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Welcome back. Have missed your calm words of wisdom.

(This comment has been summarized below, in my response. --Steve)

To commenter Sherwin Amiran:

Your post was way too long for this blog, so I'll paraphrase it here along with some of the links you provided. If you think my summary below is inaccurate, post a brief and concise rebuttal -- which, if brief and concise, I will post in its entirety.

My summary of your comment: "You're wrong, Steve. The Tea Party is pro growth, and has been advocating achieving a smaller ratio of debt to GDP via growing GDP." For evidence, see these links:

Juan Reynoso
http://www.patriotactionnetwork.com/profiles/blogs/want-to-solve-the-debt-crisis

Ron Johnson
http://ronjohnson.senate.gov/public/index.cfm/columns?ID=9e364fc4-514f-4942-aa21-f42e35356d27

Tom Coburn
http://tpmdc.talkingpointsmemo.com/2011/05/coburn-revenue-increases-still-must-be-part-of-debt-reduction-agreement-video.php

Pat Toomey
http://goerie.com/apps/pbcs.dll/article?AID=/20110706/OPINION08/307069991/-1/OPINION

Kudlow on Ryan
http://www.realclearpolitics.com/articles/2011/04/07/paul_ryans_growth_budget_109477.html

My response:
Most of those are giving growth a place in the debate; I already know about the few who are doing that, and I like seeing it. But most of them aren't Tea Party Republicans; they are Republicans who don't want to offend the Tea Party (eg, Coburn, Toomey, Ryan).

Kudlow and Ryan get it: control the numerator of debt/GDP, grow the denominator, and our grandkids will be just fine; in short, the big problem is not the debt per se, but the GDP. But the Tea Party disagrees: a numerator that grows at all, never mind more slowly than the denominator, is what the Tea Party is against -- and to prove their point, they have 50 solid votes in the House against raising the debt ceiling (i.e., in favor of forcing the deficit to zero overnight).

The Tea Party talks about "reducing the debt" to the near exclusion of all other remedies. Given that they are now revolting against the most recent Boehner plan's inclusion of a "vote on the BBA" because a BBA vote wouldn't go far enough, how many of those 50 solid Tea Party votes would go for a definition of "balanced budget" that allowed the debt to grow exactly as fast as the GDP? Answer: not one.

Count me with the growth advocates, and against the Tea Party (the House's "default caucus" mentioned in the article below):

GOP Elite Revolts Against Tea Party
http://www.businessinsider.com/counterrevolution-republican-elite-revolts-against-tea-party-debt-ceiling-deficit-reduction-2011-7

A poll released by NBC and The Wall Street Journal yesterday shows a growing disconnect between Tea Party Republicans, and the rest of the electorate over tax increases and whether to raise the debt ceiling.

Outside of Congress, party insiders are growing concerned by the combative stance adopted by the House of Representatives' "default caucus."

Steve,

I'm sorry if I came off as combative/rude. I didn't mean it if I did!

I think I may have a slightly different perspective. My company is located in Oak Creek, WI, in Ryan's district.

I've met with staffers from both Ryan and Johnson's offices. I've also met with people from Gov. Walker's office; and I feel like I've got a decent "read" on the local GOP, and local Tea Party.

Here in Wisconsin, the two are pretty much in sync; particularly Johnson, who is a tea partier in his own eyes. I met with his staff around the time that Ryan's budget died in the Senate. At the time, the thinking was that the debt ceiling increase had to be linked to serious small gov't, pro-growth policies.

IMHO, the Tea Party Caucus is playing bad cop, to allow Boehner to negotiate the best deal possible. My guess? Boehner's package will pass, with GOP/Tea support.

I guess we'll see, it won't be that long now before a vote. I'm not 100% happy with the Tea Party, but this is the first time I can remember (and I'm 30) that there are a significant number of pro-growth politicians in Congress pushing policies! I'm particularly happy that Ryan is Chairman of the House Budget Committee!

Cheers,

Sherwin

Sherwin,

No problem, I didn't take it as combative; just a bit too long for give-and-take on a blog. I learned that through experience.

Paul Ryan is one of my favorites (...and I do not consider him part of the Tea Party). He understands the economics, which puts him in a small minority, and he also has excellent communication skills -- which have only improved since I mentioned him two years ago in the end note of this article:
http://tinyurl.com/3ktj9vm

The Tea Party mantra against "spending" and "big government" is an ominous deja vu for me. Takes me back to 1994 or so, when that same message won the debate, and the Democrats obliged; our politicians made government "smaller" by cutting national security "spending" to its lowest share of GDP since pre-WW2. I explained my problem with the oversimplified rhetoric a while back, in this article:
http://tinyurl.com/3jzcsxl

FYI, I used to pick on the Concord Coalition regarding the subject of debt and spending. For example, see this article:
http://tinyurl.com/b7cc8q

But I haven't heard anything about Concord for quite a while. I'm starting to wonder if they suffered a mass defection of members to the Tea Party.

Please send me an email so I have your address. There's more to say offline. And thanks for submitting your comments.

Glad to see you're back Steve, especially now that the debt debate is coming to a head in Washington. I was wondering if you have noticed an uptick in "debt as percentage of GDP" appearing in arguments as I have. Sure, there's the normal amount of demagoguery, but if anything positive has come from the huge upswing in debt we've experience over the last couple years, it may be that more people are phrasing the problem with a more appropriate comparison to the economy.

The other argument that has grown on me in your absence is that government spending displaces private sector spending and investment, so increasing government expenditures in an economic downturn is almost always counter-productive. I couldn't remember your position on this issue, but I seem to recall you being OK with the additional spending as long as debt/GDP did not get enormously high. Maybe, as with most things, it was a matter of scale.

Word in the last hour is the Boehner plan is likely to pass; great news.

Hi Mike,

Yes, I see debt/GDP being discussed more frequently, and that's a big important step away from the moronic "debt clock" mentality.

Regarding government spending, keep in mind that defense, justice, and much infrastructure belong solely with the government -- but in other categories, the private sector almost certainly spends more efficiently.

Glad to see you back!

I've been trying to share the wisdom about your "Times Interest Taxed or TIE" with people. So many do ot fundamentally understand it.

Great to have you back, we need you.

Today's GDP report was incredibly depressing. It's a scandal the Federal Reserve hasn't eased more. If only they knew what we know now, (weak GDP, weak employment, lower inflation expectations) they wouldn't have ended QE2 prematurely.

I agree with your post. But how do we get the growth? I think the Tea Party rejects the theory that the growth can be achieved with 1.5 trillion dollar deficits in a period of weak growth. We already had a stimulus that was supposed to target shovel-ready jobs, infrastructure. As it turns out it was just a payoff to friends of the powerful. Apparently, our infrastructure is no better off then before the stimulus.

The real solution is getting government out of the way. One way to do that is to limit the amount of other peoples money they spend.

Was scanning the CIA World Fact Book last night to compare the AAA rated Country's Public Debt/GNP ratios, in addition to looking at the other economic growth indicators.

Seems all of them have higher debt ratios than USA, except China and India (not surprising) as their denominators are growing quickly.

As I understand it, the concern is the dramatic increase in our ratio over last 5 years. So with a combination of growing the GNP and reducing the size of government we could reduce or maintain the ratio.

On growth, most of the large GNP Countries have very low growth rates in the last couple of years, except for you know who.

I do subscribe to the Creative Destructive model and I believe the USA is still the best innovator for creating products. But here is the catch. A lion's share of our workforce still need jobs in traditional product build sectors.

I do support global markets. I understand the need for corporations to seek profits by outsourcing manufacturing to low cost labor markets, but here we are. Some will say its a transition.

But what is the growth plan when you have a huge burden of entitlements, 50% of the population paying near zero tax and a large number of displaced aging workers, who are not capable of relearning high intellect skill sets.

Is it time to rebuild modern manufacturing plants in the USA?

Wages and inflation in China are approaching 10% this year and although the government there is trying to cool off their growth, it won't be long before the attractive labor rates shrink.

Anyway, I am hoping that the USA takes another look at reclaiming some new production manufacturing within our borders, as we need a balance of jobs directly mirroring our work force.

btw. A little of topic, but why do
mega corporations like GE and Exxon, who yes, do their part by creating markets, products and employment, not pay any tax. We need everyone, individual and corporation to chip in and pay something. But to pay nothing? while our debt is rising out of control, I have to shake my head.

Are corporations and investment bankers beyond national borders? Perhaps its their mission to enslave all economies into a never cycle of debt repayment.

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