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The Republican economic agenda

I'm always baffled by the reaction some of my commenters have to my interviews with Republicans: The GOP has some power now, and is likely to have a lot more after November. This blog would be terribly incomplete if I wasn't trying to get some of them on the record about what, exactly, they'd like to do.

Thursday's interview with Paul Ryan focused on what Republicans would do to turn the economy around. And the main thing Ryan talked about was policy certainty. According to him, businesses are frozen because the bills passed in the past year, such as health-care reform and financial regulation, were bad, and the bills not passed in the past year, like deficit reduction and tax reform, have left businesses confused about what'll happen in the coming years.

But his solutions didn't seem like they would increase certainty very much. He wanted to repeal and replace both the financial regulation and the health-care reform bills. "Better solutions could’ve been passed," he said. But in practice, repeal would take a long time, building something new would take a long time, passing it would take a long time, and then waiting for the regulators to do whatever they needed to do with it would take a long time. Same goes for deficit reduction and tax reform. You might be able to pass better bills, but you can't pass them quickly, and there are no assurances as to what they'll look like when you're finished. If there's uncertainty when some of the laws are certain, there'll be even more of it when they become uncertain again. Businesses can't plan based on legislation that hasn't passed.

Beyond that, his short-term ideas were to encourage bank regulators to back off a bit, which might loosen credit, and to extend the Bush tax cuts, which might have some modest stimulative impact. He also wanted to see spending caps and opposed state and local aid, both of which, in the short term, would probably reduce employment because they'd cost public-sector jobs.

This agenda doesn't look like a quick fix in an economy that's ailing now because, well, it isn't one. "Long-term solutions are better," Ryan said. "Temporary stuff doesn’t work." We can have an argument about who's got the better long-term solutions, but for now, it's worth pointing out that this is one of the central differences between Democrats and Republicans.

Democrats believe there's a lot we can do in the short term to improve the employment situation, or at least keep it from deteriorating. It requires spending, but if you give businesses a tax break for hiring, you'll encourage immediate hiring, and if you help states meet their budget needs, you'll discourage layoffs. Republicans don't believe in those policies. What they do agree on -- or at least say they agree on -- is extending Bush's tax cuts, reducing the debt and rolling back Obama's major policy accomplishments, and so those ideas have become core to their economic prescriptions, even though they don't offer any immediate economic answers, and even though there's real tension between extending tax cuts and reducing the debt.

By Ezra Klein  |  August 3, 2010; 1:43 PM ET
Categories:  2010 Midterms  
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Next: State and local relief on the right

Comments

Question for your intern:

During your interview with Rep. Paul Ryan the subject of the "carry trade" came up, which is the banks ability to borrow money from the Federal Reserve at close to 0% and then lend it back to the Treasury at a higher interest rate, thus earning a profit with virtually zero risk.

http://voices.washingtonpost.com/ezra-klein/2010/07/what_would_republicans_do_for.html

My question is how much was this worth to the banks over the last year?

Posted by: jnc4p | August 3, 2010 1:56 PM | Report abuse

@Ezra: "I'm always baffled by the reaction some of my commenters have to my interviews with Republicans: The GOP has some power now, and is likely to have a lot more after November. This blog would be terribly incomplete if I wasn't trying to get some of them on the record about what, exactly, they'd like to do."

You might also remind some of your commenters that there are plenty of blogs out there that behave as if Republicans and conservatives don't exist at all, except as dark shadows, to be preached against and castigated like a Baptist preacher talking about Satan.

However, I think it's kind of human nature. As a young liberal in the days of Reagan, I couldn't understand why the CNN anchors didn't end stories about Ronald Reagan with: "And, he's a horrible, terrible, stupid, evil old man who is going to destroy the world. Prepare for the inevitable nuclear holocaust." The only reason Mondale lost, I would think, was because the media fell down in explaining that Reagan was pure evil.

Naturally, I was, like, 16 at the time, but I still recollect those thoughts when people complain about a lack of adequate invective or dismissal in your posts.

BTW, I think your serious coverage of Ryan's proposals hi-lights the weaknesses of his plans, without resorting to the sort of propaganda or spin you're so often accused of.

Posted by: Kevin_Willis | August 3, 2010 2:26 PM | Report abuse

What makes you think that a single word of anything GOP figures tell you represents what they actually intend to do? That would be really stupid of them.

Posted by: paul314 | August 3, 2010 2:38 PM | Report abuse

First, the PPACA is a failure, not an achievement: ultimately, it may fail under its own crushing cost burden, may fail in the Courts, may fail due to targeted budget cuts, may fail due to regulatory incompetence, may fail due to regulatory inabilities, or may fail due to the apathy of its dupes coupled with the active unwillingness of its victims... but it is certain to fail. Just as Nero is remembered for fiddling while Rome burned, Obama and Pelosi will be remembered for masturbating over impractical Utopian healthcare fantasies while millions lost jobs and homes.

With that "policy certainty" in mind, it's a bit difficult to accept additional proposed solutions -- more hastily conceived, costly, and unwanted "accomplishments" -- from the same folks who considered the PPACA a good idea.

Many in Congress -- and a majority of citizens -- want "to see spending caps" and oppose "state and local aid, both of which, in the short term, would" allow taxpayers to spend their money as desired rather than in strict accordance with the demands of the Obama/Pelosi Regime. In short, the Social-Democratic Party longs to contrive experiments consuming all money available from unwilling citizens, whereas the Republican Party seeks to empower citizens and the businesses they run... or at least that is, at present, the broadly-held perception.


So, yes, there is indeed a disconnect which all agree will widen to some extent after the November elections. Going forward, the current Regime must admit its failures, must set aside the arrogance which erroneously leads it to believe it has practical solutions to problems at hand, and must earnestly attempt to find some common ground -- some path supported both by a supermajority of citizens and by the two out-of-step parties in Congress. Grandiose social plans are, at present, counterproductive: it seems prudent to limit the federal government, to focus its available energies on the achievable and the necessary, and to allow ample time for deliberation and consensus.

Posted by: rmgregory | August 3, 2010 2:45 PM | Report abuse

Ezra,
Let me try and explain this to you in a way that may be easier for you and your friends to understand. Say you were renting an apartment and wanted to redecorate your apartment and upgrade some of your appliances, but you were hesitating because the landlord was acting very erratic. He was spending large sums of money on frivolous things that were not really improving the apartment complex, like a solar powered hot water heater that made taking a hot shower on cloudy days nearly impossible, and planting trees and flowers in the yard that were not appropriate for the climate and were dying soon after planting. The landlord was threatening to raise the rent to pay for his additional spending and he also imposed many new rules on the tenants that made previously simple things such as paying the rent and taking out the trash a complex procedure.
Now if you thought that the landlord was on the verge of being fired in November, and that the new landlord had a reputation for keeping the rent low and regulations less burdensome, you would hold off on spending any money until you had some certainty on who was going to be in charge. If a new landlord would be hired in November and verbally commit to low rent and less regulations, you would open up your wallet and spend freely knowing that a reasonable adult was in charge. You would not need to wait any longer because the crazy landlord was gone and would not be coming back. That is what a Republican congress would do; reassure business leaders and consumers that days of big government were over.

Posted by: cummije5 | August 3, 2010 2:50 PM | Report abuse

If a Republican congress was so reassuring, then why did businesses stop hiring during the Bush years?

Posted by: lol-lol | August 3, 2010 2:55 PM | Report abuse

Cummile5 - Please point to proof that a GOP Congress, made up of the members currently either in the body or on the ballot, would act like reasonable adults with the purse strings. As I think Kevin has mentioned before, the last them they had the chance, they blew up the sandbox. At every turn, they increased spending without finding the money to pay for it.

An arguement could be made that with split gov't, compromises could be made. It happened in the late '90s. However, I don't think Boehner is anywhere near the heavyweight that Gingrinch was in this regard.

Posted by: chris_soule | August 3, 2010 3:04 PM | Report abuse

I have to say that the Washington Post has the most entertaining trolls. Ezra must feel blessed.

Posted by: mschol17 | August 3, 2010 3:17 PM | Report abuse

@cummije5: In what city is this apartment? Which neighborhood? And why am I renting instead of owning? Is it a nice apartment? Where did the furniture come from?

Your example of the delicate balance between government spending and corporate confidence creates more, not less, confusion. Honestly, I have no clue what you're talking about. Why is the landlord being fired in November? I'm *so, so confused.*

Posted by: andrew_graham | August 3, 2010 3:44 PM | Report abuse

Again, Ezra, if Ryan's policy proposals are worth engaging, and his motivations pure as the driven snow, why haven't other leading progressive voices failed to champion Ryan as you have? What do you know that Krugman, Digby, Reich and others do not? What pearl of wisdom about Ryan would you wish to pass along to Yglesias, who just slammed you, in the nicest possible way? Why are Ryan, Olympia Snowe and Lindsey Graham so eager to meet with you and have you spread their gospel for them?

Posted by: scarlota | August 3, 2010 3:46 PM | Report abuse

I think it is great when you have interviews with Ryan or other somewhat serious GOP pols. Keep doing it. It really brings the vapidity of their proposals into focus.

Posted by: StevenDS | August 3, 2010 5:11 PM | Report abuse

A guy like Ryan may honestly believe what he says. But frankly, with most of the GOP the strategy on the economy seems to be one of sabotage unless and until they reclaim control of all three branches of government.

Posted by: JPRS | August 3, 2010 7:05 PM | Report abuse

Enough of this nonsense. The Democrats made a step toward universal health coverage while reducing the long-term budget by 2/3rds and it may really be in balance since CBO lowballed both productivity and Obamacare savings after 20 years. If Ryan doesn't like "temporary" stuff and "long term solutions are better", what exactly and precisely is better than that? The Republicans should SAY what they are going to do better. What exactly do they intend to cut? They won't name a cut because they wouldn't get elected. They really don't intend to cut anything. they are just going to give us more long-term deficits.

Posted by: Lee_A_Arnold | August 3, 2010 8:18 PM | Report abuse

"Long-term solutions are better," Ryan said. "Temporary stuff doesn’t work."

To modify something once said by a very wise man, Ryan sets himself too easy and too useless a task to tell us in a tempestuous season what to do when the oceans are once again flat.

Ryan also asserted that raising interest rates would increase investment (which was rightly ridiculed) and that we can't borrow now because the cost is too high (when its actually extremely low).

Throw in the fact that his answer to the question of "how can the government cover the rising costs of medicare?" can be summed up as to simply not pay for it, and to pay for increasingly less of it as time goes on. That is, in effect, how his voucher system would work as his plan simply involves having the vouchers grow in value at a rate less than projected Medicare expenses.

I'm sorry, but "we'll simply pay less and less of the costs as time goes on" is not an answer to "How do we cover all the costs in the future?"

If this is the best and the brightest the GOP has to offer, we're doomed if they take control of the government again.

That being said, I greatly appreciate the fact that you interviewed him. I wish more people gave time for those across the aisle to express their ideas. I'm just not very blown away by the quality of his ideas.

Posted by: nylund | August 3, 2010 8:20 PM | Report abuse

...but if you give businesses a tax break for hiring, you'll encourage immediate hiring,..."

Why would businesses hire if there's not enough demand for their products/services? We keep seeing reports that businesses are sitting on cash, rather than investing it in expanding businesses, as they don't see sales increasing. A tax break just gives businesses more cash to sit on, no?

Posted by: quickj | August 4, 2010 12:55 AM | Report abuse

I think that this writer has forgotten that Government does NOT create wealth and the idea that bailing out state governments does not help the fiscal discipline that they need to take to overcome the spending practices that they have come to enjoy in the good times. The private sector creates the wealth that the state and federal governments lap up like a kitten at the milk bowl and without the private sector, the bowl will be empty. Sure, you save teachers and DMV workers, temporarily, but in the end unless the private sector gets going the states are STILL going to have to make the difficult decisions as to what gets cut and who leaves the payroll. Sooner is better than later for those decisions, but no-one wants to irritate the progressives that are afraid if they have to cut government and nobody notices a lessening of services, it will be hard to get the large government back. And on we go for another dismal 2 years and 86 days.

Posted by: sick-of-it-in-calif | August 9, 2010 1:25 PM | Report abuse

cummije5,

Your post makes absolutely no sense. I guess you never rented. How about you come up with a more realistic hypothetical situation the next time you want to appear intelligent.

Posted by: pathfinder12 | August 9, 2010 1:28 PM | Report abuse

chris_soule, you have a good point when you say "Please point to proof that a GOP Congress, made up of the members currently either in the body or on the ballot, would act like reasonable adults with the purse strings. As I think Kevin has mentioned before, the last them they had the chance, they blew up the sandbox. At every turn, they increased spending without finding the money to pay for it."

The only thing guaranteed in life is death and taxes. The only way reasonable persons can enjoy the freedoms that our founding fathers put in the constitution is to have a split body in congress and thereby force compromise. The way it was done this last time by the Obama-ites was not a pretty picture. Yes, elections have consequences and we have seen some of them and those of us that do not like them will be hard pressed to get them changed in the future. So we move on. . . The future of this country is to slow the growth of government and the growth of unnecessary government regulations and the only way to do that is to identify and remove the pro-government expansion progressives that are in BOTH parties. Political party is only a predictor of what constitutionally guaranteed rights they want to take away from us, not a guarantee that our lives will improve. So it makes no difference if there is a D, R, I, G, or whatever by their name. Growing government is not a way to expand our economy. Government SPENDS money and does not create wealth. Private enterprise CREATES wealth that allows the people and the economy to prosper. A balance in the ideologies in congress is what the country needs to get us on the path to growth again.

Posted by: sick-of-it-in-calif | August 9, 2010 1:53 PM | Report abuse

Ezra,

Has anyone crunched the numbers of Representative Ryan's plan for fiscal austerity to determine how the national pie would be redistributed along economic lines?

The three linchpins of his plan are privitization of both SS and Medicare, the conversion from a graduated income tax to a form of national sales tax and the exemption from taxation of a whole range of, so called, deterrents to capital formation, i.e. inheritance, capital gains, etc. By my reasoning he would gut the ability of the Federal government to fund its operations from those most able to pay and shift it to those a large segment of our population whose economic house is already underwater and who lack the abililty to pay.

While some of what he says makes sense, my knowledge of how our system works says the combination of these three variables will produce a huge windfall for the top quintile of earners in our system and continued pressure on the lower and middle classes.

What is also missing from Representative Ryan's plan is any sense that spending cuts must be made across the board including what we now spend on corporate welfare which includes favorable tax treatments for businesses and a continuation of the Fed policy of making loans available to financial institutions at 0% and allowing these businesses to use this "free" money with little, if any, regulation/requirements that it be used for improving overall economic health instead of simply enhancing the profit margins of banks and investment houses.

How about assigning an intern to interview a sample of economists and get their take on what his plan would do? Let's see if those who are supposed to know these things believe Representative Ryan is, indeed, a new voice or just another empty suit attempting to package income redistribution to Republican special interests in a fancier package.

Posted by: bobfbell | August 9, 2010 2:06 PM | Report abuse

Ezra,

Has anyone crunched the numbers of Representative Ryan's plan for fiscal austerity to determine how the national pie would be redistributed along economic lines?

The three linchpins of his plan are privitization of both SS and Medicare, the conversion from a graduated income tax to a form of national sales tax and the exemption from taxation of a whole range of, so called, deterrents to capital formation, i.e. inheritance, capital gains, etc. By my reasoning he would gut the ability of the Federal government to fund its operations from those most able to pay and shift it to those a large segment of our population whose economic house is already underwater and who lack the abililty to pay.

While some of what he says makes sense, my knowledge of how our system works says the combination of these three variables will produce a huge windfall for the top quintile of earners in our system and continued pressure on the lower and middle classes.

What is also missing from Representative Ryan's plan is any sense that spending cuts must be made across the board including what we now spend on corporate welfare which includes favorable tax treatments for businesses and a continuation of the Fed policy of making loans available to financial institutions at 0% and allowing these businesses to use this "free" money with little, if any, regulation/requirements that it be used for improving overall economic health instead of simply enhancing the profit margins of banks and investment houses.

How about assigning an intern to interview a sample of economists and get their take on what his plan would do? Let's see if those who are supposed to know these things believe Representative Ryan is, indeed, a new voice or just another empty suit attempting to package income redistribution to Republican special interests in a fancier package.

Posted by: bobfbell | August 9, 2010 2:06 PM | Report abuse

The Republicans have no interest in fixing the employment problem or dealing with the issues of the day. Their focus, if they were to get into power, would be to run 24/7 investigations of the Obama investigation coupled with frequent appearances on Fox News. They do not have a plan and will not present a plan.

Posted by: ATLGuy | August 9, 2010 3:45 PM | Report abuse

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