Levellers

Faith & Social Justice: In the spirit of Richard Overton and the 17th C. Levellers

News: Business Leaders Beginning to Leave GOP; Economy Does Better with Democrats

The Wall Street Journal , that major indicator of the P.O.V. of the business elites, has noted that many business leaders are deserting the Republican Party.  Every G.O.P. presidential candidate is committed to the globalized “free trade” mantra (and, yet, they warned against the menace of Hillary Clinton who is more committed to Free Trade than any other Democratic presidential candidate–indeed, her husband pushed through NAFTA and the WTO!!), but increasingly Republican voters are turning against it. (Unfortunately, whether Republican or Democrat, most U.S. voters who reject globalized Free Trade just want to replace it with old style protectionism, instead of a global Fair Trade strategy that wins for labor, the environment, small businesses, and ordinary people EVERYWHERE.  But, the dissatisfaction with the Free Trade mantra is an opportunity to educate folks about Fair Trade alternatives.)

Indeed, one of the reasons we have a better chance at getting universal health care in the U.S. now than we have since FDR tried during the New Deal, is because big businesses are starting to support it.  General Moters is now spending most of its lobbying efforts backing universal health care–because health insurance is its number one labor cost (it adds about $500 to every automobile) and one that Toyota, Hundai, Volkswagen, etc. don’t have. 

The economy does better under Democrats (see data here) in inflation, GDP growth, personal income growth, federal deficit spending (the only two presidents in recent decades to cut the red ink in D.C. were Jimmy Carter and Bill Clinton) and federal debt, and even stock market returns.  The huge economic growth of the second half of the 1990s was not caused by Ronald Reagans tax cuts (there were 2 recessions under Reagan and 1 under the first Bush) which, combined with huge military spending, led to massive federal red ink, just as today.  That, in turn, weakened the dollar’s buying power, and led to higher interest rates.  Numerous GOP pundits predicted that Clinton’s tax increases on the super wealthy would create a recession; just the opposite happened. 

Although the dot.com bubble would have burst in 2001 no matter who was in charge, Bush II managed to eliminate the federal surplus in his first year–BEFORE 9/11.  And nearly every economist agrees that his massive tax cuts during war, and spending like a compulsive gambler (except on children’s healthcare!) is simply not sustainable.  The Democrats have an opportunity to paint themselves as the party best suited for sustainable economic growth.  They could win over business leaders not by betraying labor or the environment (Wal-Mart should still be slammed), but by praising businesses that get things right and lead on labor, safety, and the environment (CostCo should be praised for getting much more right than Wal-Mart). 

So, instead of Democrats needing to choose between the DLC’s “corporate cronyism with a human face” (Clintonism) and a populism with an anti-business sound (of which I am sometimes guilty as charged), they could combine historic progressive concerns with a pitch to responsible business leaders.  According to Paul Waldman, Princeton economist Paul Krugman (my choice for Sec. of Treasury, not that anyone asked me), and even hyper-liberal columnist Michael Kinsley, this is a prime opportunity for Democrats to do just that.  Wouldn’t that be ironic?

Update: I hate long comments and many people don’t read that section, anyway, so I’ll respond to D.R. Randle here. 1) I did not call him rightwing, but claimed he was regurgitating rightwing propaganda without backing it up. That’s not ad hominem.

2) I am not an economist.  My training is in theological ethics and philosophy. But the nature of Christian ethics is to make one a generalist:  One cannot write about political ethics without studying political theory. One cannot write effectively about matters relating to war and peacemaking without studying something of military history, geo-politics, international affairs, conflict transformation and much else–sometimes even including studying weopanry and its effects–a subject I find very distasteful. If one is to weigh in on issues in bio-medical ethics, one must know something of the science in these matters.  Likewise, to write on economic ethics, one works to get a generalist’s knowledge of economics–enough to know what economists are talking about and where the disputes are.  One does not simply read off the raw data of any of these disciplines, but brings a theological perspective to these fields–because there is no value-free, neutral inquiry.  In economic matters, whenever I am out of my depth, I economists and economically-trained ethicists who know more than I do–including a couple in my church that run a socially-responsible investment firm (he has an M.Div. and an M.A. in economics; she has a Ph.D. in economics and experience in banking). But I am responsible for all mistakes and final judgments, of course. 

3) Randle claims, as do many supply-siders, that the data showing that Democratic policies have been better for the economy than Republican ones are skewed because they go back to 1960. They should begin, it is claimed, with 1982, after Ronald Reagan had been in office a year and brought in the supply side magic.  But as Michael Kinsley shows in the article I cited above: If one does that, the figures are different, but the results (economy better under Democrats) stay the same in all categories except one: on per capita income Democrats do even better compared to Republicans than if we take the longer view. 

  4) Randle addressed NOT AT ALL the data with which I began–namely that business leaders are leaving the GOP.  Even if I don’t know what I am talking about economically, as Randle claims, would he want to make the same claim of so many business leaders surveyed by the Wall Street Journal?

5)It’s not just G.M. which is pushing for universal healthcare.  So are many big businesses, now, including one I know very well: United Parcel Service.  No one can claim UPS has a bad business track record. It reported over 4 billion in profits last year. It can afford to carry its labor costs of health benefits–but it would naturally prefer not to do so.  As long as every other industrialized nation has single payer healthcare, U.S. corporations will have an expense that others don’t–and thus an uneven playing field.  They can either level that field by working for universal healthcare HERE or they can keep shipping jobs to third world countries to lower labor costs.  Which way do you think would best benefit the U.S. economy?  Some areas of economics (e.g., monetary policy) are very hard for non-experts like me to understand. But on questions like the one above–it’s not rocket science.  Average citizens CAN get it–and they can vote with that in mind.

October 10, 2007 - Posted by | economic justice

9 Comments

  1. Actually Michael, what you have done here is slightly manipulate the data (something that Krugman does rather well – btw he would make a horrid Sec. of the Tresury because he absolutely cannot rise above his political views, among other glaring problems, and he would be laughed at by the business community, even more than he is now) in order to produce a theory that is much more complex than you make it appear.

    Supply-side economics have proven to be the best strategy over and over again – just ask Alan Greenspan (and pretty much most Economy professors at Ivy League schools – the last bastion of conservativism in the Universities is found in the finance dept’s). Greenspan’s the one that convinced Clinton to go against his traditional Democratic positions and balance the budget (forcing him basically to cut spending in order to prevent run away inflation that Greenspan predicted was coming). In fact, Bob Woodward, in his book Maestro pretty much gives Greenspan (a dedicated supply-sider) credit for the economy holding up so well under Clinton. And the fact that Clinton listened to Greenspan is the one thing I respect him for. Clinton, against what he wanted to do, curbed spending, which Greenspan explained was much more important at that time than raising taxes (though Clinton didn’t raise them as much as some like Edwards want to do, or enact programs as expensive as Hillary is proposing – Greenspan has explained in detail to Clinton and others that more gov’t spending means more inflation, whether that spending is on universal health care or defense).

    But Bush inherited an economy that was overheated and beginning to turn in the business cycle. You are right that no matter who came into office the dot.com bust would have happened and so would the downturn in the business cycle (a natural process of all economies). But Bush actually managed it quite well, especially given that the top of the market occurred in March 2000 and then only a little more than a year later 9-11 occurred and then we went to war. Spending was out of control, yet people screamed for more when we bailed out Indonesia, Iran, and Katrina (even if we did it poorly) when natural disasters occurred. And Bush did a poor job of regulating that. But he did reign during the longest Bull Market in history and besides the recession he inherited, his tax cuts have not led to recession and even now may avert one with cooperation from the Fed and some more regulation of preditory lenders.

    And had all those natural disasters not occurred, the surplus would have returned due to the tax cuts much quicker (that’s why it’s called trickle-down economics, the tax cuts trickle down, stimulate the economy and eventually it’s even stronger than before – but when a sea change in economic policy comes in there will always be some problems – but we will see that more clearly if and when a Democrat becomes President). We saw the positive results of the Bush tax cuts in the last tax season when the strong economy returned the highest tax revenue ever (something under-reported by the MSM) and the deficit was cut much, much faster than had been predicted (another fact under-reported), despite massive spending on the war front (something that is quite miraculous if you really think consider the business cycle and the history of the U.S. economy). And the regulation of the money supply by the Fed, combined with continued low tax rates (especially captial gains which encourage investing and growth) may avert a recession in the long term (almost inevitable given that we have been in the longest Bull Market in history under Bush).

    I will admit that under Hilliary I can see continued economic success, if she listens to Bernanke like her husband listened to Greenspan (btw, she shouldn’t fire Paulson who is doing a terrific job as Sec. of Treasury), but were a true Democratic economic theorist like Edwards get in, there would be serious trouble. I don’t buy into Hillary’s talk of giving out free money. She’s just doing that to try to solidify a base. In the end that would be disasterous to our economy and would surely bring more inflation.

    In the end, the economic situation in the U.S. is much more complex than you have made it out to be (for example a weak dollar doesn’t always mean inflation – like right now when inflation is at less than 3% despite outside forces like the environmental movement driving up food and energy prices). But what has been proven over and over again is that supply-side economics works, even if imperfectly. And as for why businesses like General Motors might want universal health care? Let’s just say that they wouldn’t be in this place if they produced a better product that that was more technologically advanced (especially in fuel efficiency – they really shot themselves in the foot on that one). This is just another way they are trying to get the gov’t to bail them out after poor business decisions.

    Comment by D.R. Randle | October 10, 2007

  2. Well, let’s see, I linked to data and D.R. just mouthed off, recycling standard rightwing crap that objective data has consistently refuted. About par for the course.

    Comment by Michael Westmoreland-White | October 10, 2007

  3. Michael, attacking me personally doesn’t a legitimate debate make. If you want to actually discuss the data, I will. But if you are going to just attack me as a rightwinger (as if that is somehow pejorative), then why even say anything? Your statement is the kind of thing one would generally find coming from someone who cannot answer criticism. So is that it, Michael? Can you simply not come up with anything better than an ad hominem attack?

    The fact is that the “data” that you linked was from a very well known liberal website and is interpreted based on very thin criteria. One of the biggest problems in all of this data is that economic policies of Republicans had been quite fluid until Reagan, so data prior to 1980 isn’t as relevant to supply-side economic criticism. And then the data only goes to 2001. What about the Bush administration??? What about the end of the Clinton era showing a stark move to the downside? Shouldn’t the data show a bettering economy, not a worsening one if indeed Democratic economic policy is better???

    Additionally, as Greenspan has pointed out, Kenysian theory during the mid-20th century was disproven, despite attempts by folks on both sides of the aisle to implement it, thus skewing the data to some extent (prior to 1980). And, as I noted in my previous post, there are tenuating circumstances that must be taken into account as well (the dot.com boom, the cold war, natural disasters, etc) – something that this website didn’t try to do (they had a clear agenda, or can you not recognize that while you dodge rightwing “crap”?). One major problem is that they didn’t take into account the leftover problems from one administration to the next. At the end of the Carter era the inflation rate was increasing. Why wasn’t it moving down? You see every administration must deal with the last’s problems, but the website you linked didn’t take that into account. You don’t have to when you are pushing an agenda.

    For instance, again, Bob Woodward points out in his book Maestro, that one of G.H.W. Bush’s problems was that the economy was rebounding and improving, and his policies were working, but not fast enough. By the time Clinton got on the scene, things were looking up more and more and Greenspan went to him and explained what needed to be done to make it better. And to Clinton’s credit – he did it. But then, toward the end of his tenure, the business cycle changed and move toward recession. And as I said above, it is miraculous that Bush has presided over the greatest Bull Market and economic boom in our history. There should have been at least a 12-month recession. But it was much shorter than that. But again where’s that data??? How can you make conclusions like you have from incomplete data and then not even support it, but rather just throw out ad hominems?

    You see Michael, this stuff is in my wheelhouse. I am in the finance business now and I have studied economic theory for years. I have a stockbrokers license and I watch CNBC (not necessarily a rightwing thinktank, though nonetheless strong supporters of supply-side economic theory) religiously. I challenge you to watch for a week and you will see the disrespect guys like Krugman get. He is a laughing stock, especially given his 8 predictions for a recession during the entire bull market from 2002-2007. One day he will be right, but that will only be due to the law of averages, not to his so-called “expertise”. So while you accuse me of “recycling standard rightwing crap”, you might want to consider your sources and whether they too are of the partisan nature of which you so quickly accuse me of pushing.

    Comment by D.R. Randle | October 10, 2007

  4. It’s always fun to see you get frustrated enough that you have to publically address me on your blog. And your reasoning is quite interesting – “many people don’t read that section, anyway”? I’m ok with just discussing with you. I don’t see your need to broadcast that to everyone.

    But I digress. Now, as for your ad hominem. Apparently we disagree on what an ad hominem is. So let me explain. If you use “rightwing” as pejorative, which you did, then when you dismiss my comments as “rightwing crap” then you would be suggesting that I should be ignored simply because of the fact that those on the right hold to my views. That is the very definition of ad hominem.

    In point two I am glad you acknowledged you are not an economist, but I would suggest that you read further than left-wing economists like Paul Krugman, who has indeed made himself a laughing stock among economists because of his rabid predictions, none of which have come to pass. He has continued to marginalize himself because it has become obvious to all that he is damningly partisan. Might I suggest you pick up Greenspan’s new book, or read Woodward’s book on Greenspan. Greenspan’s is more technical, but Maestro is written for the lay-economist and explains a great deal about the real force in the economy – the Fed.

    In point three, you address one issue, but again avoid the more pressing one, which is that economic results lag economic policy. Thus if a policy is good, the results will be seen in the long run, even if that means during a different Presidential term. What I found most interesting about the “data” from that one site was that it was clearly interpreted only by left-wingers and there was no true peer review going on there. And most of the time, it was gathered by those who would not be considered statisticians or economists.

    As for your third point, I think you missed the point of the article, or at least combined it with other articles that don’t compliment each other. The article doesn’t really challenge supply-side economics. In fact, it doesn’t challenge Republican economic theory. The author points out that many in the business community don’t believe that this particular group of Republicans has held true to it’s basic beliefs. So what you really have to criticize is this particular Republican leadership group – not Repusblicans at large, and especially not supply side economics, the basis for Republican economic policy. And as I stated plainly above, I do agree that spending under the Bush administration has been excessive. But when it is toned down, you get what happened with the S-CHIP legislation – a bunch of partisan politics without regard for the facts, or a willingness to compromise.

    As for business leaders leaving, I find it interesting that you posted this today, just when big financial backers on Wall Street won a great victory using their dollars they placed in the hands of Democrats. See this article for an explanation of how the bill was killed by Private equity heads who know how to hedge when it comes to playing politics:

    http://www.washingtonpost.com/wp-dyn/content/article/2007/10/08/AR2007100801704_pf.html

    In the end, many of these business leaders are following the crowd. And most aren’t even being shy about their hedging, giving to both parties to ensure they get an ear no matter who wins. And you can be sure that Morgan Stanley’s CEO is heard by Hillary, especially since so much of his company’s earnings are riding on the capital gains tax. So while it is a nice article for you to use to further your agenda, much more is going on behind the scenes than you really know. Again, turn on CNBC for a day or two and you will see just how firmly planted in supply-side economics the business community really is.

    Finally, UPS is a bad example as well. Many of these businesses that want universal health care have two things in common – Unions that pressure them for health care for life and a slowing bottom lines. I wonder why UPS is pushing for universal health care while FedEx is not? Maybe that is something you should check into.

    Comment by D.R. Randle | October 11, 2007

  5. Now, I don’t really want to get into a debate about which is better, Democrats or Republicans, because that is something I’ve tried to do before, and it is really a waste of energy. So I’ll just try to address a couple of issues.

    This isn’t necessarily sound economic theory, but from my own observations, there are two facets to the economy, the government side and the business side. What I mean is that the gov’t side consists of the gov’t budget, federal surplus/deficit, gov’t spending, etc… Then there is the business side which has to do with inflation/employment, real estate market, etc…

    Bush II has been terrible on the government side, as his spending is completely out of control. I don’t agree for the most part with Clinton’s policies, but let’s face it, in general he is just a more competent administrator. However, on the business side, Bush’s and Clinton’s numbers are quite comparable. During Bush’s tenure things got off to a rocky start, but many of Bush’s numbers are comparable to Clinton’s as far as unemployment (Bush’s have actually been better I believe), and other factors. I can try to find the source link if you want. Not everything has been rosy during Bush’s term, but one man does and should only have so much control over the economy.

    And Carter may have balanced the budget, but I don’t picture his economy as rosy. I was only born then, but many people I work with talk about the double-digit inflation. That’s not a good thing.

    You mention Bush’s tax cuts, but federal revenues have grown since the cuts (unfortunately he spends it all). Now, I don’t know if that was solely due to the cuts, but it is something worth investigating. Also, mathematics and common sense dictate that there is an optimal tax rate somewhere between 0 and 100%, and I know you wouldn’t disagree of course. When I hear the Democrat talking points, they just assume that higher taxes automatically mean higher revenues, but how do they know the magic number is always higher?

    Just a few thoughts.

    Comment by Chance | October 11, 2007

  6. I’ll read this debate later. It looks worthwhile. What I’ll say right now is that Kennedy, a Democrat, cut taxes, so your data does not necessarily refute supply side. Good ideas are good ideas regardless of which party practices them

    Comment by James Pate | October 11, 2007

  7. I will also add that bad ideas are bad ideas, regardless of what party is in power. Republican Presidents are not always committed to balanced budgets and small government. Nixon gave us a lot of big government programs. There is also the Congress factor. When we say that America did well or badly under a certain party, we usually mean the President. But the Democrats often had Congress during Republican Administrations, and the Republicans had Congress during the Clinton Presidency.

    Comment by James Pate | October 11, 2007

  8. “Republican Presidents are not always committed to balanced budgets and small government.”

    Would I be wrong to say that the last three Republican presidents have all created larger gov’t/more spending/fewer balanced budgets? Would it be fairer to say that our recent Republican presidents have not been committed at all to balanced budgets and small gov’t?

    Comment by Dan Trabue | October 12, 2007

  9. That would be fair to say, on some level. Reagan chose to spend more on the military because he saw that as a priority, and the result was us winning the Cold War. Bush II is spending more on the war and homeland security, which he considers priorities. Let’s hope that this leads to our national security in the long run.

    I think that the Republican Party has been committed to fiscal discipline at times. During the Clinton Administration, both the Democratic President and the Republican Congress agreed on balancing the budget. The dispute was how much to cut.

    The reason that I trust the Republicans a little more on fiscal discipline is that the Democrats almost always propose government programs and more spending to solve America’s problems. Can you deny that? You’ve probably seen the Democratic debates–do you see what I see? And the Democrats are always criticizing Bush when he actually does step forward to cut or restrain the growth of a program (e.g., SCHIP). You may say that we got a balanced budget under Clinton. Sure, along with higher taxes. And, also, we should remember that Clinton did not get passed all of the programs that he wanted. Would we have had a balanced budget if his health care monstrosity had passed?

    Comment by James Pate | October 12, 2007


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