Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
Over the years, the ultimate rich man’s newspaper, the Wall Street Journal, has demonstrated or feigned total ignorance of Monetary Sovereignty, and repeatedly has spread the myth of fiscal “prudence,” aka “government finances are like personal finances.”
I say “feigned,” because the myth enables lawmakers to cut middle- and lower-income class benefits like Medicare, Medicaid, Social Security, housing, aid to the poor, etc. So one wonders whether the WSJ editors are ignorant or clever when espousing their nonsense.
In either event, WSJ now laments the petard upon which the Republicans have hung themselves. In the previous post, I discussed how the Grand Old Party had sold its soul to the Misinformed New Party, the Tea Party. Here is the WSJ take on this sad, hilarious situation:
Wall Street Journal The GOP’s Payroll Tax Fiasco
How did Republicans manage to lose the tax issue to Obama?
By Felicia Sonmez
GOP Senate leader Mitch McConnell famously said a year ago that his main task in the 112th Congress was to make sure that President Obama would not be re-elected.
That tells you all you need to know about the Tea/Republicans. Curing the recession, reducing unemployment and helping those without health insurance simply were not on the agenda. Only power mattered.
Given how he and House Speaker John Boehner have handled the payroll tax debate, we wonder if they might end up re-electing the President before the 2012 campaign even begins in earnest.
The GOP leaders have somehow managed the remarkable feat of being blamed for opposing a one-year extension of a tax holiday that they are surely going to pass. This is no easy double play.
It’s an easy double play when you try to position yourself as anti-deficit-spending and pro-voter, when 99% of the all voters rely in some way on federal deficit spending. Think of what happens when you straddle a fence and slip.
Republicans have also achieved the small miracle of letting Mr. Obama position himself as an election-year tax cutter, although he’s spent most of his Presidency promoting tax increases and he would hit the economy with one of the largest tax increases ever in 2013. This should be impossible.
Right. Obama is ignorant of economics, but the Tea/Republicans have proved even more ignorant.
House Republicans yesterday voted down the Senate’s two-month extension of the two-percentage-point payroll tax holiday to 4.2% from 6.2%. They say the short extension makes no economic sense, but then neither does a one-year extension. No employer is going to hire a worker based on such a small and temporary decrease in employment costs, as this year’s tax holiday has demonstrated. The entire exercise is political, but Republicans have thoroughly botched the politics.
WSJ misses the entire point — or points:
Point 1: The economic sense is not one of employment but of money supply. Not collecting the tax leaves more money in consumers’ pockets, which is stimulative.
Point 2: Yes, the exercise is political, but when your sole goal is to win the Presidency — and your strategy is to extend and worsen the recession, and make life as miserable as possible for voters — what can you expect but a political exercise?
Their first mistake was adopting the President’s language that he is proposing a tax cut rather than calling it a temporary tax holiday. People will understand the difference—and discount the benefit.
These are the same guys who derided Obama’s inclusion of military savings from the end of the Iraq occupation, as not really a savings but rather some sort of fakery.
Republicans also failed to put together a unified House and Senate strategy. . . . Senate Republicans say Mr. Boehner had signed off on the two-month extension, but House Members revolted over the weekend and so the Speaker flipped within 24 hours.
If Republicans didn’t want to extend the payroll tax cut on the merits, then they should have put together a strategy and the arguments for defeating it and explained why. But if they knew they would eventually pass it, as most of them surely believed, then they had one of two choices. Either pass it quickly and at least take some political credit for it.
How cynical can you get? If they wanted to call it a “temporary tax holiday,” how could they pass it? And therein lies the problem. What is the strategy that cuts benefits for the 99%, defends tax benefits for the 1%, and pretends not to do either?
Or agree on a strategy to get something in return for passing it, which would mean focusing on a couple of popular policies that would put Mr. Obama and Democrats on the political spot. They finally did that last week by attaching a provision that requires Mr. Obama to make a decision on the Keystone XL pipeline within 60 days, and the President grumbled but has agreed to sign it.
Or, heaven forbid, a strategy of reducing unemployment and stimulating the economy. But of course, that is exactly what the Tea/Republicans don’t want in advance of the 2012 elections. It would make Obama look good. Better to have us sink into depression, so you can blame Obama. To hell with human suffering. Right?
One reason for the revolt of House backbenchers is the accumulated frustration over a year of political disappointment. Their high point was the Paul Ryan budget in the spring that set the terms of debate and forced Mr. Obama to adopt at least the rhetoric of budget reform and spending cuts.
Notice how WSJ makes no mention of benefits for America. Their lament is wholly about how to fool the voters, with political tricks.
But then Messrs. Boehner and McConnell were gulled into going behind closed doors with the President, who dragged out negotiations and later emerged to sandbag them with his blame-the-GOP and soak-the-rich re-election strategy.
Hmmm . . . Eliminating the Bush tax cut for the rich is “soak-the-rich,” but eliminating the FICA tax cut for workers is a getting rid of a “temporary tax holiday”? What with causing all those federal workers to lose their jobs or accept a wage freeze, shall we call the Tea/Republican strategy “soak the poor”?
At this stage, Republicans would do best to cut their losses and find a way to extend the payroll holiday quickly. Then go home and return in January with a united House-Senate strategy that forces Democrats to make specific policy choices that highlight the differences between the parties on spending, taxes and regulation.
O.K., I get it. The FICA reduction isn’t a “temporary tax holiday” after all. It’s a political strategy. And the idea is not to benefit America, but to force Democrats to make specific policy choices (as opposed to the Republicans making specific policy choices.)
I award the WSJ two traitor images, for their incredibly cynical approach to politics. At some point, one would have hoped the phrase “good for America” or “good for the working person” or “good for taxpayers” would have found room in the article.
But, it never even occurred to them.
Rodger Malcolm Mitchell
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports