Has Lindsay Graham ever actually backed any policies at all? (Other than tax cuts for the wealthy.) From my perspective (interested in politics but not making a hobby out of it) he seems to exist solely for the purpose of being that kid on the playground who smirks and declares it Opposite Day whenever a consensus is reached to play dodgeball rather than tag thirty seconds before the bell rings to announce the end of recess.
I don't have the slightest idea what Lindsey Graham's deal is. I know he was good friends with John McCain, which probably led him to feel that it's cool to be contrarian sometimes (or maybe that's why they were friends to begin with).
Sorry about the late post - I am catching up. I wonder how successful the virtue signaling is or will ultimately be. I live in a small community of 75% or so Republicans and the likes of Lindsay Graham or anyone who voted for the infrastructure bill could not be elected dog catcher regardless of how they might try to spin it. My community until recently has been run by business oriented Republicans that have had some success fending off economic decline in a farming community that lost a major employer and numerous small service businesses. Lately, populist Republicans are challenging incumbent Republicans and are winning by similar margins that Trump had against Biden. They are fighting economic development proposals that should have positive multipliers - actually they seem to oppose anything that is not social warfare. Locals will continue to vote for whatever Republican candidate in State or National election, but soon there will be no old school Republicans on school boards, city council, county commission, Sheriff, ... I struggle grasping the meaning of this beyond the significant local impacts and for whom the virtue signaling is meant. I'm not sure the Fox news / populist crowds are receptive.
I think I'm missing your point here. The senators quoted here complain about "inflation" and "tax and spend". Your argument against inflation which I'm pretty on board for you relegated to a footnote. You then make an argument that their other reason for not supporting the large bill was because it was about people. Why did you ignore their stated complaint ("tax and spend") to instead counter an unstated complaint ("shouldn't invest in people")? You could have spent some time discussing how the tax portion wouldn't have been much of a negative multiplier.
Also, a lot of this multiplier conversation confuses me. If there really is such a 1.5 multiplier on projects like this, then why isn't the money spent "all of it". Or at least as much as we can without reducing the country to a combination of utter poverty and infrastructure. Is there some kind of pareto-efficient frontier of tax-and-spend?
There might be some other differences between the two. Is infrastructure spending easier to end than SNAP spending? That Moody's chart you linked specifically says that's the multiplier in recessions and early cycle expansions. I'd be curious to see what the multipliers are in other financial circumstances..
My answer is that dividing things into "infrastructure" and "not infrastructure" is a somewhat arbitrary distinction. It was a decision made for political reasons, because Republicans MIGHT vote for infrastructure spending (and some already have), but there's virtually no chance of getting them to vote for social spending. So, yes: Their complaints about the reconciliation bill come from the standard list of Republican bullet points ("tax and spend", "inflation", "socialism"), but it's actually the political reality of needing to divide the spending into two categories to begin with that's revealing.
And the evidence I'm pointing to is that, from a vantage point that focuses purely on ROI (so to speak), a strong case can be made for many types of social spending using the same logic that conservatives accept when it comes to infrastructure spending. But everyone knows that infrastructure is more palatable to Republicans than other types of spending, hence the two tracks. I don't mean for the multipliers to be viewed as gospel; as I mention in the article, they're debatable. But the Moody's numbers are a stand-in for what I (and many people) believe to be true: Many types of social spending have a strong positive effect on GDP. Public schools are a good example; certainly, the decision in the 19th century to establish mass-public education has been enormously beneficial to this country in much the same way the Interstate Highway System has been.
The question you ask about "why not keep spending on infrastructure?" is a good one. I think the answer is: 1) Diminishing returns; 2) Opportunity costs; 3) The government might not be very good at picking the "best" projects, so you might get to the low ROI projects pretty quickly as you move down the priorities list; and 4) Maybe we actually WOULD be better off spending much more on infrastructure. Numbers 3 and 4 are basically different versions of "this isn't rational, this is Congress". I really don't know what a GDP-maximizing taxation and spending program designed by a benign (and knowledgeable) autocrat would look like, and it doesn't much matter; we're limited by the political realities of the moment.
In footnote one, you say "Senate rules actually require the reconciliation bill to be budget-neutral over a ten-year span." Respectfully, is it possible this might be incorrect? I think you're referring to the Byrd Rule.
If so, the limitation is on increasing the deficit in periods *after* the ten-year budget window, codified at 2 USCC 644(b)(1)(A)(E): "a provision shall be considered to be extraneous if it increases, or would increase, net outlays, or if it decreases, or would decrease, revenues during a fiscal year after the fiscal years covered by such reconciliation bill or reconciliation resolution, and such increases or decreases are greater than outlay reductions or revenue increases resulting from other provisions in such title in such year."
This is why e.g. the Republican corporate tax bill (TCJA) has so many tax cuts expiring after ten years. But Congress can still use reconciliation to increase the deficit in years zero through ten.
This is an excellent catch; thank you! I've updated the footnote to read "budget neutral AFTER ten years."
I really do want readers to flag this type of stuff; I get things wrong (see: the name of the newsletter). I might be creating a special kind of hell for myself by courting a wonkish readership and then encouraging corrections, but probably better to do that than to blithely accept being part of the firehouse of misinformation, right?
Thanks, glad I could help! But that leads me to a second point, which is the next sentence in that footnote: "We’re not adding new money to the economy, we’re just shifting money around."
But if you're increasing the deficit in the 10-year budget window, and then not increasing it thereafter, in a Byrd-rule compliant bill, you *are* in fact "adding new money" (or well, adding fiscal stimulus) to the economy.
This is also risking branching into a more complex argument about whether fiscal stimulus has any effect on inflation or the price level at all. Standard economists would say the Fed's actions will determine that; for fiscal stimulus to have an effect, you need to hold the Fed "neutral" in a ceteris paribus manner. But what does that even mean? Keep rates the same? Keep the stance of policy relative to the economy the same? Keep the quantity of money the same? And why would we even believe the Fed will chose not to act in the first place?
Admittedly, this is pretty minor in the context of your overall argument - I'm quibbling about the text in a footnote, after all.
Quibbles are fine! As you note, it's all about windows; you're correct that the Byrd rule requires balance after ten years but anything can happen WITHIN that ten years. But realistically, the positive effect of the spending and the negative effect of the taxes are both going to hit within the ten year window; it's not like this will be paid for by a gargantuan tax increase that hits in year nine.
But I'll concede: I'm probably being a BIT dismissive about the net impact on the deficit within the ten-year window. I'm sort of mentally categorizing bills as "paid for" and "not paid for", and putting the Covid bill in the latter category and these two bills in the former. But maybe they don't deserve to be there -- let's see what Congress ultimately produces. As I mention in the other part of the footnote, if the "pay-fors" end up being bullshit, and the bills rely heavily on accounting gimmicks (not unheard of and I've already heard whispers of that relating to the infrastructure bill), then the "the effect on the deficit will be neutral" assumption will be incorrect, and at that point it would make sense to discuss the pros and cons of deficit spending and the possible impact on inflation.
Has Lindsay Graham ever actually backed any policies at all? (Other than tax cuts for the wealthy.) From my perspective (interested in politics but not making a hobby out of it) he seems to exist solely for the purpose of being that kid on the playground who smirks and declares it Opposite Day whenever a consensus is reached to play dodgeball rather than tag thirty seconds before the bell rings to announce the end of recess.
I don't have the slightest idea what Lindsey Graham's deal is. I know he was good friends with John McCain, which probably led him to feel that it's cool to be contrarian sometimes (or maybe that's why they were friends to begin with).
Sorry about the late post - I am catching up. I wonder how successful the virtue signaling is or will ultimately be. I live in a small community of 75% or so Republicans and the likes of Lindsay Graham or anyone who voted for the infrastructure bill could not be elected dog catcher regardless of how they might try to spin it. My community until recently has been run by business oriented Republicans that have had some success fending off economic decline in a farming community that lost a major employer and numerous small service businesses. Lately, populist Republicans are challenging incumbent Republicans and are winning by similar margins that Trump had against Biden. They are fighting economic development proposals that should have positive multipliers - actually they seem to oppose anything that is not social warfare. Locals will continue to vote for whatever Republican candidate in State or National election, but soon there will be no old school Republicans on school boards, city council, county commission, Sheriff, ... I struggle grasping the meaning of this beyond the significant local impacts and for whom the virtue signaling is meant. I'm not sure the Fox news / populist crowds are receptive.
I think I'm missing your point here. The senators quoted here complain about "inflation" and "tax and spend". Your argument against inflation which I'm pretty on board for you relegated to a footnote. You then make an argument that their other reason for not supporting the large bill was because it was about people. Why did you ignore their stated complaint ("tax and spend") to instead counter an unstated complaint ("shouldn't invest in people")? You could have spent some time discussing how the tax portion wouldn't have been much of a negative multiplier.
Also, a lot of this multiplier conversation confuses me. If there really is such a 1.5 multiplier on projects like this, then why isn't the money spent "all of it". Or at least as much as we can without reducing the country to a combination of utter poverty and infrastructure. Is there some kind of pareto-efficient frontier of tax-and-spend?
There might be some other differences between the two. Is infrastructure spending easier to end than SNAP spending? That Moody's chart you linked specifically says that's the multiplier in recessions and early cycle expansions. I'd be curious to see what the multipliers are in other financial circumstances..
My answer is that dividing things into "infrastructure" and "not infrastructure" is a somewhat arbitrary distinction. It was a decision made for political reasons, because Republicans MIGHT vote for infrastructure spending (and some already have), but there's virtually no chance of getting them to vote for social spending. So, yes: Their complaints about the reconciliation bill come from the standard list of Republican bullet points ("tax and spend", "inflation", "socialism"), but it's actually the political reality of needing to divide the spending into two categories to begin with that's revealing.
And the evidence I'm pointing to is that, from a vantage point that focuses purely on ROI (so to speak), a strong case can be made for many types of social spending using the same logic that conservatives accept when it comes to infrastructure spending. But everyone knows that infrastructure is more palatable to Republicans than other types of spending, hence the two tracks. I don't mean for the multipliers to be viewed as gospel; as I mention in the article, they're debatable. But the Moody's numbers are a stand-in for what I (and many people) believe to be true: Many types of social spending have a strong positive effect on GDP. Public schools are a good example; certainly, the decision in the 19th century to establish mass-public education has been enormously beneficial to this country in much the same way the Interstate Highway System has been.
The question you ask about "why not keep spending on infrastructure?" is a good one. I think the answer is: 1) Diminishing returns; 2) Opportunity costs; 3) The government might not be very good at picking the "best" projects, so you might get to the low ROI projects pretty quickly as you move down the priorities list; and 4) Maybe we actually WOULD be better off spending much more on infrastructure. Numbers 3 and 4 are basically different versions of "this isn't rational, this is Congress". I really don't know what a GDP-maximizing taxation and spending program designed by a benign (and knowledgeable) autocrat would look like, and it doesn't much matter; we're limited by the political realities of the moment.
In footnote one, you say "Senate rules actually require the reconciliation bill to be budget-neutral over a ten-year span." Respectfully, is it possible this might be incorrect? I think you're referring to the Byrd Rule.
If so, the limitation is on increasing the deficit in periods *after* the ten-year budget window, codified at 2 USCC 644(b)(1)(A)(E): "a provision shall be considered to be extraneous if it increases, or would increase, net outlays, or if it decreases, or would decrease, revenues during a fiscal year after the fiscal years covered by such reconciliation bill or reconciliation resolution, and such increases or decreases are greater than outlay reductions or revenue increases resulting from other provisions in such title in such year."
This is why e.g. the Republican corporate tax bill (TCJA) has so many tax cuts expiring after ten years. But Congress can still use reconciliation to increase the deficit in years zero through ten.
This is an excellent catch; thank you! I've updated the footnote to read "budget neutral AFTER ten years."
I really do want readers to flag this type of stuff; I get things wrong (see: the name of the newsletter). I might be creating a special kind of hell for myself by courting a wonkish readership and then encouraging corrections, but probably better to do that than to blithely accept being part of the firehouse of misinformation, right?
Thanks, glad I could help! But that leads me to a second point, which is the next sentence in that footnote: "We’re not adding new money to the economy, we’re just shifting money around."
But if you're increasing the deficit in the 10-year budget window, and then not increasing it thereafter, in a Byrd-rule compliant bill, you *are* in fact "adding new money" (or well, adding fiscal stimulus) to the economy.
This is also risking branching into a more complex argument about whether fiscal stimulus has any effect on inflation or the price level at all. Standard economists would say the Fed's actions will determine that; for fiscal stimulus to have an effect, you need to hold the Fed "neutral" in a ceteris paribus manner. But what does that even mean? Keep rates the same? Keep the stance of policy relative to the economy the same? Keep the quantity of money the same? And why would we even believe the Fed will chose not to act in the first place?
Admittedly, this is pretty minor in the context of your overall argument - I'm quibbling about the text in a footnote, after all.
Quibbles are fine! As you note, it's all about windows; you're correct that the Byrd rule requires balance after ten years but anything can happen WITHIN that ten years. But realistically, the positive effect of the spending and the negative effect of the taxes are both going to hit within the ten year window; it's not like this will be paid for by a gargantuan tax increase that hits in year nine.
But I'll concede: I'm probably being a BIT dismissive about the net impact on the deficit within the ten-year window. I'm sort of mentally categorizing bills as "paid for" and "not paid for", and putting the Covid bill in the latter category and these two bills in the former. But maybe they don't deserve to be there -- let's see what Congress ultimately produces. As I mention in the other part of the footnote, if the "pay-fors" end up being bullshit, and the bills rely heavily on accounting gimmicks (not unheard of and I've already heard whispers of that relating to the infrastructure bill), then the "the effect on the deficit will be neutral" assumption will be incorrect, and at that point it would make sense to discuss the pros and cons of deficit spending and the possible impact on inflation.