"McCain's Economist Supporters vs. Facts"

Jonah Gelbach is puzzled by "prominent, right-leaning economists" who have endorsed John McCain's economic proposals:

McCain's Economist Supporters vs. Facts, by Jonah Gelbach: Over at MarginalRevolution, Tyler Cowen has posted the text of an email he received recently. It seems a number of prominent, right-leaning economists have endorsed John McCain's stated economic proposals. The list includes many of the usuals (e.g., Becker, Hassett, McCain chief economic adviser Doug Holtz-Eakin, Taylor, Harvey Rosen, Meltzer, etc.); the list is chock full of prominent economists who have earned their academic reputations. Here's the text that Cowen excerpted in his main post (the rest of the letter is posted in his comments section):

We enthusiastically support John McCain's economic plan. It is a comprehensive, pro-growth, reform agenda. The reform focuses on the real economic problems Americans face today and will face in the future. And it builds on the core economic principles that have made America great.

His plan would control government spending by vetoing every bill with earmarks, implementing a constitutionally valid line-item veto, pausing non-military discretionary government spending programs for one year to stop their explosive growth and place accountability on federal government agencies.

I've previously discussed the enormous increase in deficits that would be caused by McCain's tax proposals, as scored by Len Burman and Greg Leiserson of the Tax Policy Center. So let me focus on the second paragraph above, which is uniformly contradicted by both facts and experience:

1. His plan would control government spending by vetoing every bill with earmarks, Well, this one has already been repudiated by....John McCain's chief economic adviser, Doug Holtz-Eakin. I've already posted on this issue:

    

   • McCain has already had to change his "definition" of those nasty earmarks he'll eliminate (somehow, without a line-item veto). According to this story by the Politico's Ben Smith, Holtz-Eakin initially claimed that there were $100 billion in earmarks in the current budget... After a former senior Democratic staffer, Scott Lilly, pointed out that many of these earmarks included stuff McCain supports, like money for Israel, Egypt and U.S. military construction, Holtz-Eakin stated that in fact the real amount of money associated with earmarks ... was only $16-18 billion.

    

2. implementing a constitutionally valid line-item veto... Clearly, this one is there to allow them to respond to criticisms ... based on the fact that under current law, the President has no capacity to pick and choose which items to fund. President McCain will have to sign or veto actual statutes, not their components. Back in the first Clinton Administration, Congress enacted and President Clinton signed the Line Item Veto Act (LIVA) to change all this. Lawsuits ensued... In Clinton v. City of New York, the Court struck down LIVA as a violation of the Constitution's Presentment clause. ... I am not a constitutional lawyer, but given my understanding of the Court's language in Justice Stevens's opinion for the Court, I find it very difficult to imagine that McCain and his lawyers (much less his economists) will be capable of "implementing a constitutionally valid line-item veto".
   
3. pausing non-military discretionary government spending programs for one year to stop their explosive growth... Gee, I hardly know where to begin on this one. First off, a one-year pause would do nothing to stop "explosive growth". It would reduce the level of spending, to be sure, but then that "explosive growth" would go right on happening. This is a mathematical principle of which each of the economist-letter's signatories no doubt is aware.

   That said, this post over at CBPP is worth a look [Update: I see that Mark Thoma posted much of the CBPP post, which I should have noted was written by Richard Kogan, back in March]. It shows the following:
   

   1. Domestic discretionary spending fell from 18.4% of all non-interest federal spending in 2001 to (an estimated) 14.7% in 2008. By comparison, defense and security spending (in which the CBPP includes DHS and Veterans' spending) rose from 21.7% to 29.2%.
   2. The real, i.e., inflation-adjusted, growth rate of domestic discretionary spending over this period was 1.3%. That's hardly an "explosive growth" path; by comparison, defense/security increased 9.1%, while SS/Medicare/Medicaid increased 3.8%.
   3. As a share of GDP, domestic discretionary spending actually fell, from 3.1% to 2.8%. That means that this category of spending has been becoming less, not more, burdensome. Defense/security rose from 3.6% to 5.6% of GDP over this period, while SS/M/M rose from 7.7% to 8.4%.

   I am frankly baffled as to what my colleagues on the right are talking about when they discuss "explosive growth" in "nonmilitary discretionary government spending". The real money on the spending side is in the military and entitlement categories. ...

   It is inconceivable that McCain will cut military spending substantially... Moreover, even after we "win" or leave Iraq, one legacy of the wars in Iraq and Afghanistan will be substantial future expenditures to care for wounded and disabled Veterans.

   Perhaps McCain does intend to broadly slash future entitlement spending; the economists' letter refers to "plans to address entitlement programs--especially Social Security, Medicare and other government health care programs". But apart from the Part D income-testing he has proposed, neither McCain nor these economists have said how or how much he will "address" entitlement programs. No one covering this race should grant a pass either to McCain or to his economist fans concerning this issue. ...

4. That leaves "place accountability on federal government agencies." Frankly, I have no idea what this means, or how it would save any money at all, much less the hundreds of billions of dollars needed to make up for McCain's extension of the Bush tax cuts.

Politics is tough arena for economists. Few of us, myself included, have ever seen a candidate whose policies all comport with our professional judgments, much less our personal preferences. I certainly won't claim that I agree with absolutely every economic policy proposal that Obama has made, and I dislike gratuitous accusations of either incompetence or dishonesty.

But it is difficult for me to believe that people who promote John McCain's economic policies on the basis of the second paragraph of the letter above can simultaneously be aware of the facts and providing honest assessments. Perhaps I am wrong. I hope so.

Comments

[cameron]

I was pretty puzzled when i saw that post over at marginalrevolution.

From what i know of McCains economic plans, they didn't sound very promising. His whole gas tax proposal alone has me scared of a McCain administration.

We have had 8 years of an administration that had overall poor economic policies. We have seen what that can do. Now i am not faulting the people who worked in the administration. I think they had some brilliant economists. The problem was a leader who did not understand or care about economic policy. For proof of this please read price of loyalty.

McCain so far has not shown himself to be much better. Obama appears in my eyes to have the best take on economic policy, although i am sure Clinton would do just fine.

I guess this letter just shows that economist are just a partisan as the rest of us. To me that is a truly worrisome thought about the profession.

[hari]

Look! It's not just *how to lie with statistics* which is galling here but the manner and wisdom with which academics are becoming pawns in the game of (gotcha) politics of US election - right now.

Tell me exactly how far you guys are contemplating going on this *gotcha* politics of socalled academics, and, in the process, ruin the global reputation (what's left after GWB) of the Super Power?

[bakho]

The best response is a counter proposal that identifies where the bodies are buried.

The ONLY politically viable budget proposals that will deliver real cost savings would be reduction in military expenditures and health care reform.

SS is its own program. Debt service costs are not going anywhere. The entire rest of the budget is less than 20% and includes all the spending that is not one of the big 4 of Health care, military, SS and Debt service. Politicians can demagogue the budget because most citizens do not understand how their money is being spent. (wildly inflated beliefs about foreign aid and wildly inflated beliefs about non-military discretionary spending as a percent of total budget). The media don't educate the citizens because the media elites don't know the facts either.

[bakho]

I think every introductory economics class should devote 1 lecture to the federal budget. That way at least some of the public can be informed and spread the word.

[David]

We need an economics debate between some economists who support Obama and some who support McCain. Assuming no TV station is desperate enough to broadcast this, it could be made available online. (heck, I'd pay to see it)

I want to give the economists who signed the letter the benefit of the doubt, but I can't see how they'd defend this in person.

[save_the_rustbelt]

The first rule of politics is WIN.

McCain understands that.

The Democrats should understand, but seem determined to self-destruct.

[anne]

"Over at MarginalRevolution, Tyler Cowen has posted the text of an email he received recently. It seems a number of prominent, right-leaning economists have endorsed John McCain's stated economic proposals. The list includes many of the usuals (e.g., Becker, Hassett, McCain chief economic adviser Doug Holtz-Eakin, Taylor, Harvey Rosen, Meltzer, etc.); the list is chock full of prominent economists who have earned their academic reputations."

OMG. The problem must surely be Hillary Clinton.

[anne]

OMG. The problem must surely be Hillary Clinton's "gas tax holiday."

[anne]

http://krugman.blogs.nytimes.com/2008/05/08/why-you-should-hate-economists/

May 8, 2008

Why You Should Hate Economists
By Paul Krugman

From the WSJ: *

"Almost half of the economists in the latest Wall Street Journal forecasting survey decided against answering a question on which presidential candidate offers the most responsible fiscal policies. However, Sen. John McCain was the clear favorite of those who answered the question."

McCain offers the most responsible fiscal policies? Notice that this wasn't about who you think will be most economically sound in general, or who you think would be better at fiscal management in practice — although even there, nothing in the Republican party's past 30 years offers any reason to believe that it would be responsible in any way shape or form. But this question was about what the candidate is offering — and McCain's proposals are, demonstrably, ** wildly irresponsible.

It's true that the WSJ seems to have surveyed business economists rather than academics. But this is still shocking.

* http://blogs.wsj.com/economics/2008/05/08/many-economists-back-mccain-but-more-are-silent/

** http://taxvox.taxpolicycenter.org/blog/_archives/2008/4/17/3644448.html

[anne]

This is a terrible lie....

"His plan would control government spending by...pausing non-military discretionary government spending programs for one year to stop their explosive growth and place accountability on federal government agencies."

http://www.epi.org/printer.cfm?id=2806&content_type=1&nice_name=webfeatures_snapshots_20071010

October 10, 2007

War Spending Placed Above Domestic Priorities
By Monique Morrissey

Non-defense discretionary spending as percent of GDP

2002 3.7 initial budget under George Bush
2003 3.9
2004 3.8
2005 3.9
2006 3.7
2007 3.6
2008 3.6

Defense discretionary spending as percent of GDP

2002 3.4 initial budget under George Bush
2003 3.7
2004 3.9
2005 4.0
2006 4.0
2007 4.0
2008 4.3

The figures actually understate the full cost of the "war on terror," because Homeland Security, State Department, and Foreign Operations funding is included in non-defense spending. Significant long-term war costs, for veterans' health care, for example, are also not included.

[anne]

Since the initial budget of George Bush in October 2001, military spending has increased as a portion of national income while social spending has decreased as a portion of national income. Social spending has actually decreased in real per capita terms, * while taxes have been cut especially for the wealthiest. Regulatory policy has slanted to business management interests.

Profits have been at record levels, profits have increased as a share of national income, corporate non-residential domestic investment has been tepid, wages and benefits have grown relatively slowly and employment growth has been slow. Income and wealth inequality has grown to historic levels.

* http://www.cbpp.org/2-20-08bud.htm

[Andrew]

Jared Bernstein notes similar worries over at Huffington Post:

"I hold in my hand one of the most important pieces of paper in America: Table T08-0071, an analysis of candidate John McCain's tax plan.

OK, it's not really in my hand because I'm typing, but I'm looking at it carefully, and you should too. It is a table constructed by the Tax Policy Center's steely-eyed tax analysts, and it reveals nothing less than McCain's secret plan to diminish the US government beyond recognition. If he gets his way, conservatives will finally be able to say they've achieved the goal set out by Grover Norquist: to get government "down to the size where we can drown it in the bathtub."

The numbers in the table show the revenue loss to the Federal government from McCain's proposed tax cuts. In the far right corner is the 10-year total: -$5.7 trillion.
[...]
For seven long years, we've tried entrusting our government to those who discredit it, defund it, and fundamentally disbelieve in its role, except when they seek a lucrative contract or a bailout. We gone down the road-and it is a crumbling road, with potholes and failing bridges -- where the solution to every problem is a tax cut, where critical agencies are staffed with cronies at best and opposition lobbyists at worst, where secrecy trumps transparency and cynicism rules, where budget resources are never available for expanding children's health care, but always there for war."

[Bob]

>> From what i know of McCains economic plans, they didn't sound very promising.

I wouldn't worry about McBush.
______________________________

Politico.com headline - GOP getting crushed in polls, key races

http://www.politico.com/news/stories/0508/10238.html

clip -

John McCain is planning to run as a different kind of Republican. But being any kind of Republican seems like some sort of death sentence these days.

In case you’ve been too consumed by the Democratic race to notice, Republicans are getting crushed in historic ways both at the polls and in the polls.

At the polls, it has been a massacre. In recent weeks, Republicans have lost a Louisiana House seat they had held for more than two decades and an Illinois House seat they had held for more than three. Internal polls show that next week they could lose a Mississippi House seat that they have held for 13 years.

In the polls, they are setting records (and not the good kind). The most recent Gallup Poll has 67 percent of voters disapproving of President Bush; those numbers are worse than Richard Nixon’s on the eve of his resignation.

A CBS News poll taken at the end of April found only 33 percent of Americans have a favorable view of the GOP — the lowest since CBS started asking the question more than two decades ago. By comparison, 52 percent of the public has a favorable view of the Democratic Party.

Things are so bad that many people don’t even want to call themselves Republicans. The Pew Research Center for the People & the Press has found the lowest percentage of self-described Republicans in 16 years of polling.

[rufus]

"From the WSJ: *

"Almost half of the economists in the latest Wall Street Journal forecasting survey decided against answering a question on which presidential candidate offers the most responsible fiscal policies. However, Sen. John McCain was the clear favorite of those who answered the question.""

A right leaning publication owned by News Corp (aka Rupert Murdoch)....I'm shocked!

What was once the quintessential unbiased media source for business persons has been procured by the 'state' for propagating the fascist doctrine of corporate socialism.

[blackswan]

"Since the initial budget of George Bush in October 2001, military spending has increased as a portion of national income while social spending has decreased as a portion of national income. Social spending has actually decreased in real per capita terms"

"Crowding out" social spending has always been the decider's philosophy. He has never been a "compassionate conservative".

[AndrewBW]

"I am frankly baffled as to what my colleagues on the right are talking about when they discuss 'explosive growth' in 'nonmilitary discretionary government spending'."

Translation: If it's more than zero it's explosive.

[Blissex]

«We gone down the road-and it is a crumbling road, with potholes and failing bridges»

Not in the nice neighbourhoods -- only in those where the exploitative parasites of the working class well deservedly live.

A very important book "The right nation" by Micklewaith mentions that in one affluent Republican suburb someone complained to the mayor that a bridge had *cobwebs* on it and immediately the mayor sent a team to clean it up.

Republicans hate federal taxes and income taxes in particular because the federal constitution has the equal protection clause. I have read many Republican proposals to defund the federal government and to cut in particular income taxes, but very very few to cut local taxes and particular local sales taxes; and the Republican proposals against property taxes only happen over wide geographical areas where there are mixed income levels.

The general idea is that there should be two americas: shiny, well maintained and prestigious areas for the deserving, highly productive wealthy, and rundown cesspits for those who are currently welfare sponges, the working class and underclass of exploitative parasites, the welfare queens and the strapping young bucks with their stolen cadillacs and t-bone steaks.

In other words as usual a plantation economy: beautiful mansions for the masters, squalid barracks for the losers, and not a penny from the hard earned wealth of the masters to go to the vicious untermensch in the squalid barracks.

The middle classes (incomes well above the median) have completely bought into this thanks to the promise of supervisor/gangmaster cottages away from the stench of the serfs, near but of course not too near to the well tended areas where the masters enjoys the fruits of their superiority.