Chanting Points Memo: Chickens Do Not Equal Causation

Dave Mindeman at mnpAct (?) illustrates why trying to discuss economics with Democrats is such a deeply, abidingly frustrating diversion:

The business community worked hard to get Republicans elected during the last election…Now they say they are nervous about DFL Legislative control.

This is, bear in mind, the same DFL administration that, the week President Obama told America’s entrepreneurs “you didn’t build that”, repeated exactly the same message to a major privately-owned Minnesota corporation.

If they’re nervous, it’s for a reason.

As usual, business get it wrong when it comes to which Party is best for business. And, frankly, most of the perception problem stems from the fact that business always does better when government policies are promoted which favor their clientele and customers…not themselves.

That’s an interesting claim.  Let’s watch Mindeman elaborate on it before we pull the rug out.

Republicans and business generally collaborate on the superficial. They want property tax breaks….they want to limit taxes on the wealthy….they want tax incentives. All of that can free up cash and maybe increase the bottom line to a temporary extent….but they are not really pro-growth policies.

Well, yes and no, and irrelevant.  Republicans and business also favor paring back excessive regulation, and reforming taxes in the long term so that they don’t structurally hinder growth. Mindeman didn’t mention that – but to be fair, no Democrat ever does.

The dynamics of the economic engine are heavily fueled by demand. Business can create demand to some degree but unless their is a thriving middle class that has the means to purchase the goods produced, the economy goes nowhere.

Which leads us to a chicken-egg question; what creates a healthy and prosperous middle class?  Especially given that so many of us in the middle class work for, well, businesses?

MIndeman, being a Twin Cities liberal – where a sclerotically-disproportionate share of the “middle class” is employed by government, has an answer; we’ll come back to that.

First, we have a chanting point to dispense with:

When Democrats are in power, business may not get the preferential treatment they are used to by the GOP, but the broader economy usually does better.

Ah, well, then.  That settles it.

Well, no.  It doesn’t.  This is a chanting point that’s been popping up on the left a lot lately.  The left’s been circulating a graph that shows the economy grew faster under Democrat presidents than Republicans.  It tries to link a correlation – numbers on a time-line – to the President at the time.

Of course, it’s intensely misleading:

  • Truman benefitted by an immense post-war market with explosive pent-up demand, at a time when the US was the world’s only functioning economy.  His first year was a deep, sharp recession followed by manic growth.
  • Ike had a generally good economy, hobbled by a recession late in his second term.
  • Kennedy benefited from Ike’s balanced budgets (which he largely continued), but also immense Cold War and Space Program spending, as well as the fact that Japan and Germany were still not recovered from the war, and India and China were still mired in socialist contortions.
  • LBJ – more of the same.
  • Nixon, on the other hand, was where a long period of stagnation started, exacerbated by the fact that Germany and Japan both finished their recoveries from World War II and became robust export economies.  The Oil Crisis also hobbled things during Nixon’s years.
  • Carter was a one-president punch line, economically speaking.
  • The Reagan Recovery is a matter of record.
  • Bush I’s economy saw Japan and Europe compete very effectively with the US, Korea and India and Singapore starting to emerge as serious competitors, and beyond that suffered from a recession and a post-cold-war realignment away from defense spending.  …
  • …which was the “peace dividend” that Bill Clinton cashed.  Of course, he tried to cash it on nationalizing health care – but was forestalled by a GOP Congress, which cut the legs off Clinton’s inner socialist and caused him to triangulate hard to the right, becoming a very conservative president on economic matters.  He governed much more as a conservative, at least economically, than…
  • Dubya, who spent money like a Democrat cliche.  But in terms of growth, his presidency was five good years sandwiched by three bad ones; the post-dotcom, post-9/11 recession, and of course the beginning of The Great Recession.
  • Obama?  Honk if you know a long-term unemployed person.

The chanting point  – “the economy does better under Democrats” – is perfectly true, provided you completely ignore the macroeconomic and political context.

 The criticisms of the Obama economy have been largely unjustified. Comparing Obama’s 4 years to the previous 4 years in an economic sense is no comparison at all.

True, but not in the sense Mindeman intends.  The unemployment rate is vastly higher, and has remained high for a record length of time.  The “Growth” isn’t enough to cover population growth – which means we’re still in a net decline.

Worse – and by worse, I mean “in an unprecedented way that should scare the crap out of anyone who actually follows these things?”  This is the first deep recession in post-war history that hasn’t been immediately followed by a sharp recovery.  By this point in the Reagan Recovery, the economy was verging on overheating.  We’re still in the doldrums today.

So I’d suggest, with all due respect, that if business is nervous about Democrats holding unfettered power, it’s because so far this cycle, it’s been a complete disaster.

And while Mindeman is not a policy maker, his post – let’s assume it reflects the mindset of the DFLers who do make policy – give business plenty of reasons to be nervous.

Governor Dayton and the Minnesota legislature aren’t looking to punish the business community. They are as much pro-growth as any GOP hard liner. Although the last legislature talked of slowing spending and “fixing” the deficit, it is clear that what they did was a series of bandaids which will keep things in check for a brief time…only until school shifts and tobacco interest comes due.

(Notwithstanding, of course, that the DFL proposed a bigger shift…)

Structural fixes are key to the Minnesota budget and new revenue is imperative. The Governor and the legislature are not just going to raise taxes as a solution to everything, but they will use that tool if needed.

As as previous generations of Democrat legislative majorities showed, it’s always needed.

And the DFL’s sole plan for “growth” is to provide “spending money” to the “middle class” (or at least the part of the “middle class” that works for government) in the form of money redistributed from the private to the public sectors; to make sure government is given what it says it needs, first and foremost and always.

Look for a forty-billion-dollar budget, wholesale redistribution of tax money from the parts of the state that work to Minneapolis, Saint Paul and Duluth, and massive increases to the state’s regulatory apparatus…

…whose regulators are, to be fair, largely “middle class”, and will thus prosper.


10 thoughts on “Chanting Points Memo: Chickens Do Not Equal Causation

  1. Oh, yes, let’s look at how those economies controlled by Democrats are doing in, say, California and Illinois. And for those who say Socialism is failing only because there isn’t enough Socialism, let’s just look at how Italy and Spain have been prospering with all those helpful wealth transfers to the lower and middle class. And I’m sure that France’s recent downgrade by Moody’s is just a little glitch.

  2. Ditto Night Writer. As a native of Detroit, I have seen this show before. Demonize business while pointing to the past and noting that – “hey, we had higher taxes in the ’50’s and GM’s biggest problem then was too much market share!” The fact that back then GM (as well as poorly managed Ford and under-capitalized Chrysler) had no European or Asian competition apparently never enters into the calculus.
    Mickey Kaus at the Daily Caller gave me the best laugh I’ve had in a while earlier today when he did a take down of NY Times columnist Nicholas Kristof. Kristof catalogs a series of tax rate reductions (top marginal income, capital gains, etc) that have led to reduced public spending and income inequality. Then in the penultimate Liberal sentence notes “…(granted, other factors are also at work)”.

  3. Davey boy’s public screwal education is showing! Besides illustrating the fact that he was out smoking joints instead of attending his math and/or economics classes, “there” definitely is a problem with his grammar.

  4. For all his verbiage, what I walk away with is: “Duh!” When you tell a story, it’s much better if you have a POINT.

  5. Come on guys. What business or family wouldn’t do better if only they had more of their income/profit confiscated?

  6. True story:
    At a recent Minnesota government union meeting, attendees were encouraged to applaud themselves.
    Why? For getting more DFL Representatives and Senators elected.
    Why? Because now union contracts will “breeze through” the state legislature.

    Government Unions: electing new management every few years based on how much they promise to pay government union employees. What could possible go wrong?

  7. One sentence, so much irrationality:
    As usual, business gets it wrong when it comes to which Party is best for business.
    Spoken like a true commissar. ‘I will tell you what your interests are, gulak!’

  8. “trying to discuss economics with Democrats is such a deeply, abidingly frustrating diversion”

    You can say that again and again.

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  10. Pingback: Correlation, Causation – Whatever | Shot in the Dark

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