Matthew Yglesias » Conservatism = Debt

Oct 5th, 2008 at 9:23 am

Conservatism = Debt

Cato’s David Boaz alleges that “it must be a great disappointment to Goldwater Republicans to discover this story that got almost no notice this week.” The story in question turns out to be about the burgeoning national debt in the Bush years:

But as the chart makes perfectly clear, it seems unlikely to me that Goldwaterites are genuinely disappointed with this turn of events. The major causes of growing debt-to-GDP ratio are World War II and the election of post-Goldwater conservative Republicans. That’s not necessarily the worst thing in the world — arguably some Democrats are too debt averse — but the record is pretty clear. Conservatives in power leads to skyrocketing debt.

Comments
44

Filed under: Budget, Economy, National Debt

44 Responses to “Conservatism = Debt”

AGT Says:
October 5th, 2008 at 9:44 am
My father would insist that you have to overlay which party controlled congress on this graph to get the full picture.
Supercollide.com Says:
October 5th, 2008 at 10:00 am
it’s astonishing how conventional wisdom steers the economics debate (and the larger debate). you won’t see much talk of this graph.
Harvey Lobster Says:
October 5th, 2008 at 10:01 am
As much as I hate to defend conservatives, and as much as I agree, at least tentatively, with the substance of the argument, all you’ve got here is correlation, not causation. Congress plays a role, as does the business cycle and, you know, events. I think that conservatives *do* cause indebtedness, but the graph is a starting point in that argument, not a final proof.
mort Says:
October 5th, 2008 at 10:03 am
I think that was the Reagan theory…… bankrupt the government (in his case with defense spending and tax cuts) so that the Democrats can’t pass any social programs; Bush has accomplished the mission better than imagined. Now we have to fix it again.
Jeffrey Davis Says:
October 5th, 2008 at 10:04 am
The fate of the Republic was sealed when Howard Jarvis married Lee Atwater.
superdestroyer Says:
October 5th, 2008 at 10:39 am
Since the Republican party will soon be irrelevant to politics, the real question is how will the Democrats manage to lower the national debt as a percentage of the GDP while paying for the large expansion of the government that will occur during the Obama Administration.

Is MY arguing that high taxes have no adverse affect on the economy and that the Obama ADministration will be able to expand entitlements, raise taxes, increase real wages, and raise standards of living. Is there really enough money earned by all those above $3250K that it can be taxed away with no negative economic effects.

Do they really teach economics at Harvard?
P Snowden Says:
October 5th, 2008 at 10:43 am
This chart leads me to question whether this presidential dictatorship we’ve instituted is really such a good idea. Perhaps it should be balanced in some fashion by a co-equal legislative body.
And the beat goes on Says:
October 5th, 2008 at 10:55 am
I am no economist but I am not only concerned with the burgeoning national debt but personal debt as well. At first sniff, the bailout (rescue???) bill is designed to free up credit for corporations and, purportedly, for personal credit purchases as well. I suspect very little will be done to clear up any debt since Bush’s policy has akways been spend not save since it is so “good” for the economy. Those were part of his “strategy” for helping us through those horrendous weeks and months after 9/11. What is also very disturbing is how many Americans are putting themselves in deeper debt as they have to use credit just to pay for their day to day necessities.

I still think that the bottom up approach to the economy would have been the only way to reverse these disturbing economic trends. Put people back to work so they can start spending again thus pumping cash back into the economy. Provide low cost or universal health care since medical expenses still force so many Americans into bankruptcy. Allow banks to help homeownwes renegotiate their variable loans to keep foreclosures down. To me it seems so simple– put money out there for the consumers to reinfuse the system with cash.

Alas, no one asked me for advice so this is all rhetorical. I tried to give my senators and representative my two cents worth, but they didn’t listen. Dianne Feinstein even said those of us who objected were just “confused.” I mentally filed that with Gramm’s assertion that we were just a nation of whiners. And the beat goes on…
Walker Says:
October 5th, 2008 at 11:06 am
My father would insist that you have to overlay which party controlled congress on this graph to get the full picture.

Then your father would still be wrong (assuming that he was trying to shift blame to Democrats). Cactus at Angry Bear did an extensive study of this over a year ago. Every time a conservative would comment on the blog “but what about this”, he would do the study again, controlling for that factor, showing them wrong. It was quite the smackdown.

The takeaway from his study was that, at best, Republican administrations, do better with the economy in election years. But they suck in non-election years.
west coast Says:
October 5th, 2008 at 11:14 am
Actually, Matt, it’s post-Reagan GOP that ballooned debt. Goldwater ran against LBJ, Nixon was the post-Goldwater Republican. Reagan’s “voodoo economics” were not Goldwater’s, and by his time Goldwater was being set out to pasture by the GOP for his old ways of thinking and failure to embrace religious conservatives who made up a good part of Reagan’s base.
Matt Weiner Says:
October 5th, 2008 at 11:17 am
I think that was the Reagan theory…… bankrupt the government (in his case with defense spending and tax cuts) so that the Democrats can’t pass any social programs

And on a previous thread discussing this, Reagan-Bush I official Bruce Bartlett said pretty much the same thing. Which, as I said there, is pretty much the worst indictment of the conservative movement you can make. Their strategy is not to argue against social programs on the merits, but to govern so irresponsibly that Democrats will be too busy cleaning up after them to pass any social programs. When Clinton got the country back on a reasonably sound footing, Bush II came along to do it again.

For those trying to cast doubt on the correlation between the debt and presidents named Bush or Reagan, give it up. That graph is plain as day.
sootytern Says:
October 5th, 2008 at 11:20 am
Matthew, you’ve missed something glaringly obvious in the graph. Until Reagan came in, both liberal and conservative administrations reduced the deficit. I think you will find that the Republican party was radically changed in the late 70’s and 80’s from a genuinely fiscally conservative party to a thoroughly radical, socially and religiously (theocratic) conservative party. At that time I left in disgust. They no longer represented fiscal conservatism at all.
markg8 Says:
October 5th, 2008 at 11:39 am
I’ve said all along that we should never put people in charge of government who hate government. They don’t want to make it work better or more efficiently they simply want to discredit it so they can dismantle most of it.

Their mantra over the next decade will be the same as always, “government doesn’t work”. To it they’ll add “we tried that and it didn’t work and there’s no money left anyway to try again”. That’s the Republicant party for you folks.
Monte Davis Says:
October 5th, 2008 at 11:45 am
The Angry Bear posts that Walker cites are good. See also the bar charts at Brad DeLong and the comparisons helpfully pulled together at The Sideshow.

Playing with Congressional majorities and policy time lags can change relative magnitudes, but not absolute magnitudes and not signs. The bottom line is DeLong’s “Democrats are better Republicans than Republicans are” by almost every fiscal and economic measure. And to the extent that R’s appear better on taxes, ever since the Stockman Shuffle of 1981 it’s been achieved by deficits — which is simply kicking the tax can down the road, Norquist style. The semi-honorable exception, Bush I, was immediately disavowed as not a true Republican.

One hates to sound like Ross Perot with his eyes-glaze-over charts, but it really is crucial to break the grip of the half-century-old “Dems are kindly but profligate, Reps are harsh but prudent” meme.
Never certain Says:
October 5th, 2008 at 1:00 pm
A big part of the story is that Reagen and Bush were believers in the Laffer Curve fallacy. The Laffer fallacy is that if tax rates are 100% no one works and government revenues are zero. Therefore, lowering taxes will result in a small chunk of a much larger pie, and hence actually *increase* revenues. The fallacy, of course, is in the assumption that the marginal effect on incentives of a reduction in taxes will have a massive impact. In reality, most economists (I am one myself) believe tax rates are important for incentives among poor people who may choose to rely on welfare if taxed too heavily, but have roughly zero incentive effect on the rich. So, if you reduce taxes on the rich you get less revenue but no higher GDP.

That said, there is a real problem of tax avoidance. If CEOs earned 5% of what they earn now they would probably work just as hard. However, if you tax 95% of their current earnings, they may find a way to avoid paying those taxes.
Never certain Says:
October 5th, 2008 at 1:03 pm
By the way, fact #1 from the whole of macro economics is that to a first approximation economic policy (tax rates, regulation, etc.) has *no* impact on growth. If you look at Europe and North America, growth rates of GDP per capita have been roughly the same in all countries from the 1960s onwards (in the first 10-15 years after WWII Europe grew faster as part of the recovery from the war devastation).
Never certain Says:
October 5th, 2008 at 1:15 pm
Concerns about the level of the national debt are overstated. You can’t go on and inflate the national debt at this rate ad-infinitum, but in the current situation pouring a lot of money into the economy is just what the doctor (or sane economist) ordered. In practice this could mean implementing Obama’s expenditure plans without worrying about the deficit increasing further. Then, when the economy really does recover, it will be time to close some more loop holes, and increase taxes on the super rich a little above pre-Bush levels, so as to move the budget into a small surplus. The debate questions on what programmes each candidate would give up are deeply misguided. Cutting the budget is what the Republicans did after 1929, and it didn’t work very well…
Joe p from mo Says:
October 5th, 2008 at 1:24 pm
For never certain, if you look at the IRS data for tax revenues during the Bush years they went UP with the tax cuts, not down. Also the “poor” don’t pay income tax, so how do you “tax” them too much???? The problem is that Bush SPENT way too much. The problem is spending not revenues!!!
RealityCheck Says:
October 5th, 2008 at 1:25 pm
REALITY CHECK

Democrats = Tax & Spend

Republicans = Borrow & Spend

I prefer neither….but the first is the lesser of two evils
superdestroyer Says:
October 5th, 2008 at 1:47 pm
Never certain,

Since the U.S. has not built a new nuclear power plant in the last 30 plus years and has not built a new refinery in about the same time, it is hard to argue that regulations have no effect on the economy. All you can really argued is that regulations let the government pick the winners and losers in the economy from zoning ordinances at the local level to FDA/EPA regulations at the national level.

Also, it is hard to argue that taxes to not affect the economy when Texas has benefitted from being a lower tax state whereas states like Michigan have suffered from being high tax states.
Never certain Says:
October 5th, 2008 at 2:30 pm
superdestroyer, Sweden’s per capita growth rate has been about the same as that of the US. The same is true for over 10 other countries in Europe and for Canada. All these countries have higher taxes than in the US, with no harm to their per capita growth rate. There are other differences. For example, in continental Europe the unemployment rate tends to be higher. But the growth rate of GDP per capita is about the same.
Never certain Says:
October 5th, 2008 at 2:35 pm
Joe p from mo, when poor people work they often get benefits withdrawn. This effectively acts like a very high tax rate against work even if they don’t officialy pay income tax. In some cases they may actually be better off not working. Welfare reform has to some extent dealt with this, but this question of how you can help poor people without creating incentive problems remains a big challenge.

With rich people there are really no incentive issues. If you pay 30%, 40% or even 75% tax on a 1,000,000 income, it wouldn’t really change your incentives. If anything, you may even want to work harder to still have a lot left after tax. However, it would change your incentive to avoid or evade taxes, and this does put an effective limit on how much the rich can be taxed. If you doubt this, remember that 30 years ago CEOs earned less than 1/10th of what they earn now (in real terms) but they didn’t work any less.
Joe p from mo Says:
October 5th, 2008 at 2:54 pm
Never certain, I see you avoided the issue that tax cuts do increase revenues. Also your “gripe” about taxes and the poor has NOTHING to do with taxes, but with how welfare is issued!! Your first quote is “tax rates are important for incentives among poor people who may choose to rely on welfare if taxed too heavily.” So your point is wrong!!! There is no income tax on the poor. They have a rate of 0%. It is the welfare system that is the culprit. Also if you tax the rich at a high rate is does discourage working. Why would someone bust their butt to make a good living if most of the hard earned money goes to the government. There is a break point where it does to “pay” off to working harder and earn more. You could work a lot less and come out better off.
Never certain Says:
October 5th, 2008 at 3:05 pm
Joe p from mo, look, one last time, 30 years ago, CEOs and other top earners made 10% of what they earn today in real terms. Maybe less. 10%! But CEOs worked then just as hard as they work today, which is just as hard as they have ever worked. Meanwhile, people lower down the scale earn today only a bit more in real terms as they did 30 years ago. They also work just as hard. See? no difference.

Also, look at it like this. Suppose you make 100K by taking it easy, and 200K by working hard. Do you choose to work hard? And if you only earned 50K taking it easy, and 100K working hard, would you then take it easy?! If anything rich people would probably work *harder* if they earned less (or were taxed more).

Third, tax cuts do not increase revenues. There is no evidence for this, and the reason there is no evidence for this is that it is false. You will not find a single economist in the world (well, maybe 1-2. you never know) who actually believes any of this Laffer Curve BS.

Finally, the tax problem with the poor does have to do with the welfare system, but you can’t put it at the doors of Liberals. You see, the biggest problem is with welfare policies that are mean tested (the ones Republicans like most), because then you lose your benefits if you start earning your own salary. When you then take into account the low wage poor people get (lower if Republicans had their way) and the cost of working (travel, child care), you end up with a very real incentive problem.
superdestroyer Says:
October 5th, 2008 at 3:20 pm
Never certain,

Countries like Sweden have a per capita GDP of less than 75% of the U.S., so it would seem that taxes can have an adverse affect on GDP. Even Ireland, with a lower tax rate but lower technological base, has a higher per capita GDP than Sweden.

To argue that taxes have no affect on the economy is to ignore the U.S. economy of the late 1970’s. Have you forgotten how everyone had a side business so that they could expense their car, house, utilites, etc. Remember, when the government had to force business into making money so that a business could not lose money forever and be used as a tax write off?
Never certain Says:
October 5th, 2008 at 4:19 pm
superdestroyer, Sweden does have lower GDP per capita, but that’s mainly because they work shorter days and take longer holidays. Their per capita growth rate is more or less the same. Different capitalistic countries make different trade-offs, but none of that really affects growth.

Re. tax loopholes, I fully agree. The tax system should be as simple as possible. You shouldn’t tolerate a situation where you can increase your net more effectively by working on reducing your tax bill than by doing actual work. The US tax system (both individual and business) is far too complicated. A rough measure of the so-called “dead-weight” costs is the percentage of GDP going to lawyers and accountants. Only a fraction of the real total is really necessary.

By the way, Goolsbee, who is a well-known economist and an important Obama adviser, is a prinicipal advocate of simplifying the tax system. Apart from efficiency there is also the fairness argument. It is always big business and rich people who are better placed to exploit a complex tax system. Small business and poor people lose.
Joe p from mo Says:
October 5th, 2008 at 5:15 pm
Never certain, you are WRONG!!! I have looked up the IRS data of the revenue generated per year and during the Bush years it went up big time. Just because you do not want to believe they went up does not make it so. Please give me facts that revenue went down with the Bush taxe cuts!! You don’t have any!! Also I never said anything about liberals and welfare, all I said was that the poor paid no taxes, and I was right to point out your problem is welfare and not the tax system, so admit you are wrong. Also I never point a finger at any political party ect.. Now for your last point if I made almost as much money after taxes working less than I did busting my butt because it moved me into a very high tax bracket, I would work less, It’s human nature. Over all my point is the problem is not tax cuts it is govt SPENDING!!
Pliny Says:
October 5th, 2008 at 5:27 pm
Let’s get serious here. The vast majority of the budget is wrapped up in committed spending that has been instituted by the Democrats. Welfare, Social Security, Medicare, debt servicing, etc, are what drive the budgets and the deficits. Those are all outgrowths of liberalism; FDR and Johnson programs, mostly. If it weren’t for massive unconstitutional Democrat social engineering wealth redistribution programs there would be no deficit.
john in california Says:
October 5th, 2008 at 6:39 pm
jo from mo
Show me!
Joe p from mo Says:
October 5th, 2008 at 7:14 pm
http://www.irs.gov/taxstats/article/0,,id=102174,00.html Will take some looking around but all the info is at the IRS website.
Glaivester Says:
October 5th, 2008 at 9:18 pm
Sweden’s GDP growth is lower than the US’s when you look at the actual GDP, not the per capita GDP, is that not correct?

One might therfore interpret the data as suggesting that the rate of population growth/decline is related to the rate of GDP growth, and that countries with a higher/lower rate of GDP growth wind up having higher/lower rates of population growth that winds up cancelling out the effects when you do a per capita analysis.

In any case, any analysis of U.S. per capita GDP growth over the past 20 years has to take into account that we have imported tens of millions of poor people from other countries, whose immediate effect will always be to bring per capita GDP down.
b-psycho Says:
October 5th, 2008 at 10:33 pm
Joe P: Even working people that don’t pay income tax pay payroll taxes, and the total percentage rate for those (which fall hardest on low-incomes) is actually higher than the capital gains rate (which obviously affects wealthier people).

As for spending restraint, I actually agree. For instance, imagine how much we’d save if we stopped thinking overwhelming global military domination made us any safer…
Jon Says:
October 6th, 2008 at 2:27 am
I think the important thing to recognize here is that the notion that cutting taxes is always the solution to economic problems is false. Also, the notion that gov’t spending on social programs is always bad is also false. This issue needs to become, how should gov’t spend tax revenue to encourage smart growth? And the corollary to that: how much (or little) should gov’t be spending? Unfortunately, the conservative movement has stopped thinking and become dogmatic. Until both parties start talking about smart gov’t we cannot progress anywhere. I know it’s easier to tell people that lower taxes are the solution, but how about putting “country first” for a change?
Thom Scott Says:
October 6th, 2008 at 6:53 am
There are 2 sides to the debt equation .. income and expense. EVERY time tax cuts are enacted for the wealthy to bring them more in line with the rest of the nation, income to the U.S. Treasury increases. Even Democrats believe in supply side economics as witnessed by their haste to pass a big bailout bill for Wall Street last week. Even those that didn’t like the lack of fairness said they did so because if they did not, the money would not circulate down through the economy.

Of course, it doesn’t matter how much income is collected by the Treasury if we spend more than comes in. This is no different than if I continue to get 20% raises every year, yet I run my expenses up even higher than that.

So, to be intellectually honest, we have to address BOTH sides of the debt equation honestly and not just conclude “trickle down economics doesn’t work.”

A true conservative does NOT believe in big government – whether it takes the form of increases in “entitlements” or increases in military buildup. Unfortunately, there are few true conservatives around, except for the occasional Libertarian that questions the basic premises of what government is supposed to do and what they are efficient at doing. Most of them, however, have a dangerously isolationist view of the U.S. in the world… which leaves us with choices of dumb and dumber for President.

The only real answer, long term, is true education taking place in schools – reading the writings of our founding fathers and re-discovering what exactly this country was founded upon and why… as well as the political premises and policies that governed our nation from the beginning. To fail to do so will put us in further jeopardy of losing forever what once made us great.

Benjamin Franklin thought it to be a harsh and heavy handed government that would take 10% of income from its people. My how times have changed!
Christian Debt Reduction Says:
October 6th, 2008 at 11:13 am
I think the biggest mistake the Bush reign brought in was the prescription drug benefit for seniors. We do not hear much about it, however it is going to costs taxpayers trillions of which we do not have.
reenasally Says:
October 14th, 2008 at 10:37 pm
Cockran is speaking to the Liberal Club in London, England, and “liberal” at the turn of the century means what “conservative” means today – freedom. Who think that the size and scope of the federal government has become too large. It is time that conservatives unite behind Reagan ideals in order to bring about true change that will remove the onerous debt that limits our growth and prosperity as a nation.
—————-
Sally
Credit Card Debt
GoldwaterRepublican Says:
October 25th, 2008 at 3:07 pm
David Boaz is correct in his assertion that Goldwater Republicans would be disappointed in the burgeoning national debt. Remember that Goldwater Republicans are a slightly different animal than current Republicans in powerr today (read Bush Republicans). Goldwater was an actual *fiscal* conservative who would have been appalled at the runaway deficit spending and burgeoning debt that we see today under a supposedly conservative Republican administration.
Elphin Says:
February 23rd, 2009 at 9:35 pm
The saddest part of the modern conservative’s penchant for spending the wealth of the nation is that they hate to invest in the future, i.e. education, highways, waterways, clean air. Instead they figure out how to give our treasure to corporations who then convert it to personal profits for themselves.
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WBM Says:
April 16th, 2009 at 11:12 am
Ok here is the Speaker of the House data that the first commenter wanted. This shows what party was in control of the house of representatives during (most of) the years covered by the graph. Guess what? Most of the downturn in the national debt occurred during Democratically controlled Congresses. Wow, shocker! NOT!

Speaker of the House (1940 – present [mostly])
Democrat Sam Rayburn.[5] Rayburn was the longest serving Speaker in history, holding office from 1940 to 1947, 1949 to 1953, and 1955 to 1961

Democrat John William McCormack (served 1962–1971)

Democrat Carl Albert 1972 – 1976

Democrat Tip O’Neil 1977 – 1987

Republican Newt Gingrich 1994 – 1998

Republican Dennis Hastert 1998 – 2006

Democrat Nancy Pelosi 2006 – present

Matt Yglesias

Conservatism = Debt

44 Responses to “Conservatism = Debt”

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