Top Income Tax Rates Over Time

Interesting graph (source); it's shocking to remember how high the top rates used to be.



That is all.

Best (Free) Way To Be Politically Informed

Most agree that, as citizens with the right and privilege to vote, we have an obligation to do so. But if we're going to vote, we also have an obligation to make an educated decision - who gets elected and what laws are passed really does have a big impact on the world. For most important decisions, it's clear that we should have an open mind and try to learn something from a variety of people who know a lot about the relevant subject. But unfortunately, when that important decision is "politics", way too many people just operate purely from early instincts to pledge emotional loyalty to one "tribe". Voting for a candidate or law should be less like following your favorite football team and more like buying a house or car.

But it's no secret that most news sucks. You have the cable news and talk radio pundits who are really just performing pep rallies to make their tribe feel superior to rival tribes - details, accuracy, and logic are just obstacles to that goal. And then you have the non-opinion news that is often just focusing on sensationalism (gaffes! celebrities! anything-gate/anything-geddon!), or they just provide equal helpings of BS from political operatives on both sides of the aisle. That doesn't help; the ramblings of someone whose job is to convince people to vote for their political party is not going to help gain a real understanding of an issue. However, I actually think opinion news can be great. It can give you facts plus a look at how to interpret them, but we need opinion that is honest, rational, and well informed. And we need variety so we don't live in an information bubble.

IMO, the best source of fact/evidence/expertise-based viewpoints on politics is the blogs of economists. Many leading economists have blogs, and since most political issues deal with economics, this is a really great educational resource. As Matt Yglesias said: "Of all the academic disciplines (economics is) the one that's online at the greatest volume and in the most accessible way". Blogs are free, and you can scan through entries very quickly to find the pieces that interest you - this is a much quicker way to get the kinds of information you're looking for than sitting through a whole TV show.

So seriously, if you want a free and much better way to be politically informed, get an RSS reader and subscribe to economics blogs run by people who know what they are talking about. RSS readers (or news aggregators) let you subscribe to different blogs and collect them all in one place. I use Google Reader, which I usually read on my phone.

The following are the most popular (AFAIK) economics blogs and are a good starting place with a range of views:

• Marginal Revolution: This is run by 2 moderate-libertarian economics professors from GMU. It covers a wide range of things that I think anyone can find interesting, not just the political or technical side of economics. They have also started free online economics courses at Marginal Revolution University.
• The Conscience Of A Liberal: This is Paul Krugman's blog and is really the main economics blog for understanding the liberal and Keynesian perspective. He also writes for the NYTimes, is an economics professor at Princeton, and won an economics Nobel prize. I think, of the economists who blog, he does the best job of taking complex ideas and writing them in a simple way for ignorant people like me to understand. But he can also be pretty harsh toward people who disagree with him and paint them with broad strokes.
• Greg Mankiw's Blog: Greg Mankiw is a Republican who is the chairman of economics at Harvard and was an economic adviser for Bush and Romney. In a previous survey of other economists' favorite blogs, his ranked #1.

Those blogs will also sometimes debate and reference each other, as well as other books and blogs to consider. You can check out the other blogs they reference over time to add to your RSS subscription list. Every now and then I try adding a new blog and/or removing an old one. Some other blogs I would recommend on the more liberal side are: Wonkblog, Matt Yglesias, and Brad DeLong. And on the more conservative side: Scott Sumner, Steve Landsburg, and John Taylor.

A lot of posts you'll read will be confusing, especially at first. But you can skip those, and over time you'll understand more of them. And it won't be long until you look back at cable news and wonder why you ever spent time on that crap.

TV News Sucks: Reason #4827

One of the things I said here was that the news can be a crappy place to actually learn something educational about a topic from the relevant experts. Here's one example I had in mind - a graph of guests on TV news shows from one month:



So often on those shows, they are talking about economic topics. And they always have political people offer their side's spin on the issue. But that doesn't help us become better informed/educated on the topic. We just become experts on political BS. I also saw this today:

In Four Years, Sunday Shows Have Not Quoted A Single Scientist On Climate Change. Of those who were asked about climate change on the Sunday shows, 54 percent were media figures, 31 percent were politicians and not one was a scientist or climate expert.

Is Another Recession Coming?

From here: "The federal deficit has never fallen as fast as it's falling now without a coincident recession."

Why would that be? Take the case of a bunch of government employees losing their job (which would be the main effect of the sequester). In the short run, that increases the unemployment rate, and the sudden decreased spending of those people who were laid off will also mean less income for the businesses where they would otherwise have spent their income. The economy will adjust, but not immediately, so a big enough shock of this type can cause a recession during that adjustment - especially when our economy is already suffering on the demand-side.

We also have the current example of Europe. The countries that have been trying to rapidly reduce their deficit are the ones that have suffered the worst from the recession. Britain, for example, is very close to entering a triple dip recession.

However, the European countries that have done so poorly have also had tighter monetary policy. So it may be that QE3 prevents our sudden belt-tightening from causing another recession. Or maybe our labor market is more flexible such that it can absorb this type of thing better. I don't know. But isn't this all so exciting? :/

The GOP and Federalism

Remember how Republicans always say they believe we should trust states to govern better than the federal government because they are closer to the people they represent? Remember how that was one of the repeated attacks against Obamacare - that the states should be in charge of those sorts of things?

Well one of the main pieces of "Obamacare" is the health insurance exchanges, which each state can set up for themselves. But a state can also choose to let the federal government do it. Surely all those Republican states would prefer to have those run by their state instead of the federal government, right?

Wrong. Here's the breakdown of which states decided to run these themselves, and which ones decided to let the federal government do it, by party lines (found this here):



Is there a reason why Republicans would mostly prefer the federal government to run their state exchanges, other than putting politics over their own supposed principles?

Philosophies of Political Parties

I don't think people's political opinions can be completely reduced to a basic philosophical principle - our minds are far more complicated than that (in good ways and bad ways). But I do think it's helpful to have a simple-and-fairly-accurate way to categorize how people think differently. Instead of the usual two-sided "big govt vs. small govt" scale, I prefer to think of 4 basic groups, where each group is focused on a different value that they want the government to maximize.

Group	Value
Libertarians	Freedom
Republicans	Justice
Liberal Democrats	Equality
Moderate Democrats	Well-being

Libertarians believe freedom is the ultimate "good", and therefore the government should do whatever maximizes freedom, even if that means letting otherwise bad things happen. This is often how people describe the Republican party, but overall I don't think that "fits".

For a long time I've had a hard time understanding how to simplify the Republican party into a single idea, but I recently read someone say they are concerned mostly with "justice", which I think works very well. A sense that virtues should be rewarded and vices should be punished is a good way to understand what makes Republicans different from Libertarians. A large military budget will help us bring justice against evil in the world. The war on drugs, even though it limits freedom and well-being, is perceived as punishing a sin. Same with the opposition to illegal immigrants, gay marriage, etc. It can explain why they oppose redistribution in some cases and support it in others: capitalism is viewed as the way to distribute money according to who deserves it, but with Medicare, seniors are viewed as "deserving" of public help because they are assumed to have already devoted their life to their country.

The more liberal Democrats are focused mostly on maximizing equality (or fairness) over everything else. This is often how people portray all Democrats, but I don't believe that's right. An example of this thinking that I've seen many people cite is this bit from Obama during a Democratic primary debate in 2008, where at first he seems to support raising the capital gains tax even if it decreases revenue out of concern for "fairness" (in his elaboration though, he doesn't end up supporting that idea).

I think most progressives, including myself, want the government to maximize well-being. This is my understanding of what Obama meant when he said the role of government is to "do for people only what they cannot do better by themselves, and no more." Maximizing well-being justifies redistribution, because transferring a dollar from a rich person to a poor person benefits the poor person more than it harms the rich person. But it doesn't justify too much redistribution, because that harms economic growth. But diminishing marginal utility explains why those who value maximizing well-being and those who mainly value equality are natural allies in many cases.

An example of people thinking about political issues in different ways and not understanding each other is this question I've seen conservatives bring up many times: "If you want to help the poor, instead of taxing others to do it, why don't you just give your own money?". Well, take the example of social security. Before social security was passed, poverty rates were very high among the elderly. After social security was passed, poverty rates among the elderly shrunk to "normal" levels. That increased the well-being of many seniors. But if instead of passing social security, a much smaller fraction of our population just decided to "give their own money", that would not have led to nearly the same increase in well-being of the elderly that needed help once they couldn't work anymore. Therefore, as someone who judges government programs primarily by their effect on people's well-being, I just don't understand why conservatives even ask that question. But maybe the question makes sense if you're thinking primarily in terms of freedom or rewarding virtue and punishing vices; you don't get "credit" for a good deed if it's just done involuntarily via taxation.

Minimum Wage vs. EITC: Revisited

A while ago I posted this saying that the minimum wage and the EITC seem to be trying to solve the same problem, so we should end the less effective one (minimum wage) in favor of increasing the more effective one (EITC). But now I've come across a convincing reason to use a mix of the two here:

"The EITC partially subsidizes employers, and as such the minimum wage is an excellent way to combat this. So it complements, rather than substitutes, for an EITC."

Basically, if someone is willing to do a job for X dollars per hour, and then we start giving them a tax credit of Y dollars per hour, then they will now be willing to do that job for lower pay because of the benefit of the tax credit. So now the employer can pay the employee less (won't happen immediately, but that's how the market will adapt over time). In the most extreme case, their wages could be reduced to X-Y, which would lead to that tax credit, in effect, going entirely to the employer. So a minimum wage (by limiting how much wages can be reduced) lessens the amount that the EITC (intended to increase a worker's income) can get shifted to the employer.

This also has me wondering about how much the EITC can explain the rise in income inequality since the 70's. The EITC was started in 1975 and has been increased since then. Meanwhile, the minimum wage has mostly trended downward, adjusting for inflation, since 1970. Hmm...

Securing Our Border

With the talks of immigration reform, one of the pieces that appears will be part of the deal (if one happens) is increasing the number of border patrol agents. So how do those numbers look over the last few decades?



That's a pretty big increase. Meanwhile, the number of illegal immigrants in America is estimated to have risen from 3.5 million in 1990 to around 11 million now (link). So has increasing the number of agents really stopped illegal immigration at all? Border control agents cost money, and we have a Congress that is supposedly looking for ways to shrink our deficit. So yea... let's not spend more money on this.

They Took Our Jobs!

People shouldn't have children, because if we keep adding more people to our economy, there won't be enough jobs for everyone! -- says no one, ever.

It was so tough on our economy when women started entering the workforce. There weren't enough jobs for the men anymore! -- says no one, ever.

Lots of people have been moving to Texas from other states. This is a problem because they'll take all the jobs from the real Texans! -- says no one, ever.

We should have strict immigration laws to keep people out of our country, because they'll take our jobs! -- says many people.

???

Stagnating Median Income: Not That Bad?

Many, including myself, have been really bothered by this:


This trend is often the primary concern among progressives. We've had a lot of economic growth over the last few decades, but since the 70's the median income has hardly budged. When people complain about income inequality in the U.S., the idea that worries them the most is usually that all the economic growth is unfairly going to the top, while the average worker gains nothing. In fact, I got the above graph from the wikipedia page on income inequality in the U.S., and the subtitle of that image is "The benefits of increased productivity over the last 35 years have not gone to the middle class".

However, I recently saw something that really confused me about this:


Even though the median income only increased 3% from 1980-2005, the median income for all demographics actually increased much more than that. How is that possible? It turns out this is just a case where we don't intuitively understand mathematics very well. Steve Landsburg explains a hypothetical situation that makes this more clear:

Imagine a farmer with a few 100-pound goats and a bunch of 1000-pound cows. His median animal weighs 1000 pounds. A few years later, he’s acquired a whole lot more goats, all of which have grown to 200 pounds, while his cows have all grown to 2000. Now his median animal weighs 200 pounds.

A very silly person could point out to this farmer that his median animal seems to be a lot scrawnier these days.The farmer might well reply that both his goats and his cows seem to be doing just fine, at least relative to where they were.

That’s exactly what’s happened with median incomes. Each demographic group has progressed, but at the same time, there’s been a great influx of lower income groups — women and nonwhites — into the workforce. This creates the illusion that nobody’s progressing when in fact everybody’s progressing.

This makes sense. Median incomes started stagnating - and income inequality started rising - around 1970. That was around the time it started becoming culturally accepted for women to have careers. And it was soon after the Immigration and Nationality Act of 1965 which allowed much more immigration into our country.

Surely there are other factors as well; reality is complicated. But unless this data is just wrong, there's far less reason to be concerned with the issue of our median wages and income inequality than most progressives realize. When I first started spending time trying to really understand politics around 4 years ago, this issue quickly shot to the top of my priorities. But now, when you combine the data above with this and this, it has really fallen toward the bottom of my list.

We are gaining, not losing, freedom

It gets annoying to constantly see the complaints from some people that, nowadays, our "liberties" are being "infringed upon" compared to "the good old days" of America. That's most clearly not true for anyone who is not a WASP straight male. But even beyond that, David Frum wrote something a couple of months ago that surprised me:

In 1962, the government regulated the price and route of every airplane, every freight train, every truck and every merchant ship in the United States. The government regulated the price of natural gas. It regulated the interest on every checking account and the commission on every purchase or sale of stock. Owning a gold bar was a serious crime that could be prosecuted under the Trading with the Enemy Act. The top rate of income tax was 91%.
It was illegal to own a telephone. Phones had to be rented from the giant government-regulated monopoly that controlled all telecommunications in the United States. All young men were subject to the military draft and could escape only if they entered a government-approved graduate course of study. The great concern of students of American society -- of liberals such as David Riesman, of conservatives such as Russell Kirk and of radicals such as Dwight Macdonald -- was the country's stultifying, crushing conformity.
Even if you look only at the experiences of white heterosexual men, the United States of 2012 is a freer country in almost every way than the United States of 1962.

Income Inequality vs. Economic Growth

This is largely just to keep track of this post from Krugman if I want to find it again.

One common viewpoint on the economy is that the rich spend less than the non-rich, so the more income inequality we have, the weaker our aggregate demand will be. This would help explain why our 2 depressions of the last century have occurred when inequality was high. And it was one of the first thoughts I had around explaining why our economy does noticeably better under democratic presidents than republican ones.

But as Krugman points out in the link above, that idea is hard to square with the correlation of private savings rates and inequality in the past. Here's a graph of our private savings rates over the past few decades:



Income inequality began rising some time in the 70s, with a temporary halt in that trend in part of the 90s. But the savings rate trend is basically the opposite; when inequality was increasing, savings has mostly gone down (therefore private spending went up). I think this pretty much discredits the theory that income inequality leads to lower demand and higher unemployment. There could be some explanation of how it can still be true, but I think it's best to go with the simplest thing that the evidence suggests unless we have a REALLY good reason to suspect otherwise.

Don't limit the charitable tax deduction

When the debate was still going on about which deficit reduction deal we should pass in place of the fiscal cliff, one of the common ideas was capping tax deductions, where tax deductions across the board are blocked at a certain dollar amount. This was something that had support of both some Republicans and some Democrats.

The fiscal cliff deal we ended up getting did something like that - it reinstated "PEP and Pease" on high income earners. And for the next deficit deal around the coming sequestration and debt ceiling fiasco, a hard cap on deductions is likely to come up again as an option.

But supporting this, when charitable deductions are not excluded, seems like a blatant example of what I talked about in my post on "the biggest flaw in the Democratic party". Democrats are concerned about poverty and inequality, and want the government to help with it. But the worst cases of poverty, by far, are in third world countries, not America. That is what many charities are addressing. And limiting the tax deduction for charitable giving reduces charitable giving, both by reducing incentives and by leaving those who give with less to give.

I understand raising taxes on the wealthy so we don't have to cut programs for the poor as much. But taxing charitable donations seems like a really self-defeating means towards that end.

Biggest Flaw in the Democratic Party?

This is a problem that I often wonder about, but I don't know what the right answer to it is...

A big (main?) principle of the Democratic Party is to tax the rich to provide more help to the poor in our country, mostly for 2 reasons:
1. Utilitarianism: the poor can benefit more from an extra dollar than someone who is already rich. So it is viewed as an overall good thing to set up society such that the rich may not be able to afford as many vacations, but in return more people are able to have access to health care and education.
2. Fairness: your success in life isn't just a matter of hard work. Those who are born into wealthy families are much more likely to become wealthy themselves: access to better education, a safer environment to grow up in, less stress and therefore easier to do well in school, family connections in business, etc. So redistributing some degree of wealth is seen as making up for natural unfairness.

Obviously, Democrats would laugh at a proposed policy to raise taxes on those making over $250k just to give more to people who make $100k-250k. If the goal is to reduce the suffering of poverty and ease the worst cases of unfairness, obviously we should focus on those who actually need the most help.

With that in mind, how do the poor in America compare to third world countries? On a global scale, wanting to tax the upper classes of America to give more to the lower classes of America is a lot like the ridiculous case of welfare for people making $100k. From the utilitarian perspective, helping end malaria in third world countries does more good-per-dollar-spent than making sure every American has comprehensive health insurance. And when it comes to fairness: someone born in a poor part of America can complain that they didn't get a fair shot at success, but not compared to someone born in the Congo.

Democrats often accuse Republicans of failing to have a global perspective. But if your political philosophy is largely based around alleviating poverty/inequality, and your solution is to focus on increasing the social safety net of one of the richest countries in the world.... what would you call that?

How The GOP Could Win My Vote

After the election, one of the popular topics is what the GOP needs to do to gain more voters. Within the Republican party, here's some of the opinions from George Will, Charles Krauthammer, and David Frum. Probably the most common idea is a more open immigration policy to win more of the Hispanic vote (even Hannity has said he's now "evolving" on that issue).

Our political parties are always changing in some ways. The one-dimensional scale of "left vs. right" is a huge over-simplification of reality, so there are plenty of options for policy changes without switching sides on that spectrum. So, as a current Democratic voter, here are policies the GOP could adopt that can remain consistent with conservative philosophy and probably win my vote:

1. Market monetarism. In my mind, the weak economy is clearly a case of low demand, and the fact that inflation remained low after our monetary and fiscal stimulus should count as proof of that. Unfortunately, most Republicans don't seem to agree that's the problem. Democrats do, and they mostly support Keynesian fiscal policies as the cure. But market monetarism is another potential cure for the same problem. It seems to be gaining a lot of support lately among economists and wonks, but not really any politicians yet. I don't know if market monetarist policies will work, but I'd be willing to vote for finding out.

2. Carbon taxes. Climate change is another area where I wish our political parties could agree on the same problem and move on to arguing solutions. Climatologists virtually all agree that global warming is real and that humans are involved. The conservative approach to this problem, which I think would be best, is carbon taxes. Basically, come to some agreement on the long-term costs to the environment from burning fossil fuels, and add a consumption tax of that amount to them. Then the free market would have the right financial incentives to pursue a path toward cleaner and more efficient energy with the right balance. To stay true to conservative philosophy, the revenue gained from that tax could all be used to reduce our taxes on income. And with a broad approach like this, we could also end all the targeted government regulations in this area like energy requirements for cars or light bulbs.

3. Consumption taxes. Conservative states generally prefer consumption taxes over income taxes. And most economists agree that is more economically efficient. So it doesn't seem like much of a stretch for Republicans to support a national VAT of some level, and they could use all the revenue to lower taxes on income (though it wouldn't hurt to use some of it for deficit reduction either). On this and the above issue though, I would want something to be done to avoid it becoming too regressive though.

4. Build on, rather than end, Obamacare. Originally, conservatives fought against Medicare, but eventually gave up. Similarly, I want Republicans to give up repealing Obamacare and instead move forward and improve it. If the private insurance exchanges+mandates+subsidies end up working well (which it already does in Switzerland, Massachusetts, etc.), then we can end the employer tax incentives for providing insurance to workers and use that for individuals themselves. Republicans don't want obstacles for starting or growing a business; and that's what our current system is. Other conservative ideas I may be able to support would be reducing the requirements of what insurance must cover and making the insurance exchanges an alternative option for Medicare.

5. Open borders. The essence of a free market is that if a person wants to hire another person for a job, at a wage agreed to by both sides, to provide something that customers want to pay for, they can do so. Strict immigration laws are nothing more than "big government" intruding in the free market with arbitrary rules. It's not at all consistent with conservative economic values.

6. Marriage equality. The fact that prohibiting gay marriage creates real harm on real people should be enough to support marriage equality. But if not... homosexuality will exist whether or not gay marriage is legal. So from a socially conservative viewpoint, even if you personally disapprove of homosexuality, you can support legal gay marriage as an institutional encouragement of monogamy over promiscuity. Besides, this is coming anyway, and the GOP will have to join the future on this issue at some point. Might as well do it now. Another alternative is to just get the government out of marriage entirely and only recognize "civil unions" as a legal issue, regardless of whether the couple is gay or straight.

7. Marijuana legalization. Nobody seriously thinks the Prohibition was good policy. It attacked people's freedoms, made criminals out of ordinary people, and empowered criminal organizations. How is our war on drugs any different? This is another change that seems to be coming sooner than we previously would have guessed. And Obama is still against it. So this is an opportunity for the GOP to lead on an issue that will embarrass us in the future when we look back on it. Plus, it's consistent with the conservative philosophy of getting the government out of people's lives. And let's face it; you'll win a lot of the youth vote. This doesn't have to mean encouragement of drug use; we could put a hefty tax on it, and use the revenue to reduce taxes on work.

I could go on with things like patent reform, filibuster reform, chilling out on military spending, etc.

The Jetsons and Politics

Possibly the biggest fundamental issue dividing people politically is the question of if and how much the government should redistribute the wealth that a free market creates/allocates. On one side, you hear many people claim that redistribution is just fundamentally wrong, and a pure free market will always work best overall. On the other side, you hear many people claim that there's a fundamental right to things like health insurance, retirement, a "living wage", etc. Neither side makes sense to me, and thinking about the world of the Jetsons (and its opposite) is a good way to explain why.

First, what are the pros and cons of different sides of the redistribution scale, regardless of where you think the optimal point is?

I think most people will agree on 2 main problems with doing too much redistribution.  There's the moral problem where it just feels wrong to take too much money from those who have made it. And there's the economic problem, where it makes everyone poorer by reducing incentives to work and leaving less money for long-term investments in technology and such.

Similarly, there's 2 main reasons why people get uncomfortable with too little redistribution. Morally, we want to minimize human suffering, and some amount of redistribution does that. And economically, social safety nets can encourage risk-taking, and other services such as public education enables the potential of those who wouldn't be able to afford to do so otherwise.

Now imagine a future where technology has advanced to the point where we live like the Jetsons. Robots do everything for us that we could ever need or want. There would be no jobs other than making and maintaining those robots, and we'd only need maybe 1% of the population to do that. This would be a really weird society to be a hard-core conservative. With no redistribution, everyone would be at the mercy of the all-powerful 1% that makes/maintains the robots. It's pretty clear that in a situation like that, we might as well be mostly socialist and let everyone enjoy the things that we can easily afford to universally provide.

On the other hand, if you go far back in time, or if we have some sort of apocalyptic event that takes away all our technology, it'd be very different. If we have no real health care, what does it mean to say that health insurance is a human right? If we have hardly any technology, such that we all have to work extremely hard and struggle just to survive, it's not possible to ensure food/shelter/water for those who get too sick/disabled/old to work. And it wouldn't make sense to have unemployment insurance; you can easily find a job because there's so much that needs to be done. In that kind of society, it wouldn't make sense to be a liberal. For society to continue, we would need those who are able to produce the most to flourish. And any programs to take from the better-off to help the worse-off would be taking away money that may be spent on the technological progress that would end up benefiting everyone in the future.

Neither of those two extremes may ever happen to us. But thinking about the extremes makes it clear that there's not one right answer on redistribution that can apply to all possible scenarios. No matter where you are on the political spectrum, it makes sense for government redistribution to grow as (if?) our technology and economy grows.

Presidents & The Economy

Perhaps the most common argument you hear in favor of electing Romney is the following:

A. Obama is president.
B. The economy is weak.
C. Therefore: A must be the cause of B. We need a Republican president.

But the underlying logic to that leads to some uncomfortable conclusions for Republicans. Here is a graph of job growth/loss per month during (and a bit before) Obama's presidency:

He became president, and quickly passed the stimulus, in February 2009. Soon afterward, we went from economic free-fall back toward recovery. One thing to notice from the graph is, whenever you hear claims about the total number of job losses under Obama, clearly that's the result of those first few months. And despite what many try to imply, the recession has been over for a while. I'm not trying to claim "everything is fine!" though. Job growth has been slow, especially when you consider how long it will take to bring back all those jobs that were lost, and it's important to have real debates as a country around identifying the causes and cures of this slow recovery.

However, if your economic argument right now is pretty much the one I summarized earlier, then what does that underlying logic really say about the job chart above? Do you prefer slow recoveries or severe recessions? And if you think economic growth during a presidency is a good way to know which policies are best, then there's a lot more history to look at besides just Obama and Bush...

Before Bush & Obama, here's the break-down of how the economy has done on average under Democratic and Republican presidents. In all categories, we've done significantly better with a Democratic president.

In fact, for as long as we started officially tracking recessions, we've entered a recession in the first term of every Republican president we've elected (link). If Romney is elected, let's hope he's the very first one to break that trend.

And if you also consider congress, we've had the strongest economic growth when Democrats have both the presidency and congress (link). You also see some of that from the job chart during Obama's presidency. The employment situation improved rapidly in the early months of Obama's presidency when there was a Democratic super-majority. You don't really see great results coming from the loss of that super-majority in 2010 or the Republicans gaining the House in 2011.

That being said, this doesn't necessarily prove anything; there are a lot of factors involved in how the economy does other than the president. I don't think Obama is to blame in any significant way for the slow recovery. And I don't think the Great Recession is Bush's fault just because it happened while he was president. But if you do hold the simple view of "economy bad, Obama president, therefore Obama bad", then the last thing that analysis of the economy should do is lead you to vote for a Republican president.

GOP & Govt Health Care Programs

This is something I meant to blog about back when Facebook was blowing up about the Supreme Court ruling on the "Obamacare" health insurance mandate. Aside from the legal arguments about constitutionality, I just have no idea how to understand the GOP's stance on when the government can make us pay for health care coverage.

Here are some government programs where you have to pay for someone's health care:

• Medicare - for old people.
• Medicaid - for poor and disabled people.
• CHIP - for children.
• VA - for veterans.
• Employer tax subsidies - for most businesses.
• COBRA - for temporarily unemployed people.
• EMTALA - for emergency care.
• USMS - for prisoners.
• The "Obamacare" mandate - for yourself.

The Republican party right now wants to repeal the mandate, saying it's an unacceptable infringement on liberty. But I'm not hearing any calls to end other government programs that provide health insurance. The biggest government health care program is Medicare, and only a small minority of Republicans support even making cuts to it, much less ending it completely. Pre-Obamacare, we were already close to universal health care coverage. Obamacare (mostly) gets us the rest of the way, but only on top of existing government programs that Republicans support.

So... why are the vast majority of Republicans OK with all government programs that force you to pay for health care except Obamacare?

Obama: Cutting Taxes for the Rich

So Obama wants to let the "Bush tax cuts" expire on the rates above $250,000, and now there's all the discussion on whether it's good/bad to raise taxes on the rich, accusations of class warfare, etc. But that would actually be a tax cut for the rich...

The "Bush tax cuts" were temporary tax cuts set to expire in 2010. If they expired, you'd pay more taxes now, but it wouldn't be quite right to say "they raised my taxes". Remember when Bush also did a 1-year tax cut/refund in 2008 to help stimulate the economy? When you didn't get that same cut the next year, nobody said "Congress raised my taxes." There's no reason to differentiate that from the bigger "Bush tax cuts." It just feels different because 10 years is a long time.

Those tax cuts did not expire in 2010 like they were supposed to. That's because Obama passed a new law to keep them in place for 2 more years, which means Obama gave all of us a big tax cut.

Now it's set to expire again, and Obama wants to pass another law to keep them in place for all income under $250,000. Again, that in itself would be Obama cutting taxes since these temporary cuts were designed to end. Understood properly, not only is this a tax cut rather than a tax hike, but it is also a tax cut for everyone, including the rich. That's because our tax rates for different income brackets are marginal.

As a simple hypothetical example: pretend we have an income tax system of 10% on income up to $10,000 and 20% on everything over that. That doesn't mean that the moment you make $10,001, you now pay 20% on all your income. It means you pay 10% on the first $10,000 of your income, and 20% only applies to your last $1. Therefore, passing a law that cuts taxes on all income under $250,000 is cutting taxes for everyone who makes over that amount as well.

It's funny actually. With the tax policies proposed by each side, both the Democrats and Republicans are trying to cut taxes for everyone. They are only actually arguing about how big of a tax cut to give to the rich.

* mostly stolen and expanded from here.

One way to improve unemployment

I've blogged before about how, not long into Obama's presidency, the private sector began and has continued job growth, but it's the public sector where we've continued to lose jobs. Since then, I've somewhat-planned to try to do some math with the raw data to see how different the unemployment rate would be if we hadn't cut so many government jobs. Luckily, my procrastination paid off and they did this for me on Wonkblog.

Here's the change in public employment in the last 4 recessions:

And here's the numbers of how today's unemployment rate would be different if we had taken a different policy towards government jobs:

Since Obama was elected, the public sector has lost about 600,000 jobs. If you put those jobs back, the unemployment rate would be 7.8 percent. But what if we did more than that? At this point in George W. Bush’s administration, public-sector employment had grown by 3.7 percent... If you add those hypothetical jobs, the unemployment rate falls to 7.3 percent.

But the unemployment rate would actually be lower than those 2 numbers because, at least in the short term, cutting a government job will also hurt the private sector, and adding a government job will help the private sector (unless you're at full employment, which we clearly are not). Because when you fire a bunch of teachers, cops, etc., they have less money to spend. So they buy less things, which means other companies will make less money due to their lost purchases, so then those companies will have to cut jobs. Likewise, if throughout this recession the govt hired more people, more people would have more money to spend, which would allow other companies to hire more employees to cover their new customers. This is what people are talking about when they say WW2 got us out of the Great Depression.

So it seems like the simplest thing we should have done differently to fight this recession is to, at the very least, hold government employment steady. But unfortunately, the 2010 elections brought in a big push toward "smaller government" (i.e. firing many people who currently work for the government). Regardless of what "size" you think the government should be under normal circumstances, it's pretty clear that it's best to have a temporary increase in government jobs during recessions and then trim those back as the economy recovers. Even if we should reduce the number of people the government employs in the long-run, this is a pretty crappy time to do it.