Romney's Favorite Myth Exposed: Economic Growth Isn’t About ‘Makers’ vs. ‘Takers’

Romney's Favorite Myth Exposed: Economic Growth Isn’t About ‘Makers’ vs. ‘Takers’

The release of the video in which Governor Romney denigrated the 47 percent of households who don't pay income taxes has set in motion a silly debate about who pays taxes and who doesn't. This debate is a distraction from the real issues because paying taxes and receiving government benefits like Social Security and Medicare are less important in terms of income distribution than the way the government structures the economy.

In the last three decades the economy has been restructured in ways that have led to a massive upward redistribution of income. Serious public debate should be focused on these mechanisms.

The Impact of Trade Policy

To start with the most obvious, trade policy has been deliberately structured to place U.S. manufacturing workers in direct competition with low paid workers in the developing world. The predicted and actual outcome of this policy has been the elimination of millions of manufacturing jobs and wage depression of a large segment of the workforce as displaced manufacturing workers are forced to compete for jobs in retail, restaurants and other sectors of the economy.

The effect of this trade policy is further enhanced by the decision to have an overvalued dollar (aka a "strong dollar") that dates from when Robert Rubin became Treasury Secretary in 1996. An overvalued dollar hurts those in sectors that are exposed to trade, while benefiting professionals like doctors and lawyers who rely on professional restrictions to largely insulate themselves from international competition.

About Those Subsidies

While trade is a huge deal, it is far from the only story. The government gives $60 billion a year in subsidies to the large Wall Street banks in the form of "too big to fail" insurance. This means that the banks can borrow at lower interest rates because creditors assume that the government will bail them out if the bank gets into trouble.

Patent monopolies on prescription drugs transfer close to $270 billion a year from patients to the drug industry. Almost all drugs would sell for $5-$10 per prescription without this form of protection from the government.

Don't Forget About Interest Rates

The Federal Reserve Board is also an incredibly important force in redistributing income upward. As a matter of policy it will raise interest rates to slow the economy and throw people out of work, if it believes that inflation might rise above its 2.0 percent target. Higher unemployment puts downward pressure on the wages of workers in general. By contrast, inflation poses a threat to banks and other lenders, hence the Fed's obsession with ensuring that the inflation rate remains very low.

The structure and enforcement of laws around union organizing and strikes can also be very important in determining the distribution of income. While Canada is very similar to the United States in many respects, more than 30 percent of its workforce is represented by a union. This compares to just 10 percent in the United States. The main difference is that Canada's labor laws make it much easier to organize a union. Since unionized workers tend to get higher wages, the decline in unionization since the 70s has likely been an important factor in depressing wages.

The New U.S. Economy

These policies and others that have been put in place over the last three decades lie behind the enormous upward redistribution of wealth that has taken place over this period. Their impact dwarfs the impact of the tax increases on the wealthy that are being proposed by President Obama.

A presidential campaign is a great time to have a national debate over these policies. Unfortunately, we seem destined to have a silly debate over whether poor people should be paying more in taxes.

Governor Romney may have badly damaged his campaign with his videotaped remarks. Unfortunately the rest of us will be the big losers if his comments preempt a serious discussion of the upward redistribution we have seen over the last three decades.

If Romney knows so much about business and economics how come he thinks it is just 47% of the population that gets some kind of government benefits including companies like Bain.

What liberal media? CNN Lets Neo-Nazi Dinesh D'Souza Peddle Conspiracy Theory That Obama Is "Anti-American". Why is there this strong current in journalism not to call people out on the most outlandish lies.

Sen Scott Brown (R-MS) is nothing more than an ATM machine for the too big too fail banks. I guess that is what makes brown such a "nice" guy, he is so willing to bend over for special interests.

Decent Moral Americans Just Say No To Sen. Scott Brown a Serial Liar Without Honor

Decent Moral Americans Just Say No To Sen. Scott Brown a Serial Liar Without Honor

A major theme in Republican complaints about the $862 billion stimulus program is that it didn't deliver enough jobs. Republican Sen. Scott Brown of Massachusetts took that view to an extreme, claiming that it didn't create any new jobs. Here's what he said during a Feb. 4, 2010, news conference, shortly after he was sworn in.

“The last stimulus bill didn’t create one new job, and in some states the money that was actually released hasn’t even been used yet,” Brown said.

ABC's Jonathan Karl immediately followed up. “It didn’t create one new job?” Karl asked.

“That’s correct. We lost another 85,000 jobs again, give or take, last month,” Brown responded.  “And in Massachusetts, it hasn’t created one new job and throughout the country as well. It may have retained some, but it hasn’t created any new jobs."

There are two ways to analyze this question -- looking at jobs created directly by the stimulus, and looking at jobs created in the broader economy since the stimulus bill took effect.

We'll look first at jobs funded directly by the stimulus.

According to Recovery.gov -- the Obama administration's Web site that tracks the stimulus effort -- the American Recovery and Reinvestment Act created or saved 634,042 jobs between Feb. 17, 2009, and Sept. 30, 2009, and it funded 595,263 jobs between Oct. 1, 2009, and Dec. 31, 2009. The data come from reports filed by the primary recipient of stimulus funds such as state and local governments and private-sector companies.

These numbers aren't perfect. They meld bits and pieces of part-time jobs into "full-time equivalent" jobs, and the two periods use different criteria for job counting, due to a change dictated by the Office of Management and Budget in December 2009. (For the earlier of the two periods cited above, the number refers to jobs created or saved; for the later of the two periods, it refers to the number of jobs funded by the stimulus without reference to whether that funding created or saved a job.) Also, the Government Accountability Office, the investigative arm of Congress, concluded in November 2009 that "there are a range of significant reporting and quality issues that need to be addressed" in this reporting system.

So these statistics may overstate the actual number of jobs created. But not by enough to make Brown's zero-jobs claim accurate.

So there's strong evidence that the stimulus has created lots of jobs directly through federal spending. What about the economy as a whole?

Economists have been estimating the impact of the stimulus on jobs by comparing two numbers: current employment statistics and an estimate of what those employment numbers would have looked like had there been no stimulus.

In a report released on Jan. 13, 2010, the president's Council of Economic Advisers estimated that between 1.77 million jobs and 2.07 million jobs were created or saved by the stimulus through the fourth quarter of 2009.

Separately, the council's report cited four independent analyses of the same question. These estimates were by the nonpartisan Congressional Budget Office, as well by three private-sector economic-analysis firms. Here's what those groups found:

• CBO: Between 800,000 jobs (low estimate) and 2.4 million jobs (high estimate) saved or created.

• IHS/Global Insight: 1.25 million jobs saved or created.

• Macroeconomic Advisers: 1.06 million jobs saved or created.

• Moody's economy.com: 1.59 million jobs saved or created.

A couple of caveats: These estimates are based on economic models that vary somewhat from study to study, and not everyone buys the idea that it's possible to measure how the economy would have fared in the absence of a stimulus.

Indeed, some economists, including many conservatives, believe that the multiplier effect from the stimulus is small or nonexistent. "Every dollar Congress injects into the economy must first be taxed or borrowed out of the economy," writes economist Brian Riedl of the conservative Heritage Foundation. "No new purchasing power is created; it is merely transferred from one part of the economy to another. ... Removing water from one end of a swimming pool and pouring it in the other end will not raise the overall water level -- no matter how large the bucket. Similarly, borrowing money from one part of the economy and redistributing to another part of the economy will not create new growth -- no matter how big the stimulus bill."

We acknowledge that there's some dispute on this question. Still, the independent estimates we've seen have credibility, and they all agree that at least 1 million jobs have been created or saved. That, in combination with the hundreds of thousands of jobs cited on recovery.gov as being funded directly by the stimulus, contradicts Brown's assertion that the bill "didn’t create one new job."

But if Brown had chosen his words more carefully, he could have scored better on the Truth-O-Meter.

He's right that the economy as a whole has been losing jobs almost every single month since January 2008. According to a chart prepared by the Obama White House, there has been positive job growth in only one month during that period -- November 2009. (In his news conference comment, Brown actually underestimated the net job losses in December 2009, which was the most recent month for which data was available before he spoke; it was about 150,000, rather than 85,000.)

So if Brown had said that the national economy hasn't seen any net gain in jobs since the stimulus bill was passed, he would have earned himself a True.

But that's not what Brown said. He said the stimulus bill "didn’t create one new job" and, when asked to clarify, he said it "hasn’t created any new jobs." It's perfectly reasonable to question whether the $862 billion was well spent and whether it is good economic policy. But that money has clearly resulted in tens of thousands of jobs that wouldn't exist otherwise. It's preposterous to claim that no new jobs came out of it. We find his claim Pants on Fire!

The stimulus both created and saved jobs. Brown and his fellow conservatives with their anti-regulation and do not enforce regulation policies caused the economy to crash. Now like many conservative cowards he is trying to shift blame. The worse one can say about Obama and Democrats is they are not repairing the house conservatives burned down fast enough. Why does brown lie so often. because he has no character or honor. he cannot win talking facts. So like his hero George Bush he simply lies all the time about everything. Brown is an empty suit. he has no ideas and no leadership skills. he has never accomplished anything. never come up with a great idea. he is incapable of inspiring or living up to our Jeffersonian ideals. Brown is a cynical opportunist who only cares about one thing - Scott Brown and how much money and power he can get by way of public office. Want government to work better/ Want government for the people instead of special interests like Brown's friends the Ant-American Koch brothers. Than get rid of brown in 2012.

Conservatives hemorrhaged jobs and President Obama brought us back from the brink, but little Scotty brown doesn't have the integrity or maturity to admit that.