Tuesday, July 27, 2004

The Fabled Middle

The fight for the middle is always a political goal -- even if the parties' platforms are taken straight from Marx and Moses.

Problematically, though, the Dems are putting forth nonsensical statements, the most important of which is about the economy.

They claim that the middle class (to which nearly all people except Bill Gates claim descent or inclusion in) was better off under Clinton, jobs didn't migrate, etc, etc, etc.

Their arguments are flawed on economic logic on several fronts. For brevity, I will keep the argument short [though if anyone is so inclined, we can continue in the comments section].

Empirically, the US was awash with easy cash during Clinton's time. We should have been, as we had an asset price bubble that articificially inflated GDP numbers (and hence, most parts of the economy). To an extent, you can claim that Clinton had something to do with it, in that he didn't do much to interfere with it. Yet, it is false advertising to claim credit for more than getting out of the way of something as complicated as an economic expansion.

The confluence of market factors (interest rates, technological shifts, favorable international conditions for investment, the Japanese and Chines centra' banks' need for T-Bills) and the individual actions of every worker in this country is not something that Clinton (or any President) can claim.

I'll discuss the deficit and tax numbers later. Suffice it to say that Georgie II hasn't pleased most people with his budget decisions (war aside), and I don't believe that the Left will exercise more restraint than he has.

What, then, can the fabled middle do? Believe that the Dems have lost their congenital urge to please by spending, or believe that Bush will suddenly take on the AARP and repeal the worst legislation of the past 25 years (Medicare increases worth $400B) and is serious about curbing spending?

On this answer rides the future of the economy.

1 comment:

Anonymous said...

Some part of Bush's economic problems can be traced back to Clinton's term in office -- but which part? Trying to separate out the effect of his actions from the macro-economic (and even international) environment is very difficult. The results can be measured by data collection, but how do you weigh the input effects that lead to the results? It is a good PhD dissertation topic.

Most righties want to believe that Bush's problems came from Clinton and he provided the solutions. They are not wrong, but they do not fully account for the wide range of factors that influence economic growth, either. Really accounting for economic trends is much trickier than most people realize.

That said, studies that follow such things, tend to link macro-economic stimulus at times of reduced macro-economic consumption to increased GDP (or a weakened recession). Bush did just that with his tax cut and budget priorities. But now, as the economy grows, he should reign in spending. His tax cuts are not sacrosant, but should be evaluated to see which, if any, need to be raised to generate revenue.

The fact is, the tax code's complexity makes most discussions about taxes ridiculous because no one arguing about such things has read the tax code or the detailed line items about revenue generation. If they would, they would agree on a tax structure that maximized the yield per line item without reducing the demand curve.

Think about taxes as bell curves: you want to tax at the top of the curve, where your rates, whatever they may be, generate the most revenue. You should strive to do this in a way that does not distort people's incentives to work or spend money.

Too often, unrelated ideas about justice or freedom skew the debate away from how best to tax. I don't believe that Clinton attempted to do this, nor did Bush, nor will Kerry. Because taxes occur in a rapidly shifting environment, it may be too difficult, practically, to do more than guess anyway.

That doesn't mean that we shouldn't try to change things, just be more honest about the difficulty.