated that voter mistrust of Biden reflects FOX fake news popping up on TV sets uninvited to brainwash unsuspecting viewers.

 

Economic policy advisors historically cringed at election campaign presidential bragging. Not so anymore. Former Fed Vice Chair and Princeton economist Alan Blinder contributes regularly to the WSJ, providing Democratic Party spin. Judging by the letters, WSJ readers are unconvinced. Other economists accuse Trump of lying. In his discussion of the recent Presidential debate, Jason Furman alleges: “Donald Trump made many false remarks.” Joseph Stiglitz alleges: “In the firehose of outright lies that Trump spewed throughout the debate, the most dangerous falsehoods concerned his and Biden’s respective economic-policy records”

 

Since both argue that Trump lied about the benefits to existing citizens of Biden’s open borders policy, let’s consider their evidence. While Furman agrees that all net employment gains during the Biden Administration did go to illegal aliens (Furman calls them foreign-born) he credits only a “grain of truth” because “Immigration Is Behind the Strong U.S. Economy” (WSJ, Monday, July 1).

 

It’s Furman’s assertion that contains only a grain of truth: Real GDP grew by 2.5% last year (not 3% as Furman reports) and the output of illegal immigrants counts towards the total value of goods and services. But existing voters didn’t share in the one-off rise in real GDP.

 

Will it benefit them over time? Furman first argues that no output was lost because no citizens were displaced from the labor force (the flip side of asserting that free trade with low wage countries has no effect on US employment). This seems unlikely. Second, he conflates the current wave of illegal immigration with carefully structured legal immigration in the past, e.g., his faculty colleague, to support his implicit assumption that the value of immigrants’ production exceeds that of their consumption, hence that the tax revenues generated exceed the costs of public service. While the work ethic of the current wave of illegal immigrants is laudable, less than half have jobs and most had subsistence jobs in their country of origin. It will likely take several generations before their earnings and tax payments come close to covering the public costs of food, shelter, health care, schooling, policing and other social services. Similarly, while the Social Security System taxes of those who register will marginally contribute to current baby boomer benefits, their participation in the System will deepen its permanent (actuarial) deficit due to Social Security’s progressive benefit structure. The current wave could be self-sustaining in a very long run, but these chronic unsustainable deficits for the foreseeable future adding to the record US debt weaken the US economy, moving the day of reckoning forward.

 

The “root cause” of illegal immigration as reported by the Vice President’s Task Force mostly fall into the main category of “bad (generally leftist) governance” in their country of origin that inhibits individual productivity and improved living standards, recently exacerbated by current anti-growth environmentalism that drives the poorest off the land. Unfortunately. leftist governments in Latin American democracies have generally increased their hold on power in the wake of chronic policy failure. The victims deserve our empathy, but with the population of Latin America approximately double that of the US, open borders isn’t a feasible solution.

  

Stiglitz defends his accusation of Trump lying by touting Biden’s unprecedented spending plans:

 

Biden’s actions increased the ten year deficit by almost $12 trillion dollars. Stiglitz asserts these expenditures are all both desirable and non-inflationary. Other analysts have pointed out that they are generally lacking in controls and have thus far mostly benefited cronies. Touted as a defense against a growing Chinese threat, emulating Chinese directed investment methods is not much of a defense when China has more that four times the population and more than four times the per-capita savings of the United States.

 

Oppose open borders and you are labeled “racist.” Oppose massive deficit financed crony capitalism and you are labeled “anti-science.” Defend yourself against politically motivated charges, and you are a “threat to democracy” and the rule of law. Stiglitz’s title “There’s no Debating Who Would Be Better for the US Economy” makes sense only as a directive: those that do not accept the Party talking points are, according to “economic advisors,” liars and enemies of the state.” We should understand by now their “democracy” tolerates no dissent?

 

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Kevin Villani

11 thoughts on “What Happened to Serious Economic Policy Debates?”

  1. I do distinctly remember a time when not only when we were running budget surpluses but when the budget deficit was a serious political issue. Then again what did Hartley say about the past being another country?

    The Left has coherent strategies but it operates politically in terms of narratives. Root causes, allegations of racism, ending democracy and all of that is just the packaging for communications. More to the point of the post, so is the idea of government spending as “investment” I laugh (and then cry) when people tell me what a great president Biden is because of the things he has done which upon investigation seems that he spends money on programs that favor Democrats and is paid for by putting it on a credit card. So brave, such leadership

    As far as serious economic policy debates? To oversimplify, it’s hard if not impossible, to debate these things when there is consensus on what the questions are and also when to one side everything is politics and to the other they have no idea how to act (P)olitically. However the one thing there is a bipartisan consensus regarding economic policy is that spending money, whether through spending hikes are tax cuts, is good.

  2. “Biden’s actions increased the ten year deficit by almost $12 trillion dollars.”

    Let’s start by putting the blame where it properly belongs. It is Congress which has the power of the purse. If we citizens would vote for responsible CongressCritters, they would stop any Administration from spending like drunken sailors. The problem is not in our Biden, but in ourselves.

  3. Let’s start by putting the blame where it properly belongs. It is Congress which has the power of the purse. If we citizens would vote for responsible CongressCritters, they would stop any Administration from spending like drunken sailors.

    I tend to disagree. Let’s start by putting the blame where it properly belongs. It is Congress which has the power of the purse. If we citizens would vote for responsible CongressCritters, they would stop any Administration from spending like drunken sailors. The McCain – Feingold Act changed fund raising for Congress critters. Pre-McCain, politicians spent time calling major donors and time writing legislation.

    post-McCain, the legislators turned over the task of writing bills to staff and spent more time fund raising. Since “Citizens United” some of that fund raising is more centralized but legislation has mostly remained with staffs, especially leadership staffs.

  4. I tend to disagree. The McCain – Feingold Act changed fund raising for Congress critters. Pre-McCain, politicians spent time calling major donors and time writing legislation.

    post-McCain, the legislators turned over the task of writing bills to staff and spent more time fund raising. Since “Citizens United” some of that fund raising is more centralized but legislation has mostly remained with staffs, especially leadership staffs.

    Corrected comment.

  5. I remember ’68ish doing a high school paper on the unsustainable federal deficit, then a dire 25 billion according to this:
    https://www.thebalancemoney.com/us-deficit-by-year-3306306

    From the same source, four years in surplus but you can be sure that was from the sort of accounting that puts citizens in jail. I’ve been assured many times, by many people, that what can’t go on won’t. I probably even believe it, but the question is; when will it hit the fan? 56 years is a long time to defy gravity.

    The extent that Trump’s economy was better than Biden’s certainly wasn’t due to Trump’s fiscal restraint, even before covid. There is a lot to be said for having the sense, on inheriting favorable conditions, to not screwing them up. The covidiocy gave license to every legislators worst instincts to use “government” money to buy votes. The less gullible among the media are now reporting that two-thirds was stolen, I’d be surprised if as much as 10% wasn’t.

    We are at the confluence of rising interest rates, declining office occupancy, indeed declining commercial occupancy of all kinds not associated with multi-acre warehouses and a stock market completely convinced we are living in the best of all possible worlds because(?) and the only way is up. What could go wrong?

  6. If we citizens would vote for responsible CongressCritters, they would stop any Administration from spending like drunken sailors.

    Where can we find such responsible CongressCritters to vote for?

    I note we have elected a GOP-controlled government multiple times now and yet have not obtained a responsible Congress. I further note said political party has oft made mouth-noises claiming to be responsible and yet never delivers anything but more of the same. I still further note the one time the gop did in fact restrain government expenditure- late in the last century- the regime went full Alinsky on the leader- Newt Gingrich- and drove him out of Congress.

    It doesn’t matter that the alternative party is worse. Fast or slightly less fast, the end is same- bankruptcy and collapse. I still recall something from a rather thick book on ancient history by historian Peter Green- paraphrasing, by the time the Roman Republic ceased, democracy had become such clown show that no serious person wanted anything to do with it.

    So I will posit this: A huge fraction of the American people have simply given up on the present regime in its entirety and are simply bracing for impact. It still amazes me just a bit to see generators for sale in so many stores and I won’t comment on the never ending gun buying spree I’m sure everyone knows about.

    Hence, there is no serious economic debate because the serious people in the electorate have had enough and are no longer paying attention to the regime’s justifications for its endless schemes to enrich itself at our expense. The regime certainly doesn’t want any serious discussion, because that might cause the less serious people in the electorate to start paying attention.

  7. well the end of the Republic was preceded by the Social War and the Civil war about 40 years apart, where Sulla and Marius faced off, followed by the Triumvirates, the social wars were over immigration of a sort
    its curious with 35 trillion dollars, a nauseating figure, they still haven’t made entitilements any more stable, in fact the reverse is so, Dems are enamored of confiscatory rates, and Republicans of tax cuts,

  8. Could they find a more credible sorcerer than stiglitz, the one who certitfied the Venezuelan central bank, who vouched for the soundness of the Subprime framework

    take the infrastructure act, as promised what bridges have been built or repaired what roads, heck what charging station for ev’s it’s some black budget, for purposes untold,

  9. It looks like France is about to get it good and hard:
    https://www.dailymail.co.uk/news/article-13614769/France-faces-immediate-financial-crisis-weeks-Olympics-Macrons-disastrous-election-minister-warns-victorious-hard-left-vows-90-tax-rich-freeze-food-prices-wild-250bn-spending-spree.html

    Every time someone points to the parlous state of the American economy and the impending dedollerazation as a consequence, all the alternatives are usually fighting to keep double digit inflation from becoming triple digit while their citizens are transferring everything they can here.

  10. …what bridges have been built or repaired what roads, heck what charging station for ev’s it’s some black budget…

    The country is simply being looted. You don’t spend endless billions on infrastructure and somehow end up with nothing useful in any honest universe.

    …its curious with 35 trillion dollars, a nauseating figure, they still haven’t made entitilements any more stable, in fact the reverse is so, Dems are enamored of confiscatory rates, and Republicans of tax cuts…

    Again, looting. The United States is essentially a slave society, with legacy Americans despised by the regime and effectively corralled into a continent-sized latifundia.

    The regime simply has no interest in expending wealth upon people it wishes would die off. Hence, illegals are getting illegally lavished with benefits they haven’t paid for or earned while obligations to actual US citizens are being forgotten.

    To quote Col. Schlichter, they hate us and want us dead.

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