Bill Clinton and the Facts at the DNC 2012

I did not watch Bill Clinton's speech at the 2012 DNC last night because I'm trying to catch up on a few missed episodes of "Breaking Bad." However, I've now listened to all of the address (and watched some of it) thanks to C-SPAN's complete 49 minute video:





The NY Times has the full transcript.

According to Bloomberg News, Clinton's big early applause line about the huge advantage in jobs created during Democratic versus Republican administrations is true:

since 1961, for 52 years now, the Republicans have held the White House 28 years, the Democrats, 24. In those 52 years, our private economy has produced 66 million private sector jobs.

So what’s the job score? Republicans, 24 million; Democrats, 42 (million). (Cheers, applause.)

Actually, Bloomberg didn't really find any significant factual errors in Clinton's speech. That's partly because he didn't do what many other Dems did last night. Consider Elizabeth Warren's address, as the Times reported it:

Elizabeth Warren, the Massachusetts Senate candidate, summed up Mitt Romney’s tax plans this way: 

“He wants to give tax cuts to millionaires and billionaires,” she said. “But for middle-class families who are hanging on by their fingernails? His plans will hammer them with a new tax hike of up to $2,000.” 

The Times noted that this charge "is not entirely accurate." That is odd phrasing, but easily explained. The problem is that Warren, like other Democrats, correctly calculated that the Romney tax "reforms" (including significant rate cuts and unidentified reductions in "loopholes") cannot possibly be revenue-neutral, as intended. As Clinton aptly noted on many occasions, the arithmetic just does not work.

Thus, Warren and others assume that the lost revenue would be made up primarily by closing loopholes that benefit the middle-class, such as the mortgage tax deduction or other benefits related to payment of college tuition.

The Times explains the problem with Romney's vague plans for the budget and taxes:

Many tax experts — from the left, the right and the center — do not think there is any way to do all of those things. 

When you cut tax rates that much, rich families’ tax liability falls considerably. For the tax plan to raise the same amount of money as it does now, someone would need to pay more. 

But it is not clear that Mr. Romney would raise taxes on the middle class. Instead, the plan might add to the deficit, make smaller cuts to marginal tax rates or take away preferential rates on investments and savings.

Former President Clinton avoided this problem, as Bloomberg noted, because "he showed the possible choices that Romney’s constraints would force."

It does seem a bit unfair that Democrats would be criticized for stretching the truth about Romney's tax and spending policies precisely because his plans are so slippery and unworkable. 

Incidentally, the Times also called out some Democrats for repeating the Romney line I've discussed about him allegedly liking to fire people. Fair point. Then again, the Republicans made a similar untruth the organizing theme of the convention.

Also, Democrats are essentially accused of hypocrisy for claiming that anti-terrorism initiatives will not "run afoul" of civil liberties or constitutional protections. Again, fair point. The drone war is deeply unsettling.

Unfortunately, the problem is primarily that President Obama has not reversed all of the egregious policies initiated by George W. Bush and other predecessors in the Oval office.


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Lobbying Power

I do not really study American politics and lobbying, but this tidbit from a year- old Time magazine (June 20, 2011) recently caught my attention:

...the fossil-fuel industries are lobbying Congress hard to block any legislation that would impose federal standards for renewable energy or diminish their special status. This includes $5.5 billion each year in tax breaks and discounted royalty payments as a result of $200 million in lobbying and political contributions. By contrast, the clean-energy lobby, which includes wind and solar, spent $30.7 million in 2010.

Wind energy, which currently makes up just 2.4% of the U.S. energy grid, has received some fairly significant subsidies in recent years.  Indeed, earlier in the article, the journalist pointed out that Spanish energy company "Iberdrola received over $1 billion in cash grants from the U.S. Treasury" as part of the Obama stimulus plan. 

According to the National Journal, the renewable energy industry received in total about $7 billion in "tax credits and grants for energy from solar, wind, geothermal, and ethanol." Those have now mostly expired, I think.

Unfortunately, green energy subsidies have not been popular in the new "tea party" Congress, partly as a result of the half billion lost in the Solyndra deal.  As the NY Times  reported in late January:

As of early this year, the cash-grant program, known as the 1603 program, had awarded $1.76 billion for more than 22,000 solar projects, according to the Treasury Department.

The Obama administration supported an extension of a tax credit plan that would have provided another  $6.8 billion from 2011-2015. Of course, these policies are being framed around jobs more than the environmental or geopolitical implications:

“Because of federal investments, renewable energy use — sources like wind and solar — has nearly doubled,” Mr. Obama said at a stop at Buckley Air Force Base in Aurora, Colo., where he promoted the increasing use of renewable power by the military and repeated a call for Congress to approve the tax credits. “Thousands of Americans have jobs because of those efforts.”

One-third of the growth in renewable energy in recent years has been in wind power. Solar has also grown quickly, but it is still relatively expensive in the face of cheap coal. In any case, it would appear that even modest lobbying can be effective if the audience is receptive to the requests. Perhaps the fossil fuel industry spends so much because most politicians realize that the subsidies are bad policy. 


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Cliché Time: Lies, Damn Lies & Statistics

If I had more time, I'd examine this June 25 Courier-Journal op-ed by John David Dyche in more detail. Dyche fills his paragraphs with "facts," implying that this means it is not biased or distorted in any way.

Wrong.

Here's a sample of the mediocy:

The Urban Institute-Brookings Tax Policy Center estimates that 46 percent of households will not pay federal income tax for 2011. The Heritage Foundation asserts that in 1984 only 14.8 percent of the population paid no federal income tax.

Obviously, Dyche is trying to imply that the U.S. has so expanded the social welfare state that few Americans now pay income taxes. Compared to 1984, that is obviously untrue. Rather, the problem is that since 1984, the wealthiest Americans have acquired a far greater share of the country's wealth and capture a very large portion of annual income. Just between 2002 and 2007, the wealthiest captured two-thirds of all income growth. The data over the last 30 years is particularly depressing. And since 2008, the Great Recession has further concentrated wealth and massively increased poverty at the bottom.

Moreover, the Earned Income Tax Credit explains some of the change as well.

Dyche also ignores the payroll tax.

This set of "facts" from the op-ed is also misleading:

NPR, using inflation-adjusted dollars, reports that, “In 1962, federal spending was $707 billion and accounted for 18 percent of U.S. GDP. In 2011, federal spending was $3.1 trillion and accounted for 24 percent of GDP.” As recently as 2008, total federal spending was about $2.5 trillion, and the long term, historical average of federal spending is 20 percent of GDP.

Why pick 1962 as the baseline? That was before Johnson's Great Society, so it ignores Medicare, Medicaid, etc. Does Dyche mean to suggest that America was a better place when those social welfare protections were not in place? The "long term, historical average" is fairly ridiculous since the U.S. had fairly limited federal spending until the Great Depression. The social safety net that is in place helps protect against the wild economic swings capitalism periodically suffers.

One fact Dyche did not note: federal revenues (thanks to tax cuts, as well as the recession) are now lower than they have been as a portion of GDP in over 60 years. Obviously, deficits would be much lower if taxes on the wealthy had not been repeatedly reduced. What was the top rate in 1962? Answer: over 90%!!

Incidentally, a significant portion of current spending is debt service, meaning that higher revenues over the past 30 years would have meant a lot less government spending now.


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Obama and Wall Street

Is Occupy Wall Street fueling a populist political movement on the left that can pave the way to new economic stimulus, dramatic economic reforms in the tax code, or whatever else they might seek? I'm not trying for cheap snark -- but they have been somewhat unclear about their goals.

Could the protest movement even help energize voters on the political left, in the same way the tea party did on the right in 2010, and thus help Barack Obama and other Democrats find victory in November 2012?

Or, as my Duck of Minerva colleague Megan MacKenzie argued today, should the White House be ashamed for ignoring (and thereby "insulting") the anti-Wall Street populism for the past 10 days?

I have to disagree with Megan on this one.

Sunday, Obama blasted Bank of America for its $5 fee on debit card users. "You don’t have some inherent right just to, you know, get a certain amount of profit, if your customers are being mistreated,” he said. Later, he added, “this is exactly the sort of stuff that folks are frustrated by.” Was that a nod to the protesters? It sure sounds like they are on the same side.

The National Journal today criticized the President for his overt "tax the rich" populism -- an approach some of his advisors apparently think will fail in key swing states. Steve Benen dismissed that take, however.

A month ago, independents sided with the GOP by a five-point margin on creating jobs, but now we independents siding with Obama by 13 points. That’s a pretty dramatic swing in a fairly short period of time, suggesting that those arguing that the president is driving independent voters away with his new economic message have this precisely backwards.

Google the White House website for "Wall Street" and you learn that the President or his chief spokespersons have been demonizing Wall Street in some way almost every day -- and pointing out that their reform law was aimed at tightening regulation. Here's a sample from September 30:

frankly, we had seen the rules tilted against ordinary folks in favor of those who were well connected in Washington or powerful on Wall Street.

And we argued in 2008 -- and we captured I think the imaginations of a lot of people -- that we could bring about some fundamental change if we got past some of the partisan rancor and the constant politicking that had come to characterize Washington.

Treasury Secretary Tim Geithner today emphasized "shock" that Wall Street itself has turned against President Obama -- and he expressed (somewhat incoherent) sympathy for the concerns of those who Occupy Wall Street. For the new populist Obama, it is desirable for Wall Street to hate you. "The enemy of my enemy is my friend," right?

And finally, Politico reported this additional evidence today:

“He [Obama] gets genuinely pissed off at the banks; it’s not an act,” said Jared Bernstein, a former adviser to Vice President Joe Biden, who participated in Obama’s daily economic briefing in the Oval Office for the first year of the administration.... “The angriest I ever saw the president was when we found out about those bonuses,” he said. [The banking industry] is like a Doberman he found by the side of the road, nursed back to health, only to have them jump up and bite him.

Our newly populist president has seen his poll numbers drop month-after-month. I do not know if his new economic message will reverse those trends, but it does appear as if he's rolled up his sleeves for a fight with Wall Street. And in doing that, he's with the Occupy Wall Street crowd.


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Finding truth in the debt ceiling debate

Sorry for the recent silence. I went to a wedding in Boston and then spent a little more than a week at Fenwick Island, Deleware. I attended a minor league baseball game (Delmarva Shorebirds vs. Asheville Tourists), consumed a great deal of seafood and my fair share of Dogfish 60 IPA, and swam virtually every day. It was fun and relaxing.

Today, I spent some time at the Duck of Minerva blog catching up on national politics. Josh Busby, who is very interested in climate change (and thus mentioned it in passing), wrote a very good post on the debt ceiling debate.

One commenter (Ht) reacted in a highly partisan way -- dismissing climate change science as fraudulent, calling Democrats Marxists, labeling the Obama administration as socialist, etc.

I felt compelled to reply:

This comment illustrates a frequent problem with public debate in the US. People throw around terms like "socialism," "Marxist," and "crony capitalism" (disclosure: I've used that one) without always grounding them in facts.

Dan pointed out that even the DoD accepts climate science. Almost every "real" scientist does -- certainly major national science organizations, atmospheric scientists, other specialists, etc. Still, there's some room for doubt about specifics given modeling, projections, assumptions, etc.

There's very little doubt, however, about other factual inaccuracies in this comment. Obama most certainly did not triple spending.

Tax rates are much, much lower than they have been, historically. Indeed, the Obama era not only saw the extension of the Bush tax cuts, additional tax cuts targeted at lower and middle income people were passed (payroll taxes, for instance). Tax rates were higher under almost any "ideal" past (at least since FDR). They were higher under Ike, JFK, Nixon, Reagan, etc.

Likewise, as a portion of GDP, federal spending is *not* at historic highs. There was a blip peak for TARP (passed under Bush), but the overwhelming majority of that was repaid. Also, federal spending was still relatively low compared to Depression-era initiatives. Indeed, the stimulus only temporarily increased spending and it was pretty tame for the remarkable economic crisis of 2008. Also, it included one-third tax cuts. The spending surge was temporary and mostly ended by now.

The "Marxist" regimes the US opposed during the cold war had economic and political systems not at all like the US systems. The somewhat more socialist *western* European states have historically taxed and spent at much higher levels than the US has done. And I would note that they have superior social welfare systems -- without really posing any threat to political liberty.

Now crony capitalism, particularly in the defense sector, there's a problem...

I added some relevant links, obviously, and fixed a minor error.

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Palin vs. Perry

There are already a number of Republican candidates for President, but it is difficult to take most of them very seriously. For example, Newt Gingrich's staff quit en masse this past week, basically because of his comment that Paul Ryan's Medicare plan amounted to "right wing social engineering." Then, Steven Colbert destroyed Herman Cain's idea that Congress should only pass bills limited to 3 pages in length.

Many Republicans are likely hoping that more promising candidates will declare their intentions to pursue the presidency, such as former Alaska Governor Sarah Palin or Texas Governor Rick Perry.

This weekend, I read two interesting pieces about these politicians and came away somewhat surprised about their relative strengths and weaknesses.

Joshua Green has a fairly sympathetic story about Sarah Palin in the June 2011 Atlantic Monthly. As Green notes, Palin genuinely did face down special interests during her truncated term as Alaska governor. Specifically, she confronted oil companies by proposing and getting both a new gas pipeline ("bid out" without oil company cooperation under the Alaska Gasline Inducement Act) and a new oil resource tax -- dubbed Alaska’s Clear and Equitable Share (ACES). The latter has meant billions of dollars for the Alaskan Treasury, though Sean Parnell, the Republican Governor that followed Palin, is working to gut it. Palin seemed to support the oil tax because of a populist urge -- the oil belonged to Alaskans, but they were not getting their fair share.

Green points out that Republican legislators in Alaska were opposed to Palin's ACES plan, so she had to turn to Democrats to get a bill passed. And thanks to that effort, the resulting law was more progressive than the one she originally proposed (and Republicans already opposed). It generates more revenues because of a higher base rate and accelerates that rate more quickly when oil prices surge.

That actually sounds like the achievement of a bipartisan maverick.

By contrast, Bob Moser has a devastating story about Perry in the May 30, 2011, issue of The Nation. While Texas has significant oil resources, Texas under Perry's leadership has taken the standard Republican line these days -- business deregulation, tax cuts for the wealthy (and for business), and a conservative social agenda. This has meant huge deficits followed by gutting public services -- $23 billion cut in this case, which is about a quarter of the state's spending.

Worse, in comparison to Palin, Perry's "tax swap" reform plan led directly to $5 billion in structural deficits. Moser even quotes some Republicans in Texas who think the state has gone too far. Critics have not been kind at all, referencing some very disturbing data:

It makes little sense that for all of Texas’ abundant wealth and corporate bling, the state would rank thirty-eighth in per student spending, forty-fifth in SAT scores, third in teen pregnancies and dead last in the percentage of adults with high school diplomas. “Texas is setting a new standard by setting new lows,” says East Texas blogger Susan DuQuesnay Bankston....

“If you wanted to destroy an enemy,” says former Lieutenant Governor Bill Hobby, a Democrat, “you would do exactly what the Republicans are doing to the State of Texas.”

Moser points to a Business Insider piece by Joe Wiesenthal and Gus Lubin that refers to Texas as "America's Ireland." It originally looked like neoliberal economics was going to create an impressive economic leader, but then the state's wealth collapsed.

One shouldn't read too much into this comparison of Palin and Perry. It is certainly possible that a President Perry could govern as a "uniter, not a divider." Moreover, Green's piece is called "The Tragedy of Sarah Palin" because the Fox News talking head has basically rejected all that she achieved in Alaska in order to build on the image she developed in the 2008 campaign -- as a hard-right Republican ideologue. She may occasionally refer to herself as a maverick, but she does not trump her record raising taxes or working with Democrats. Also, many other observers have noted her problems with the truth.


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Republicans and taxes

Yesterday, The Washington Post had a terrific article by Lori Montgomery about the Republican Party's anti-"tax orthodoxy." Virtually all Republicans in both the House and Senate have signed Grover Norquist's "no new taxes" pledge, an idea he apparently came up with when he was 14 years old.

The article points out that after decades of cutting taxes, debt has soared and revenues have cratered during recent economic hardship. Norquist would disagree, but there's not much fat to cut in the federal budget either -- unless politicians want to go after defense spending, middle class subsidies (mortgage interest deduction) or big government subsidies (in energy, agriculture, mining, etc.). Those benefits are favored by many of their donors and voters -- as are tax cuts on the affluent.



Nonetheless, the article includes several quotes from Republicans calling for tax increases, including former Fed chair Alan Greenspan:

Former Federal Reserve chairman Alan Greenspan joined the chorus Friday, dropping his support for the 2001 George W. Bush tax cuts. Greenspan told CNBC he’s so “scared” by the debt that he now favors a return to the higher rates of the Clinton administration.

Greenspan was part of Ayn Rand's posse, though I doubt that will influence Rand Paul's thinking much.




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Anti-Austerity

Keep August 2 in the back of your mind. That's the date the US government is expected to exceed the current debt ceiling, meaning that Congress will again have to approve either a higher limit or new spending cuts (or, ha ha ha, new revenues).

Late last year, economist and Time columnist Zachary Karabell reminded his readers of the dangers of austerity during recessionary times:

As Liaquat Ahamed charted in Lords of Finance, his Pulitzer-winning account of central bankers' policymaking before the Great Depression, the orthodoxy of austerity and budget cutting hobbled the world and led to a decade of deflation and depression.

The Tea Party has woven a story of government overreach that includes deficits, health care, job loss and general disdain for Washington and Wall Street elitism. It's a simple narrative fueled by legitimate outrage at the cozy system of influence that characterizes politics today. But as economic policy, it is the 2010 version of what the blind, rigid bankers of the 1920s and '30s offered—and it will sink an already leaking ship.

I'll be watching over the next few months to see if any DC politicians or influential TV media personalities point out the dangers of austerity during tough times.

Who will lead the anti-austerity parade?



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America's Political Corruption and Taxes

Late Friday night, Republicans and Democrats in the Congress compromised and a government shutdown was avoided. The White House, many members of the news media, and elected officials from both political parties are celebrating nearly $40 billion in spending cuts:

The agreement cuts about $38 billion in spending for the fiscal year that ends on September 30, a decrease that the parties call the biggest annual spending cut in history.

Despite the celebration of "bipartisanship" at work, many top economists say that this is bad public policy. The U.S. needs more economic stimulus rather than reduced spending. Government spending foments demand that can help spark the economy.

In Britain, ordinary people opposed to their government's spending cuts organized and conducted high profile protests to highlight the fact that deficits could be addressed by taxing corporations. Specifically, UK Uncut points out that many very profitable businesses pay little to no taxes. A couple of weeks ago, they achieved a political victory -- a public inquiry into corporate tax avoidance.

The US has not yet had many protests aimed at corporate tax evasion, but the Wisconsin rallies signal the potential for mass unrest caused by government cutbacks. And the US is a prime target for US Uncut. As their new website points out, General Electric paid $0 in taxes on over $5 billion in profits. Bank of America, Verizon, and Citigroup likewise have lower tax burdens than the average American household, get billions in refunds from the government, or pay no taxes (despite getting bailouts as well).

Fareed Zakaria explains the problem, politically:

The American tax code is a monstrosity, cumbersome and inefficient. It is 16,000 pages long and riddled with exemptions and loopholes, specific favors to special interests. As such, it represents the deep, institutionalized corruption at the heart of the American political process, in which it is now considered routine to buy a member of Congress's support for a particular, narrow provision that will be advantageous for your business.

Instead of celebrating billions in spending reductions during difficult economic times, the U.S. could be collecting revenues from businesses that pay little to nothing in taxes.

And then, the government could go after government subsidies that encourage ecologically undesirable activity -- oil, mineral rights, etc. The libertarian right agrees that "corporate welfare" is anathema; thus, this could be a great area for bipartisan cooperation.

As I've blogged before, libertarians also agree with progressives that Pentagon spending should be in for a major correction. They might not agree to buy more butter, but they certainly favor fewer guns.


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Class warfare?

In the January/February Atlantic, business journalist Chrystia Freeland wrote about the rise of the global "super-elite":

Its members are hardworking, highly educated, jet-setting meritocrats who feel they are the deserving winners of a tough, worldwide economic competition—and many of them, as a result, have an ambivalent attitude toward those of us who didn’t succeed so spectacularly. Perhaps most noteworthy, they are becoming a transglobal community of peers who have more in common with one another than with their countrymen back home. Whether they maintain primary residences in New York or Hong Kong, Moscow or Mumbai, today’s super-rich are increasingly a nation unto themselves.

Thanks to "free trade" and the information revolution, tremendous gains in productivity have mainly served to concentrate wealth -- reflected in skyrocketing executive pay and Wall Street bonuses, for example.

The rest of us have not done as well:

the vast majority of U.S. workers, however devoted and skilled at their jobs, have missed out on the windfalls of this winner-take-most economy—or worse, found their savings, employers, or professions ravaged by the same forces that have enriched the plutocratic elite. The result of these divergent trends is a jaw-dropping surge in U.S. income inequality. According to the economists Emmanuel Saez of Berkeley and Thomas Piketty of the Paris School of Economics, between 2002 and 2007, 65 percent of all income growth in the United States went to the top 1 percent of the population.

I've blogged before about income inequality in the US, and of course "two Americas" was a major theme of John Edwards in his campaigns for the presidency, but Freeland closes with a warning about open class warfare that few analysts have offered:

The real threat facing the super-elite, at home and abroad, isn’t modestly higher taxes, but rather the possibility that inchoate public rage could cohere into a more concrete populist agenda—that, for instance, middle-class Americans could conclude that the world economy isn’t working for them and decide that protectionism or truly punitive taxation is preferable to incremental measures such as the eventual repeal of the upper-bracket Bush tax cuts....The lesson of history is that, in the long run, super-elites have two ways to survive: by suppressing dissent or by sharing their wealth. It is obvious which of these would be the better outcome for America, and the world. Let us hope the plutocrats aren’t already too isolated to recognize this.

Maybe it's time to reread Sinclair Lewis.


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Please give

Cross-posted from Duck of Minerva today.

This year began with a human tragedy of horrific proportions -- the earthquake in Haiti. We may never know precisely how many people died, but the government in Port-au-Prince estimated 230,000 in February.

The news did not improve as the year progressed. Consider this ANI news report from Saturday about flooding in Pakistan -- and keep in mind that floodwaters have not yet receded in some areas even though the worst flooding occurred months ago:

It is estimated that the floods affected up to 20 million people, while over 750,000 homes were damaged or destroyed.

The UN had rated it as the greatest humanitarian crisis in recent history, saying that the number of people suffering from the crisis exceeded the combined total in three recent mega disasters - the 2004 Indian Ocean tsunami, the 2005 Kashmir earthquake and the 2010 Haiti earthquake.

In 2011, experts predict that thanks to La Niña, Kenya may well experience a humanitarian emergency. Zimbabwe is on the brink of disaster because of cholera, measles, and flu outbreaks.

Haiti itself is ending the year with a cholera epidemic that has infected 100,000 people and killed nearly 2200 already.

And yet, despite these truly heart-wrenching emergencies, the number of people harmed and killed in them is dwarfed by the ravages of day-to-day poverty of the type described in Paul Collier's work on the world's "bottom billion." A billion people live in abject poverty on $1 a day and roughly another billion live on $2 per day.

In the November/December Washington Monthly, Charles Kenny, a senior fellow at the Center for Global Development, explains that "complex humanitarian emergencies" like the Haitian earthquake and Pakistani floods are not, in fact, the primary source of human suffering worldwide:

[F]ocusing on war, flood, famine, and earthquakes is in itself a selection mechanism. Humanitarian emergencies are thankfully rare, concentrated, and usually short-lived events. Take Africa—often seen as the home stable for the four horsemen of the apocalypse. Less than three-tenths of a percent of the population was affected by famine in the average year between 1990 and 2005. And in 2005, only one-half of 1 percent of the population were refugees.

If tens of millions of people are in need of urgent assistance every year, this still suggests that, however telegenic are humanitarian crises, they don’t represent the biggest challenges of global poverty. More than 16 percent of children born in Africa die before their fifth birthday, for example. Around a billion people worldwide are malnourished....The considerable majority of extreme human suffering occurs outside of what is commonly recognized as a crisis situation.

Kenny explains in that article that humanitarian emergencies are often rightly followed by new emergency assistance -- even as development aid to address the endemic problem of global poverty languishes. Thanks partly to the Great Recession, government development assistance is certainly down from peak levels earlier this decade.

Americans like to consider themselves a charitable people -- particularly at this time of year. Indeed, Giving USA Foundation reports that Americans give away over $300 billion annually, which is over 2% of GDP. And it amounts to a lot of cash. Jeffrey Sachs has been saying for years that global poverty could be eradicated for about $200 to $250 billion per year.

However, close scrutiny reveals that individual charitable giving by Americans does not typically go to causes that help the global poor -- or national poor, for that matter. In the December 6 issue of The Nation, CUNY Graduate Center History Professor David Nasaw asks, "Where does this money go?"

Some to disaster relief or to feed, clothe and shelter the poor—but not very much. Former Labor Secretary Robert Reich claims that only about 10 percent of charitable giving goes to the poor and needy. A third goes to religious organizations; 13 percent to education; 7 percent to hospitals, healthcare organizations and research; 4 percent to arts and culture; 3 percent to international peace and relief efforts; 2 percent to environmental and animal-related causes.

Although it is never easy to quantify giving, closer scrutiny of individual, as opposed to foundation, funding indicates that much of it goes to causes that directly or indirectly benefit the donors. Individual donors are more likely to give to the church or synagogue they or members of their families attend, to their alma maters, their children's private schools and the museums and cultural institutions they patronize.

I am not sure of the precise NGO or IO targets for charitable giving to alleviate global poverty, but I am certain that this issue should be a higher priority for individual donors like you and me -- though Nasaw points out that the 3.1% of Americans earning $200,000 or more annually (or who hold assets above $1 million) give about 70% of the $300 billion US total.

I guess that means we need to convince affluent people to be less selfish in their annual giving.

One last note. Nasaw points out that thanks to the US tax code, "every $100 donated to charity by a high-income person means $35 less to the Treasury." He is not trying to sound like a Grinch (or perhaps a Scrooge), but if affluent people could not deduct their private donations, the US Treasury would have nearly $75 billion potentially to use in the public interest.

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Nostalgia for Republican Economics?

When George W. Bush inherited the White House in January 2001, the nation's unemployment rate was 4.2%. Eight years later, his administration's assortment of economic policies managed to turn that into 8%.**

That's an increase of 90% -- not quite a doubling.

Unfortunately, due to the Great Recession that began in 2008, unemployment levels have continued to increase during the Obama admininistration -- up now to 9.6% in September (the latest month with complete data). That's an increase of 20%.

It's bad, but it's dumb to blame Democrats exclusively -- especially since Republicans limited the stimulus, demanded much of it in the form of tax cuts, and won't agree to fund infrastructure projects and other spending at the level that helped the US exit the Great Depression.

Much of the debate in the 2010 midterm election is about government's role in the economy, but I assure all readers that this would simply be little more than background noise if unemployment was closer to 6 or 7%.

Incidentally, with a little help from Google, you can easily find wild (tea party) claims that the Obama administration has "quadrupled the national debt."

The U.S. government debt was $5.73 trillion on Bush's January 20, 2001, inauguration day. By the start of Obama's presidency on January 20, 2009, it stood at $10.63 trillion. Bush's tax cuts and the unfunded wars in Iraq and Afghanistan nearly doubled the federal debt in 8 years. Specifically, it was an increase of 85.6%.

The current U.S. government debt on October 23, 2010, stands at $13.67 trillion. That's an increase of 28.6% -- largely because the Bush tax cuts do not expire until January 1, 2011, and the wars remain unfunded.

The tea party's claim seems to be based on CBO estimates from March 2009 of future deficit spending forecast through 2019. The latest projections are not as bleak and are quite volatile, depending upon assumptions about economic growth, tax revenues (will those Bush cuts expire or not? -- it's a $700 billion question over a decade), etc.

In a nutshell, Republicans are poised to retake the House and perhaps the Senate because their noisiest loyalists have convinced too many members of the media and electorate that the Obama administration is somehow to blame for what they label unprecedented government spending, borrowing, and intervention into the economy.


** New presidents assume office on January 20, so it makes sense to average the monthly data for January/February as I've done here.

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Tea Party vs. The Facts

For weeks, I've meant to link to Bruce Bartlett's Forbes piece on the beliefs of the tea party participants. Bartlett was last seen on this blog more than 4 years ago as a conservative critic of Bush's policies. Bartlett was a domestic policy aide to Ronald Reagan and is something of a deficit hawk.

However, despite apparent shared ideals, Bartlett cannot abide the tea party movement. He reports the results of a survey of tea party members revealing their poor grasp of basic tax and spend issues:

Tea Partyers were asked how much the federal government gets in taxes as a percentage of the gross domestic product. According to Congressional Budget Office data, acceptable answers would be 6.4%, which is the percentage for federal income taxes; 12.7%, which would be for both income taxes and Social Security payroll taxes; or 14.8%, which would represent all federal taxes as a share of GDP in 2009...

Tuesday's Tea Party crowd, however, thought that federal taxes were almost three times as high as they actually are. The average response was 42% of GDP and the median 40%. The highest figure recorded in all of American history was half those figures: 20.9% at the peak of World War II in 1944.

There's a lot more like that. In fact, the group members being off by a factor of 3 was actually low compared to another data point:

To follow up, Tea Partyers were asked how much they think a typical family making $50,000 per year pays in federal income taxes. The average response was $12,710, the median $10,000. In percentage terms this means a tax burden of between 20% and 25% of income...

According to calculations by the Joint Committee on Taxation, a congressional committee, tax filers with adjusted gross incomes between $40,000 and $50,000 have an average federal income tax burden of just 1.7%. Those with adjusted gross incomes between $50,000 and $75,000 have an average burden of 4.2%.

Even if the respondent was assuming no exemptions, itemized deductions, or other reductions in tax burden, the Tea Party respondents were still significantly off the mark.

a single person with $50,000 in taxable income last year would owe $8,694 in federal income taxes, and a married couple filing jointly would owe $6,669.

Read the entire piece as Bartlett provides a lot of specific detail to debunk the mythical views held by the tea party members.

This is a pretty important fact they seem to have missed: "federal taxes are very considerably lower by every measure since Obama became president." About 40% of the stimulus package was just tax cuts, mostly for 2010.

And this: "No taxpayer anywhere in the country had his or her taxes increased as a consequence of Obama's policies."

Bartlett speculates that anger about the deficit gets mistranslated to anger about taxes. Frankly, I suspect the tea party concerns about the deficit reflect a complete failure to understand basic Keynesian economics. Government deficits are necessary during economic contraction to stimulate demand not provided in the private sector.


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