Winning Progressive

(By the Pragmatic Pundit)

More than 200,000 people have signed a petition asking President Obama to nominate Nobel Prize-winning economist and New York Times columnist Paul Krugman to replace outgoing Treasury Secretary Tim Geithner.

The movement to draft Paul Krugman is a grassroots ambition started by actor Danny Glover of “Lethal Weapon” and “Color Purple” fame.  Glover also has a long history as a political activist, lending his influence to everything from unions to AIDS to poverty.  A member of the Center for Economic and Policy Research , he initiated the petition, with the following statement:

“We just had an election in which both candidates for president were talking about how we need to create jobs.  But now that the election is over, all we are hearing about is how we are going to cut the budget. That’s not going to create jobs… if anything it will create more unemployment.

“We need a Treasury Secretary who understands this, who understands that Wall Street — not the government — caused the Great Recession and needs to be reined in, that austerity in a weak economy doesn’t work — in the U.S. or around the world.  Paul Krugman understands all this and he would be a great pick for Treasury Secretary.”

It’s true.  Unlike most economist, who focus on Wall Street, he approaches solutions to the economic crisis with an eye on best practices for the middle class and poor.  He favors policies that create jobs and opposes cuts in Social Security and Medicare benefits.

According to economist Mark Weisbrot,

“Never before has the public weighed in on who should be Secretary of the Treasury of the United States…This is historically unprecedented.”

The petition, launched through SignOn.org , a site affiliated with MoveOn.org., reads:

We urge you to nominate Paul Krugman for Treasury Secretary. Krugman will protect Social Security and Medicare from benefit cuts, promote policies to create jobs, and help defeat the austerity dogma in Washington and around the world.

If you’re not familiar with Paul Krugman, you can learn about him here and here and here.

If you like the idea of Paul Krugman as the Secretary of the Treasury, you can sign the petition here.

(By Josh Marks, cross-posted at Green Forward)

Right now the disconnect between Washington’s political-media class and the American people is astounding. Somehow in the midst of this economic catastrophe, the conversation steered away from fiscal stimulus and job creation to deficits and spending cuts. Meanwhile, millions of unemployed and underemployed Americans continue struggling to make ends meet.

Along comes Nobel Prize-winning economist and New York Times columnist Paul Krugman with his new book “End This Depression Now!”. Since 2008, Krugman (and a few other courageous individuals like former Obama economic adviser Christina Romer and economist Joseph Stiglitz) has been a voice in the wilderness calling for bigger and bolder government intervention to stimulate job growth while political leaders on both sides of the Atlantic fail to meet the challenge of this economic crisis with timid half measures and awful austerity. In America, the Republican Party is ruled by anti-government hysteria and free-market fundamentalism.

Krugman is a disciple of 20th century British economist John Maynard Keynes, who advocated against austerity measures and for public spending to tackle unemployment during an economic downturn. Keynes’ magnum opus was “The General Theory of Employment, Interest and Money” and his ideas came to a successful realization during World War II when the U.S. government borrowed money and started massive wartime spending that eliminated unemployment and brought the economy roaring back.

WWII is what plowed America out of the Great Depression and shut up the deficit hawks of the time, the Hooverites who feared government intervention and put their faith in private industry to solve the Great Depression. No one wants another war, so Krugman often jokes that we need a fake alien invasion to rally the public behind more fiscal stimulus (although Krugman glaringly omits climate change and global warming as the very real threat that could be used to justify expansionary fiscal policy).

Krugman is critical of American and European leaders for failing to learn the lessons of the Great Depression. Of course Republican free market radicals like Alan Greenspan are hammered for deregulating Wall Street to the point where the bankers brought down the entire global economy. But also Ben Bernanke is singled out for not being forceful and creative enough at the Federal Reserve. And Krugman criticizes the American Recovery and Reinvestment Act of 2009 for not being big enough and not making a large dent in unemployment. He argues this made it harder to pass a second stimulus package because Republicans would wrongly argue that public spending doesn’t work. And President Obama is criticized for at times going along with the Republican narrative that deficits and spending cuts must be dealt with now, even though there is no evidence that approach works. In fact, spending cuts can actually prolong the recession and even potentially create a second recession.

But Krugman argues that there are simple solutions to these problems, and that if the right policies are put in place, unemployment could be significantly reduced in less than two years.

The first solution is a federal aid package to states and localities so they can start hiring back teachers, firefighters and other public employees. Krugman writes that with federal aid to reverse budget cuts, state and local governments could be spending $300 billion a year that would create more than a million direct jobs and possibly up to three million jobs when indirect effects are taken into account.

Upgrading the nation’s crumbling infrastructure is another area that could create millions of jobs. There are many delayed or canceled projects that could be restarted with fiscal stimulus — roads, bridges, rail, airports, water pipes, broadband cables and more. And of course if we are capable of still thinking big, there are visionary projects like clean energy, the smart grid and high-speed rail that could transform our inefficient passenger rail system into the best in the world (the Recovery Act committed $8 billion to high-speed rail, but more federal money is needed).

Other solutions include environmental regulations boosting the renewable energy sector and incentivizing energy efficiency upgrades; Bernanke’s Fed having “Rooseveltian resolve to do whatever is necessary” by being “aggressive and experimental”; fully addressing the housing crisis with robust debt relief for homeowners, “a program of mass refinancing”; and taking a tougher stance on China and other currency manipulators.

But what about the political will? It isn’t there right now, but can it be? Krugman devotes the last chapter to this subject. And he has some timely advice for President Obama as he enters a tough reelection fight:

“The experience of Obama’s first term suggests that not talking about jobs simply because you don’t think you can pass job-creation legislation doesn’t work even as a political strategy. On the other hand, hammering on the need for job creation can be good politics, and it can put enough pressure on the other side to bring about better policy too. Or to put it more simply, there is no reason not to tell the truth about this depression.”

(By NCrissie B)

So I knew the would-be third party Americans Elect had been cast into Pundit Purgatory when pundits began referring to other pundits who supported Americans Elect as “Very Serious Men” and suggesting those pundits file to run on a “Very Serious Ticket.”

The underlying story is that “no candidate has reached the national support threshold required to enter the ‘Americans Elect Online Convention’ this June,” despite the fact that AE qualified for the ballot in 27 states and had a bankroll over $20 million. The party rules required only that candidates draw 1000 online votes in at least 10 states. No one met that bar, and none of the hoped-for big names – Jon Huntsman, Olympia Snowe, Joe Lieberman, Mike Bloomberg, Lamar Alexander, etc. – wanted to run on the AE ticket.

The deeper story is the Myth of the Missing Political Center, as the New York Times‘ Paul Krugman wrote yesterday:

So why Americans Elect? Because there exists in America a small class of professional centrists, whose stock in trade is denouncing the extremists in both parties and calling for a middle ground. And this class cannot, as a professional matter, admit that there already is a centrist party in America, the Democrats – that the extremism they decry is all coming from one side of the political fence. Because if they admitted that, they’d just be moderate Democrats, with no holier-than-thou pedestal to stand on.

The Myth of the Missing Political Center is premised on the Myth of the Socialist Democratic Party. That latter myth, pushed by Republicans, insists that President Obama and today’s Democratic Party are – in Mitt Romney’s words – like “Old-school liberals [who] saw a problem and thought a government-run program was the answer. Obamacare is the fulfillment of their dreams.”

Except that the Affordable Care Act is based on private insurance, the same kind of program Romney ushered in as Governor of Massachusetts and in 2009 boasted “could help Washington find [a health care solution].” In fact, the ACA is almost identical to a 1993 proposal by Republican Sen. Lincoln Chafee.

Indeed on issue after issue, President Obama and the Democratic Party have favored market-based economic solutions, for which they have drawn criticism from actual socialists. Meanwhile, Republicans extol ‘free markets’ while at the same time saying “Let the private sector determine the winners and losers, and then – when somebody is successful – then you give them the subsidies and the tax credit.” Whatever ‘the American center’ might be, it’s not about “coddling the super-rich.”

Yes, Americans are concerned about federal taxes, federal spending, and the federal deficit. So are Democrats, and in fact taxes, spending, and the deficit – relative to Gross Domestic Product – have all been cut under President Obama:

In fact, Democrats’ claiming the political center has driven Republicans off the right edge:

The GOP has become an insurgent outlier in American politics. It is ideologically extreme; scornful of compromise; unmoved by conventional understanding of facts, evidence and science; and dismissive of the legitimacy of its political opposition.

When one party moves this far from the mainstream, it makes it nearly impossible for the political system to deal constructively with the country’s challenges.

“Both sides do it” or “There is plenty of blame to go around” are the traditional refuges for an American news media intent on proving its lack of bias, while political scientists prefer generality and neutrality when discussing partisan polarization. Many self-styled bipartisan groups, in their search for common ground, propose solutions that move both sides to the center, a strategy that is simply untenable when one side is so far out of reach.

Americans Elect failed because its core premise is the Myth of the Missing Political Center. The U.S. already has a centrist party. As Dr. Krugman concluded:

The large number of people who believe in all the good stuff the centrists claim to favor are, you know, going to vote for Obama.

(Crossposted from Blogistan Polytechnic Institute (BPICampus.com))

(By NCrissie B)

Nobel Laureate Paul Krugman often describes the federal government as “an insurance company with an army,” explaining:

The vast bulk of its spending goes to the big five: Social Security, Medicare, Medicaid, defense, and interest on the debt.
[...]
And if you want smaller government, either you’re talking about cuts in the big five, or you have no idea what you’re talking about.

That’s an accurate description of the federal budget. At a deeper level, it’s also a good shorthand description of what progressives see as the essence of civil society. At the federal, state, and local levels, progressives envision government as “an insurance company with legal authority.” Aside from maintaining public safety and resolving disputes through law, we see government (often working through private actors) enabling us to pool assets and pool risks so that together we can do what few if any of us could afford to do on our own. We pay ‘premiums’ in taxes or fees, and expect to receive commonly-defined ‘benefits’ in infrastructure, education, health care, and retirement. If your ‘premiums’ don’t cover the ‘benefits’ you need, the loss is made up by those whose ‘premiums’ exceeded the costs of their ‘benefits.’

But there is another perspective on government. Call it “a bank with an army” at the federal level or, more broadly, “a bank with legal authority.” In this view, again aside from public safety and dispute resolution, government (or the private actors it supports) should enable us to hold assets and save for expected and unexpected risks. But this is ‘banking,’ not ‘insurance.’ The risks remain individual, and no one should expect to ‘withdraw’ more from government (or private actors supported by government) than he or she has individually ‘deposited.’ If you didn’t ‘deposit’ enough for pay for a risk, the loss is on you.

Insurance vs. banking in health care

That distinction between insurance and banking – pooled assets and pool risks vs. held assets and individualized risks – is the key difference between the Democratic and Republican views on health care.

While Democrats debated whether health care reform should mean government providing insurance directly (single-payer or public option) or through private actors (premium support for and better regulation of private insurance), we agreed that health care should be a pooled risk. A major illness or injury costs more than most of us can afford on our own, as proved in the American Journal of Medicine study finding that health care costs were the leading cause of bankruptcy in 2007. And while many Democrats were disappointed that the Affordable Care Act works mostly through private actors, most of us were (or should have been) pleased that the ACA treats health care as a pooled risk … as insurance rather than banking.

To call the ACA a “Republican bill” because it mirrors ideas proposed by Republicans in the 1990s is to miss how much the Republican Party has changed since then. By 2009, Republicans were advocating health savings accounts as the primary way to pay for health care:

Money kept in HSAs can be used for health care in later years, or for anything in retirement. So patients are effectively using their own money for non-catastrophic care. That provides powerful incentives to avoid overly costly or unnecessary care and to look for doctors and hospitals that can provide quality care at lower cost, creating real market competition to reduce costs.

The Republican House alternative would allow consumers to use funds saved in HSAs to pay for the catastrophic insurance covering costs above the deductible. Broadly expanding HSAs across the entire health system, including Medicare and Medicaid, would essentially solve the health cost problem.

This is the ‘banking’ model of health care, based on the Randian premise that health care is not a right. In this view, health care is a commodity or service just like food or haircuts. If you need it, you should save for it, or borrow for it. If you need it and can’t save or borrow enough, the loss is on you.

Whatever Republicans may have proposed in the 1990s, by 2009 the Affordable Care Act was not a “Republican plan.” It was a Democratic plan that pooled rather than individualized risk.

Similarly, Rep. Paul Ryan’s plan to ‘reform’ Medicare would change it from a defined-benefit plan to a defined-contribution plan. Again, this individualizes risks. If the government’s defined contributions are not enough to cover the cost of seniors’ insurance or care, the loss would be on them.

Insurance vs. banking in retirement

Republicans also advocated policies that encouraged businesses to switch from defined-benefit pension plans to defined-contribution 401(k)s, and long for a similar ‘reform’ for Social Security. The difference is, again, between insurance and banking.

In a defined-benefit plan – the insurance model – the government or employers pool assets and pool risks. When the economy is strong, workers’ contributions and pooled interest accrue faster than retirees’ benefits and the pension fund balance grows. When the economy is weak, the pension fund balance shrinks. Regardless, retirees get their defined benefits.

In a defined-contribution plan – the banking model – the government or employers hold assets and individualize risks. Workers ‘deposit’ their individual contributions and accrue individual returns. If the investment market is strong, if the portfolio is well-managed, and if a worker can afford to contribute enough during his/her working years, he/she will ‘withdraw’ a good retirement check. But as millions learned during the 2008 market collapse, the market is not always strong. And if the market is weak, if a portfolio is poorly-managed, or workers can’t afford to contribute enough during their working years … again, the loss is on them.

Those who say “both parties are the same” because President Obama and Democrats in Congress propose changes to health and retirement premiums or benefits are missing the forest for the trees. Democrats remain committed to health care and Social Security as insurance programs, with pooled assets and pooled risks.

Republicans want health care and Social Security to operate as banking programs, with held assets and individualized risks. That’s an entirely different, far more perilous forest.

(Crossposted from Blogistan Polytechnic Institute (BPICampus.com))

In his recent New York Times column titled Things to Tax, Paul Krugman sensibly argues that an increased overall taxes must be a key component to any plan to deal with present and long term deficit issues.  Professor Krugman identifies two areas where taxes should be raised.  The first is through creation of a financial transaction tax, or Tobin tax, which we have previously recommended here at Winning Progressive, both because it would help raise revenues and because it would help reduce the speculative gambling that has overtaken far too much of Wall Street.

The second area identified by Professor Krugman for raising additional revenue is restoring higher taxes for the wealthiest Americans.  As Krugman notes:

The I.R.S. reports that in 2007, that is, before the economic crisis, the top 0.1 percent of taxpayers — roughly speaking, people with annual incomes over $2 million — had a combined income of more than a trillion dollars. That’s a lot of money, and it wouldn’t be hard to devise taxes that would raise a significant amount of revenue from those super-high-income individuals.

One area where we should be looking for additional revenue is by restoring the estate tax to at least its 2001 level.  The estate tax is a tax on the transfer of wealth at one’s death.  In 2001, the estate tax rate was set at 55% with an exemption for the first $675,000 of the estate.  There was also a 5% surcharge on estate value over $10 million.  But then the W. Bush Administration’s 2001 tax legislation gradually lowered the estate tax rate and increased the level of the exemption.  By 2009, the estate tax rate was 45% and the first $3.5 million of the estate was exempted from any taxation.  As a result, the number of estate tax returns fell from 108,000 in 2001 to less than 34,000 in 2009.  A total of $21 billion in estate taxes were paid in 2009 on a total estates value of $194 billion, for an effective estate tax rate of 10.8%.   And then in 2010, the estate tax disappeared entirely. 

Had no action been taken the estate tax in 2011 and moving forward would have returned to the 55% tax rate from 2001 combined with the $1 million exemption level from 2002.  Instead, as part of the budget compromise in December 2010, President Obama and Congress agreed to an estate tax rate of 35%, with an exemption of $3.5 million for an individual or $5 million for a couple as an extension of the W. Bush tax revenue reductions.  While this compromise was far from ideal, it was also far better than the proposal of many Republicans to permanently eliminate the estate tax. 

With the economy continuing to struggle, cutbacks to core government programs occurring, and the deficit still running high, however, more revenue is plainly needed, and an increase in the estate tax is a good way to get some of that revenue.  The estate tax has two major things going for it: 

• Fairness: The people who pay the estate tax are paying it on money that they did nothing to earn.  If I had a rich relative who died and left me a $5 million estate, I would be extremely upset about their death, but I would not be upset that I received only $4.3 million after the estate tax, rather than $5 million.  Taxes for core government services have to come from somewhere, and the estate tax is probably the fairest place for them to come from.
• Restoring Meritocracy: The estate tax is the most progressive and meritocratic tax in the country, as it impacts only the richest 1% of estates and helps prevent the perpetuation of wealth in wealthy families from generation to generation.  Contrary to Republican myth, only approximately 80 small businesses and farm estates nationwide owed any estate taxes under the 2009 standards.  With the income gap between the richest 1% and middle class Americans tripling between 1979 and 2007, it is critical that we restore the estate tax in order to help reduce that gap.  

Fortunately, there is a proposal in Congress to restore the estate tax back to its 2001 rate and 2002 exemption level, adjusted for inflation.  In particular, Rep. Jim McDermott recently introduced the “Sensible Estate Tax Act of 2011,” which would restore the 55% marginal tax rate and $1 million exemption for individuals ($2 million for couples).  Such a proposal would generate approximately $236 billion from 2012 through 2019. 

Rep. McDermott’s estate tax legislation has been endorsed by United for a Fair Economy, Responsible Wealth, Bill Gates Sr., and many others.  Lend your voice and vote to the effort by:

* Calling your Congressperson and telling then to restore the pre-2001 estate tax levels to help reduce the deficit and protect critical government services from further cutbacks.

* Writing a letter to your local newspaper editor in support of the estate tax

Here at Winning Progressive we tend to be fans of Paul Krugman, largely because he is one of the few nationally prominent figures who consistently uses their position to promote a strongly progressive economic vision for our country. To those of us who are disheartened seeing the vast majority of the media focus almost exclusively on the interests and concerns of the wealthy, Professor Krugman’s columns and blog are often an oasis of economic common sense.

Unfortunately, Professor Krugman tends to go off track when it comes to one topic – President Obama. Too frequently, Krugman’s writings assume the worst from our President, and treat compromises that he makes to get things done as the President happily selling out progressives and adopting the conservative position. Now, strongly advocating the progressive position and offering constructive criticism when President Obama or other Democrats stray from the path are absolutely necessary elements of advancing the progressive cause. But making President Obama appear to be essentially as bad as the Republicans – as the constant attacks from Professor Krugman and too many others on the left tends to do – is both wildly inaccurate and counterproductive to the goals we are trying to achieve.

A case in point is Professor Krugman’s most recent New York Times column, Messing With Medicare. In it, Krugman discusses the importance and value of Medicare and why we should expand Medicare to everyone.  Krugman then notes the problems with two proposals floating around D.C. – raising the eligibility age for Medicare and means testing. Then, based on unsourced news reports, Krugman assumes that President Obama has offered such changes to Medicare in the debt ceiling negotiations.  After explaining why cutting Medicare would be bad politics for President Obama and the Democrats, Krugman then assumes the worst from our President, stating:

it’s possible that the reason the president is offering to undermine Medicare is that he genuinely believes that this would be a good idea. And that possibility, I have to say, is what really scares me.

The problem with this analysis is that such an unsubstantiated attack on President Obama is counter productive to the progressive movement because it feeds into the GOP’s efforts to blur the line between the two parties on every issue where the GOP position is unpopular.  Winning Progressive agrees with Professor Krugman that the politics of proposing cuts to Medicare are bad.  But that is why we progressives need to avoid falling into the trap of pretending that President Obama’s willingness to accept certain things as part of the debt ceiling negotiations somehow makes him an enemy of Medicare along the lines of the Republicans.  The simple fact is that he is not.

First, let’s all keep in mind what the GOP’s plan is – to abolish Medicare and replace it with inadequate vouchers that seniors would have to use to try to negotiate with private insurance companies. The GOP plan would increase overall health care spending and leave millions more seniors without health insurance or with highly inadequate insurance.  Yet all but five Republican House members and all but four Republican Senators voted for exactly such plan to abolish Medicare.

By contrast, President Obama has already taken a number of steps to strengthen Medicare, including putting us on track to close the prescription drug plan doughnut hole, cutting unnecessary insurance industry subsidies in the Medicare Advantage plan, proposing to allow Medicare to negotiate for lower prescription drug prices, and encouraging comparative effectiveness policies and a strengthening of the Independent Patient Advisory Board to help rationalize health care spending. Each of those things will help put Medicare on a more sustainable path so that it will be there over the long run and be less vulnerable to GOP efforts to destroy the program.

As for raising the Medicare eligibility age, that is undeniably a bad idea. But there is little evidence that the President actually pushed for that.  Instead, Professor Krugman and numerous others cite solely to unsourced reports about what the President was willing to accept as part of negotiating to save our economy from the GOP hostage takers. So, we don’t know if President Obama actually agreed to this or, if he did, what worse thing he avoided by doing so. What we do know is that our President has time and again publicly vowed to defend Medicare benefits and make sure that it is sustainable over the long run.

As for means testing, I have no problem asking the wealthy to pay somewhat higher premiums or co-pays. In fact, Medicare premiums are already means tested, as folks making more than $170k as a couple or $85k as an individual pay a bit more in premiums than do the rest of us.  So the only real objection identified by Professor Krugman to asking the wealthy to pay somehwat higher premiums or co-pays – namely, efficiency - does not fly.  Certainly, such a proposal does not constitute President Obama “offering to undermine Medicare” as Krugman fears. 

The biggest problem with these sorts of attacks from our fellow progressives is that they blur the lines between the two parties on an issue where the pro-Medicare position is clearly the more popular.  Right now, the GOP’s vote to abolish Medicare presents a clear picture for voters as to who supports Medicare and who opposes it.  But when progressives claim that President Obama is “offering to undermine Medicare” based on unsubstantiated reports about what he may have been willing to accept to save our economy from hostage takers, it inaccurately makes the public think that it does not matter in terms of Medicare whether one votes for Democrats or Republicans.   

The true enemy of Medicare is the GOP not our President. Let’s not help the GOP make it seem otherwise.