FDR 2.0?

From the Wall St. Journal: "Get Ready for the New New Deal." If you don't know much about history, economics, or the New Deal, that might strike you as good news.

Comments

[Christopher]

A former Reaganite and current McCain advisor doesn't like Democratic economic policies? Shocking!

I'm not expert, but I do consider myself fairly knowledgable about history, economics, and the New Deal. Yet Obama's economic plan still "strikes [me] as good news."

[Dave]

So, Christopher, do you sincerely feel the US economy is underregulated? Do you think what will put it back on track is more government intervention and taxation?

Memo to the 21st century: Socialism doesn't work, even if you relabel it More Regulation. Maybe Obama didn't get the memo.

[Christopher]

Yes, Dave. I feel the economy is underregulated. I think that raising taxes on the highest-earning 5-10% of the American population and cutting taxes for everyone else is a reasonable approach to improving the economy, yes.

Memo to Dave: Obama is not a socialist. Labeling his policies such does not make them so.

[bfwebster]

I strongly recommend _The Forgotten Man_ by Amity Shales as a refresher on the Great Depression and how FDR's policies actually prolonged it (unemployment did not significantly drop until the start of WW II). ..bruce..

[Tim J]

"I think that raising taxes on the highest-earning 5-10% of the American population and cutting taxes for everyone else is a reasonable approach to improving the economy, yes."

Obama doesn't stop with the top 5-10%, Christopher.

http://article.nationalreview.com/print/?q=MDMzMzRlOTJhNjdmYWI1YWY3OTg3MTVjNjZiNjI5MjU=

And, as Charlie Gibson pointed out to Obama in a Primary Debate, increasing Capital Gains Taxes actually decreases tax revenue. Not that Obama actually worries about that. He just wants to be "fair".

http://www.youtube.com/watch?v=WpSDBu35K-8

[Jim Cobabe]

Not only do such policies and promises seem to propose trying many things that have been an abject failure in the past, but the public seems to eat it up with no sense of scepticism or doubt.

I don't like either major party's campaign. But Obabma's promises that are supposed to save us are just absurd. And everyone within his audience seems to just cheer him on. Maybe the American people deserve whatever disastrous outcome. Just please don't blame me.

[Christopher]

Tim J,

Linking to a National Review article written by Peter Ferrara just destroyed any and all credibility you possessed prior to your clicking the "post" button.

[Tim J]

And your failure to address a single issue raised here instead attacking the messengers does nothing for your argument.

[Jeff Brock]

The audience of some rally is beside the point (luckily for mccain too). Obama's plan makes sense. With Bush's policies our national debt has strongly increased, and it's very likely mccain would continue the trend. Today on KSL (Salt Lake local news) they went through the tax proposals of both obama and mccain, and they made it clear that the average middle class household would get 2 times or more of a tax break through obama than mccain. Plus calling obama a socialist is ridiculous, anyone listen to colin powell on sunday??

[Mark D.]

It is worth mentioning that corporate income taxes are economically irrational. Economically speaking, corporations are just proxies for their shareholders. There are lots of working and middle class taxpayers who own parts of corporations, either directly, or through pension plans, insurance, and mutual funds.

The resulting double taxation on dividends and the value of retained earnings is punitive and much higher than any other tax. Charging an effective tax on dividends ranging from 33% to 70% is economically counterproductive. The lower effective rate on capital gains encourages malinvestment, unhealthy expansion, and economic instability.

If we want a rational progressive tax system - where all types of income are treatly equally, the corporate income tax should be eliminated and capital gains treated as ordinary income (after adjusting for inflation).

One cannot have a New Deal, or even pay for the old one (Social Security and Medicare), unless the tax system doesn't irrationally discourage the economic activity where the taxes come from.

[Christopher]

Tim, I've made no "argument" here. I simply responded to Dave's post by noting that Paul Rubin's dislike of Democratic economic policies is not big news, and by suggesting that one can be informed about history, the economy, and the New Deal and still favor Obama's economic plan.

And, by Dave's own definition of attack (see here), I have not attacked any messengers.

[Tim J]

"Linking to a National Review article written by Peter Ferrara just destroyed any and all credibility you possessed prior to your clicking the "post" button."

Sorry. If you want to play semantics, you I should say "discredit the messenger." Happy?

[Dave]

Wow, having me quoted back to me. I think I've cleared some sort of hurdle with that one. Thank you, Christopher.

No, I don't think Christopher is attacking anyone. And he did respond to my query by admitting he wants more regulation and higher taxes for high earners, although he denies this smacks of socialism.

Is a country that has nationalized its railways, banks, and health care system fairly characterized as socialist? After the planned bank bailouts/buy-ins and ObamaCare arrive, we'll be there.

[David G.]

Tim, the source of your information is often as important as the content, especially in highly partisan debates like this one. NRO has about as much credibility among liberals as the Daily Kos has among conservatives.

The non-partisan Tax Policy Center doesn't break it down in terms of top 5 to 10%, but it does suggest that under Obama's plan the top quartile will actually see a 2% increase in after-tax income, so I don't see how you can argue that "Obama doesn't stop with the top 5-10%."

TPC predicts that Obama's plan will increase government revenue by 600 billion over the next decade, while McCain's plan will reduce revenue by the same amount. However, TPC predicts that neither plan will reduce the national debt, but rather both will increase it, with Obama increasing it by 3.5 trillion and McCain by 5 trillion.

http://www.taxpolicycenter.org/UploadedPDF/411750_updated_candidates_summary.pdf

[Christopher]

If you want to play semantics, you I should say "discredit the messenger." Happy?

Yes. You made my day.

[Tim J]

"so I don't see how you can argue that 'Obama doesn't stop with the top 5-10%.'"

I was referring to corporate taxes and taxes on capital gains. These taxes will negativley impact more than just the top 5-10%.

[Tim J]

I seriously need to take a typing class.

[Tim J]

"NRO has about as much credibility among liberals as the Daily Kos has among conservatives."

That's understandable, but I would rather see someone debate the points of an article rather than dismissing the entire argument. And I do realize this happens on both sides of the aisle.

[Chris H.]

"Socialism doesn't work, even if you relabel it More Regulation. Maybe Obama didn't get the memo."

Wow, you have been listenig to way too much Glenn Beck.

[Chris H.]

Did my comment get deleted?

[Chris H.]

Nope, there it is, sorry.

[Aluwid]

<"NRO has about as much credibility among liberals as the Daily Kos has among conservatives.">

"That's understandable..."

Not really. Comparing NRO to Daily Kos is like comparing Newt Gingrich to Cindy Sheehan. Sure they're both super-partisan for their respective sides, but only one of the two is a nut.

[Chris H.]

"If you don't know much about history, economics, or the New Deal, that might strike you as good news."

Of if you dare disagree with Dave, that may be a good news. Of course, everyone to the left of Milton Friedman is a socialist. So Obama must be one. As a proud socialist, I find the right funny in their use of terms (particularly when the farwell of their ideology is so obvious, except to them because their ideology is all they have left).

Maybe we should do what those good Friedmanites in Chile did and kill the socialists. My wife will get over it, though my six year old really likes me.

All of this will make my gloating more joyous on Nov. 5.

[Chris H.]

That was supposed to be failure, not farewell of their ideology. Though I do bid it farewell.

[Christopher]

Comparing NRO to Daily Kos is like comparing Newt Gingrich to Cindy Sheehan.

Aluwid, I'm glad we can agree that Gingrich is a nut.

[Aluwid]

Christopher,

"Aluwid, I'm glad we can agree that Gingrich is a nut."

If paranoid delusions are what constitutes sanity in your eyes then yes, I guess Gingrich would be proud to be called a nut.

[Geoff J]

Memo to the 21st century: Socialism doesn't work, even if you relabel it More Regulation.

Umm... Dave... We're in the 21st century and if there is anything the last eight years has taught us it is that getting crazy with deregulation doesn't work.

Besides, the GOP leadership of this century are half-socialists as far as I can tell anyway. They were all about privatizing profits for big business but came rushing in to socialize the losses. (Even if I agree that they had no choice on the latter)

[James]

I don't get it... what's wrong with socialism? A good number (perhaps majority) of the world's leading democracies would be classified as "socialist" by most Americans and yet they are some of the most prosperous and peaceful countries in the world.

[Dave]

Chris H., and as a socialist proud may you be. It's a description, not an epithet, and as a socialist you're certainly not alone in the world. My point isn't that socialism doesn't sound good on the campaign trail. It's that it doesn't work. Obviously, the optimal degree of government involvement in the economy is well above zero, but from where we (the US) stand now, he's pointing in the wrong direction.

[Tim J]

"Umm... Dave... We're in the 21st century and if there is anything the last eight years has taught us it is that getting crazy with deregulation doesn't work."

First, the economy wasn't deregulated for the past eight years and second, regulation on the part of the Fed had a great deal to do with the economic mess we're in.

http://online.wsj.com/article/SB122428279231046053.html

[Tim J]

"Besides, the GOP leadership of this century are half-socialists as far as I can tell anyway."

I don't think you'll find an argument against this, but it's irrelevant to the point being made.

[Geoff J]

Tim J,

If you are going to point to already-outdated opinion pieces in the future it might help if they have something to do with the subject at hand. That WSJ article did absolutely nothing to support your claim that "regulation on the part of the Fed had a great deal to do with the economic mess we're in". In fact the word "regulation" doesn't even appear in the piece.

First, the economy wasn't deregulated for the past eight years

Hmmm... This is a bizarre response. I don't even know how this sentence is supposed to connect with my comment.

I can say that I was referring to the GOP-sponsored legislation in late 2000 that banned regulation on credit default swaps as being at the heart of our current financial fiasco. I think Dave is wrong if he doesn't think more regulation is needed in some key areas at least.

[Seth R.]

I think Amtrack should be nationalized.

My wife and I want to ride the train with our kids sometime.

[Seth R.]

Nationalized and PAID FOR, I should say.

[Clark Goble]

While the NRO is biased and occasionally has some pretty egregiously bad articles I think it unfair to compare it to KOS. WorldNet Daily I'd compare to KOS or even people like Michele Malkin (sp? because I'm too lazy to look it up)

That said, if you are in a discussion quoting a source from a pretty biased journal and then expecting your interlocutor to have the duty to go through and answer everything is a bit silly as well. It's better to simply find objective facts or quote a more mainstream journal.

I think it remotely likely that Obama will be able to keep his campaign promises of lowering taxes while simultaneously engaging in all the spending he wants. One side will have to fall. While I think many liberals think it'll be the tax pledge realistically I think Obama will end up being conservative about what new programs he tries to enact. The problem is that Reid and Pelosi undoubtedly won't be so constrained.

I'm voting for Obama but I'm hardly happy about what the next 4 years holds. It's said that the best the Republicans could muster was McCain although given the last 8 years of Bush that's hardly surprising. Hopefully the Democratic congress will have some principles but the last 2 years of their rule doesn't exactly inspire confidence. Obama, I'm convinced, is at least playing with some composure and thought. The Democratic Congress is anything but thoughtful and deliberative. They're about as bad, if not worse, than the Republican Congress from before.

I do believe Obama will put through tax cuts though...

[Mark D.]

The Tax Policy Center is non-partisan in name only. It is a joint venture of the Brookings Foundation and the Urban Institute, two reliably left wing think tanks.

That doesn't mean that everything they conclude is not credible, but rather that their conclusions should be compared against those of other competing organizations such as the conservative Heritage Foundation and the libertarian CATO Institute. "In a multitude of counselors, truth is made manifest".

[Clark Goble]

BTW - while it's fun to invoke FDR and his many economic mistakes I think Obama (unlike Bush) actually listens to economists. His one big weakness is he's a tad protectionist. Unfortunately so is McCain, although not as badly. Anyway, I think economists are pretty clear what FDR did wrong. I don't think you'll see Obama repeat them nor engage in the changes FDR did. For one we're not in anything like a depression. There just isn't the political will. And despite likely winning in a landslide the country is still too evenly divided. If Obama tries too much he'll end up like Clinton in '94 and I think Obama is smart enough to recognize that.

Also, let's be honest. Obama is, like Bush, going to have his hands full in international issues.

[Mark D.]

Strictly speaking Obama isn't planning to cut any tax. His so-called "tax cuts" are actually targeted government subsidies for certain favored activities. All sorts of government checks for those who pay no federal taxes at all.

This type of social engineering inevitably results in counterproductive incentives, waste and inefficiency. Take the mortage interest deduction for example. If you want people to build larger houses than they need on larger lots than they need further from the city than they need, you could hardly find a better strategy. Obama's refundable mortgage interest tax credit will make this problem worse.

I think Obama is basically a cipher. That makes his performance hard to predict. If his economic program passes, I think the next decade is more likely than not to reprise the history of the 1970s. A stagnant stock market, double digit inflation, rising interest rates, and emboldened foreign adversaries. Obama probably isn't so much the second coming of FDR, but rather more likely the second coming of LBJ.

[Dan]

What Obama proposes is not socialism. As actual socialists in America have responded, it actually is an insult to true socialism to claim Obama's plans are socialist in nature. Why can't those who do not agree with Obama retain some form of sensibility and rationality?

Stop throwing around these labels that mean only what YOU want them to mean?

I could just as easily throw around the fascist label at conservatives and it would do ABSOLUTELY NOTHING to further an actual debate on the merits of the points. You may disagree with Obama's plans, but they really are not socialist.

Frankly, if you want to talk socialism, let's talk about the state of Alaska. Talk about a socialist state! It's quite ironic, actually. See, every single person in Alaska is standing on state-based crutches, and not only that but everybody gets paid a communist-style equal amount! Nothing about it is merit based. It is solely a matter of being an Alaskan. And the conservatives of Alaska want to continue this practice of having Alaskans rely on the state for a good part of their income.

Heh.

[Dave]

Dan, Alaska's subsidies flow from the state's cut of resource revenues. It is not based on wealth and income redistribution. The bite of "spread the wealth" criticism depends on whose wealth is being spread and how much is redistributed. A little redistribution is not a bad thing, but the more benefit you try to milk from redistribution, the more damage is done to the incentives that drive the productivity of a free-market economy. Socialism kills incentives. That's why it doesn't work.

Four years from now, the campaign slogan might be, "It's the incentives, stupid."

[Tim J.]

"I can say that I was referring to the GOP-sponsored legislation in late 2000 that banned regulation on credit default swaps as being at the heart of our current financial fiasco."

From the WSJ:

"The Gramm-Leach-Bliley Act passed the Senate on a 90-8 vote, including 38 Democrats and such notable Obama supporters as Chuck Schumer, John Kerry, Chris Dodd, John Edwards, Dick Durbin, Tom Daschle -- oh, and Joe Biden. Mr. Schumer was especially fulsome in his endorsement.

As for the sins of "deregulation" more broadly, this is a political fairy tale. The least regulated of our financial institutions -- hedge funds -- have posed the least systemic risks in the current panic. The big investment banks that got into the most trouble could have made the same mortgage investments before 1999 as they did afterwards. One of their problems was that Lehman Brothers and Bear Stearns weren't diversified enough. They prospered for years through direct lending and high leverage via the likes of asset-backed securities without accepting commercial deposits. But when the panic hit, this meant they lacked an adequate capital cushion to absorb losses."

http://online.wsj.com/article/SB122282635048992995.html

And in Time:

"First, I think it's fair to say that 90% of the people who blame today's troubles on Glass-Steagall repeal have no idea what they're talking about. It's just that the whole thing has a deregulatory sound to it--and deregulation is bad."

http://time-blog.com/curious_capitalist/2008/10/forget_glasssteagall_repeal_it.html

Deregulation and the CFMA has been made out to be the boogeyman here. It's an easy, not to mention lazy, narrative to make. Republicans are conservatives. Conservatives are for a free market. A free market means no regulation. Blame Republicans!

[Tim J.]

To add, CDS's were never regulated to begin with, thus the repeal of Glass-Steagall did nothing in that regard.

In fact, the CFMA actually helped us in this crisis as it made it easier for Bank of America to buy out Merrill Lynch and other similar deals.

[Jim Cobabe]

The audience of some rally is beside the point (luckily for mccain too).

I am glad to hear that audiences at rallys are not important. But I thought I heard some concern expressed about how scary they were. Not sure why you would think this was lucky, for anyone.

Obama's plan makes sense. With Bush's policies our national debt has strongly increased, and it's very likely mccain would continue the trend.

Obama's plan is as skewed as the Bush policies, just way on the liberal side. It won't work any better to steal everything from the rich.

[Dan]

Dave,

Socialism kills incentives. That's why it doesn't work.

Name the socialist countries of the world. The countries where you see socialism at work.

[Dave]

Sweden. At least until they figured it out a few years ago and restored incentives by slashing individual tax rates.

[Clark]

Strictly speaking Obama isn't planning to cut any tax. His so-called "tax cuts" are actually targeted government subsidies for certain favored activities.

I'm not sure what you mean by the subsidy part. It is true that he gives a tax credit that will apply even if you would owe no taxes. He claims that this offsets payroll rather than income taxes though. While one can complain on this it is true that most of the people who would get a credit also do pay payroll taxes. And Obama's camp's response notes that McCain plans something very similar for his health care tax credits.

Of course neither McCain nor Obama get to pass laws. So the bigger question is what makes it through both the House and Senate.

[Clark]

Tim I do agree that a lot of rhetoric about the current situation is overly heated and usually ignorant. However I think there is a general consensus that more regulation of derivatives. Although even there one has to be careful. There are three main categories of derivatives and most people aren't making those sorts of distinctions.

Even if you think there should be more regulation of derivatives one has to be careful since some of the regulations suggested would make transactions much more expensive and cause lots of unintended consequences.

The typical problem isn't regulation but poorly thought out regulation or deregulation. What we need are well thought out but minimal rules that are then vigorously enforced. What we usually get is a stew of special interest rules thought out by a bunch of clueless politicians. (Whether during the regulation or deregulation process)

I typically favor deregulation but I think one has to admit that it has all too often been done in a less than thoughtful manner. Then recent regulation like the horrible Sarbanes Oxely do tons of stupid things that don't appear to resolve the desired problem but cause all sorts of new problems.

The problem is that we have two parties each in favor of one extreme (regulation or deregulation) but very, very few thoughtful people in either party.

[Carl]

Social programs (healthcare, welfare) and regulation do not add up to socialism. As far as I can tell, the means of production are still in the hands of the people. A bit of regulation of those hands does not make the US a socialist state, and it's not even close to being a slippery slope.

[Carl]

I meant to add that you can argue whether regulation is good or bad policy, but it's a far cry from socialism.

[Dan]

Dave,

Sweden. At least until they figured it out a few years ago and restored incentives by slashing individual tax rates.

Thank you. Now, what incentives have been destroyed in Sweden? It seems to me their economy has been doing fairly well overall. Plus Swedes have given us the Volvo, Reason (a music production program, which really really rocks!), and IKEA, among many other things, like Swedish meatballs.

Furthermore, you state that Sweden "figured it out" so to speak by slashing individual taxes. Would you say then that they are NOT a socialist nation? Or do you still see them as such? Is not your argument against socialism that it kills incentives? If Sweden slashed its taxes (to give incentives back to the people supposedly) would they no longer be considered a socialist nation in your eyes?

Any other examples?