Last week, I posted the first in an ongoing series of analyses dealing with Attorney General Ken Salazar's positions on the issues, and the ways in which they help to determine whether or not, as the Salazar campaign maintains, he is a true centrist, willing to strike a different path from the national Democratic Party. Here. Then, we take a look at Salazar's second position paper,
Creating Jobs and Economic Activity. I must preface this analysis with an admission, and a caveat - I am
not an economist, and though generally familiar with the various macroeconomic schools of thought, am not qualified to present any sort of authoritative opinion on the minutiae involved in discussions of this type. As such, I present to you
my impressions only as those of a conservative "civilian", and defer to both those whose works I cite (i.e., The Heritage foundation, Daniel Drezner, et. al.), and those members of the Alliance (specifically Joshua) who might want to chip in with additional insight. That having been gotten out of the way, let's jump in:
Statement:
As a small businessman and farmer, I know that private enterprise, not government, creates jobs. But government policies and priorities can make a difference to families and businesses, and Washington has an obligation to act responsibly, and fairly, when it comes to federal spending, the deficit and tax and fiscal policy.
No real argument here. We're still dwelling in the realm of platitude and hyperbole, so there’s no real point in nitpicking as yet. As Salazar has written, it is private enterprise that fuels economic growth. As such, the Federal Government has a very limited role to play. I suspect that the Attorney General and I would begin our economic policy divergence at that point, however, and that we would likely have very different definitions of exactly what constitutes "responsible action" on the part of the Federal Government. Moving on:
Statement:
Unfortunately, too many families are struggling, feeling the pain of job cuts and insecurity, and their dreams for the future put on hold or changed forever. I want to be a voice in the Senate for those families.
One of my highest priorities will be to promote policies that create jobs and economic opportunity. I will work with business and community leaders throughout Colorado to achieve that goal.
Here's where we begin to gain a bit of insight into Salazar's direction. Additionally, here is where we are presented with our first example of a red herring run amuck. "The pain of job cuts and insecurity" is, unfortunately, something that has always existed, and
will always exist. Industries will rise and fall in power, and companies will start and fail. These things are inevitabilities, of course, but Salazar intimates that the opposition party (the GOP) is somehow responsible for intensifying these fears, though the unemployment rate is currently identical to that of 1996 - during the "golden years" of the Clinton economy. It's hard to get too exorcised over this particular throwaway line, though, as it's a political standard, and will likely see use from both sides (in one form or another) in any campaign for Federal office. I must admit, however, that I'm tempted to run for national office, just so I can be the one candidate who, in the midst of a heated debate over economic policy, turns to the audience, and says, "Well, in contrast to my opponent, I'm
not the candidate for the little guy. Personally, I hope that each and every one of your fails to achieve your dreams, and that your children are faced with a future of dead-end jobs, hopelessness, and poverty. Oh, and also, I'd like to announce that I now own all
four railroads, AND have made an offer on Park Place. The hotels will be in place shortly." Let's just get this out of the way, shall we? I do not operate under any assumption that my political opponents are ghouls, or that the Republicans, and the Republicans alone have our nation's best interests at heart. I don't think that Ken Salazar is a bad guy (on the contrary, he seems to be a fine human being), I just happen to think that he has some bad ideas, and that, though his motives are very likely pure, the policies of the Democratic Party will not lead to the type of success to which we should aspire. This, of course, is why I disdain so much of the campaign process. Each time a candidate (from either side) makes some boneheaded remark about how
they pull for the little guy, they make the unspoken accusation that their opponent doesn't. Granted, I've known plenty of people who, because I'm a conservative, assume that I go around at night poking the homeless with sharp sticks, just for kicks. I've got to say that there's little more off-putting about the political process than having to listen to some candidate intimate that I don't
care as much as he does, simply because I favor different solutions to the problems we face. It all boils down to class warfare, which unfortunately, seems to the make up the very foundation of DNC economic policy. Unfortunately, I see a great deal of this focus beginning to emerge in Ken Salazar’s economic position paper (providing yet another example of the "Salazar is anything but an independent"-phenomenon).
Statement:
Government should be a responsible steward of the money entrusted to it, and it should prepare now to meet its future obligations. Yet in just three years, the federal budget has gone from record surpluses to record deficits. Today, the national debt has grown to more than $60,000 for each and every American household. That must change.
As a Senator, I will be a strong voice for fiscally conservative policies that don't saddle our children and grandchildren with even more debt. America's long-term economic health is at a crossroads. It is simply immoral to pass the responsibility of paying off the national debt onto our children and their children.
I am committed to work on crafting deficit reduction proposals. Our nation needs a balanced approach, a combination of spending cuts, budget reforms, and tax reforms that spread fairly the pain of deficit reduction.
These paragraphs provide an excellent example of Ken Salazar"s ability (like Roy Romer's, and Bill Clinton"s) to co-opt conservative-sounding verbiage ("deficit reduction", "spending cuts") for use in promoting traditional Democratic economic policies (tax increases, spending increases, etc.). Salazar is correct in his assertions about the national debt. It
is troublesome, and does, in fact, call for serious action (were I not pressed for time, I might expound on my criticisms of the spending habits of the Bush Admin...). The problems with Salazar's position, however, are threefold, from what I can see.
1. Salazar touts the myth of massive surpluses during the 1990s. I suppose I should clarify - while it's true that we had tremendous economic surpluses on paper, there was no "there" there, as it were. The surpluses were predicated on the sky-high predictions for tax revenue that were the result of the grossly overvalued stock market of the time. Once the dot-com bubble burst, the opportunity to realize these surpluses vanished with it. In addition, Salazar seems to neglect 9/11, and the inevitable costs associated with the increase in military-, intelligence-, and homeland security-related spending. At best, the combination of Salazar's use of the untenable, unsustainable 90s boom and his (willful?) omission of the economic realities of our post-9/11 nation is indicative of an economic view that is utterly unrealistic. At its worst, it is disingenuousness of the most glaring kind.
2. While I am encouraged by Ken Salazar's apparent support for cuts in spending, let's just say that I'm a
bit skeptical of the form that these cuts would take. There has been no indication that Salazar wouldn't simply support a return to the Clinton-era policy of "Slash the military, pump the entitlements, and pray for peace". While we were able to get away with this reckless behavior in the short-term, it laid the foundation for, and left us scrambling to deal with 9/11, and the security situation that has since unfolded.
3. This bit scares me:
...tax reforms that spread fairly the pain of deficit reduction. It scares me for this reason: I'm more than reluctant to trust a Democratic Senator to determine exactly what constitutes a "fair" method of reforming the tax code to "spread fairly the pain", chiefly because of
quotes like this:
Many of you are well enough off that ... the tax cuts may have helped you...We're saying that for America to get back on track, we're probably going to cut that short and not give it to you. We're going to take things away from you on behalf of the common good.
- Senator Hillary Rodham Clinton (D-NY)I know, I know, I know. That was Hillary Clinton - not Ken Salazar. The problem here is this: like it or not, a vote to elect Ken Salazar to the Senate gets this woman (and the many in her party who share her philosophy) closer to the majority she needs to "take things away from [us] for the common good". Not a big fan of that idea, personally.
Statement:
No one likes paying more taxes. But we must have a fairer tax policy that rewards work, not just wealth. We need to be realistic: we cannot fund a strong national defense, homeland security, continue the war and nation-building in Iraq, as well as address education, health care, infrastructure and other domestic needs, at the same time that we permanently and significantly reduce our revenue base. Those who suggest we can safely increase spending while we permanently decrease taxes risk crippling the economic future of our nation.
I will also be an independent voice for agriculture and our rural economy and small towns. Economically, Colorado has become two states -- many parts prosperous, dynamic, and growing, and others poorer, stagnant, and shrinking. I want to prevent the permanent creation of "Two Colorados."
The federal government has had a long and important role in helping rural economies, from the Homestead Act designed to bring settlers west to the efforts of President Kennedy to revitalize Appalachia. The time is ripe for a similar effort today.
"We must have a fairer tax policy that rewards work, not just wealth." The intimation, of course, is that most of the wealthy didn't get that way by
working, but mysteriously, by simply
being wealthy. I need to sign up for that. In their 1999 book
The Millionaire Next Door, Thomas Stanley and William Danko argue that 80 percent of American millionaires are first-generation. That is, they didn't inherit their wealth. They don't live extravagant lifestyles, but have slowly built up their net worth through self-discipline, planning, and most of all, saving. I'd point out that it becomes increasingly difficult to save any sort of significant portion of your income when the Federal government is busy taking things away from you "for the common good". Tax cuts of the kind that Salazar would prefer - "targeted" cuts - are completely inequitable. According statistics compiled by The Tax Foundation (referenced by The Heritage foundation
here),
the top 1 percent of income earners pay nearly 35 percent of the income tax burden; the top 10 percent pay 65 percent; and the top 25 percent pay nearly 83 percent. The bottom 50 percent of income earners, on the other hand, pay barely 4 percent of income taxes.
As the piece goes on to say, it is thereby virtually impossible to create any kind of tangible tax cut that
doesn't benefit the wealthy. The question bears asking, what, exactly, is the harm in benefited the wealthy? Entrepreneurs create jobs, and it is utter foolishness to cultivate a mindset whereby taxation is viewed as punitive, and designed almost solely, it would seem, to punish those in society who dare take a risk. Ronald Reagan understood this, and implemented tax
rate cuts. Consequently, our nation's tax revenues nearly doubled (+99.4%). John F. Kennedy understood this phenomenon, as well. Ken Salazar, I'm afraid, has missed the boat that floats on JFK's proverbial rising tide.
Salazar spends far more time delving into specific action items than he did in his first policy paper. For the sake of (relative) brevity, I'll limit the number of items I'll look at today to one, but it's a pretty big one, at that.
He starts off pretty well, actually:
I support responsible, common-sense tax cuts for low- and middle-income workers and their families and small businesses. For example, we should make permanent the elimination of the marriage tax penalty; make permanent the expanded bottom 10% tax bracket; continue the child care tax credit for the middle class; make sure the alternative minimum tax does not reach middle-income taxpayers; and raise the estate tax exemption to $10 million to allow family farms, ranches and small businesses to stay in the family. I will fight to close unfair tax loopholes that encourage big corporations to move their headquarters overseas to avoid paying taxes, and other unfair tax breaks, while supporting corporate tax changes that encourage domestic investment.
I'm glad to see that Salazar supports a
permanent end to the marriage penalty, though I admit that I'm just a bit skeptical as to how long that support would last were he elected. While I'm no economist, I think that one of his middle suggestions -
make sure that the AMT does not reach middle-income taxpayers - is going to be more than prickly to put into practice. As to the rest? Here we see the primary talking point of the Dems' 2004 economic platform - that President Bush is helping "big business" to ship "American jobs" overseas (because, again, he doesn't care about you and me, right?). Salazar and the rest seem to believe that jobs are some sort of zero-sum commodity, and unfortunately, the strong sense of isolationism that runs through much of the populist movement (lots of adherents to this mindset on both sides of the aisle) resonates with this message. What about outsourcing? Is it the bogeyman we're being told that it is? One of the more common sources of fear concerning outsourcing is an oft-quoted report by Forrester Research indicating that 3.3 million jobs will be lost to outsourcing in the coming years. Scary, right? Well, it would be were it not for the fact that this number represents less than one percent of the total number of jobs lost in regular turnover. From
The Heritage Foundation (citations available in the original article):
Over the past decade, America has lost an average of 7.71 million jobs every quarter. The commonly cited Forrester Research prediction of jobs lost to outsourcing estimates that 3.3 million service jobs will be outsourced between 2000 and 2015 - an average of 55,000 jobs outsourced per quarter. According to these numbers, at worst, jobs lost to outsourcing represent only 0.71 percent of all jobs lost per quarter as part of normal turnover in the economy.
Other consulting firms have jumped on the bandwagon, but the author of the original Forrester study "now says his numbers were hyped" and expresses frustration that the issue has spun out of context. The context, of course, is the net positive impact of trade and technology. America has averaged gross gains of 8.11 million jobs per quarter over the past decade - an average net increase of 400,000 jobs every quarter, swamping the impact of outsourcing.
The new interest in outsourcing is producing a wave of new research, and the overwhelming consensus vindicates the position espoused by Greg Mankiw, renowned Harvard economist and current chairman of the Council of Economic Advisers, that trade-induced labor flows are a net positive for the U.S. economy.
First, the gains of trade have been shown to vastly outweigh the costs, even when job dislocations are factored into account.
Second, the U.S. economy is going through a permanent structural change, so the labor force dislocations are more severe than during normal recessions, which means the productivity gains are higher as well. The data support the theory here, with the U.S. economy experiencing record high gains in productivity.
Finally, even net jobs are gained due to outsourcing, as emphasized by a recent Global Insight study:
While global IT software and service outsourcing displaces some IT workers, total employment in the United States increases as the benefits ripple through the economy. The incremental economic activity that follows offshore IT outsourcing created over 90,000 net new jobs in 2003 and is expected to create 317,000 net new jobs in 2008.
As Daniel Drezner writes,
Believing that offshore outsourcing causes unemployment is the economic equivalent of believing that the sun revolves around the earth: intuitively compelling but clearly wrong.
Salazar's tendency toward codespeak in dealing with his economic policy suggestions is troubling, and the fact of the matter is that higher taxes, increased social spending (coupled with the requisite cuts to our armed forces), and economic isolationism do not represent visionary economic policy - they simply mark a return to the failed policies of the past. I'd prefer to look forward, thank you very much.
(Cross-posted at
Exultate Justi)
