Cantor’s Big Speech

Eric CantorEric Cantor gave a speech and I think it sucked. What are the odds?

Ezra Klein provides a nice rundown of all of Cantor’s policy proposals. He isn’t too impressed either, but I think that he gives Cantor far too much credit.

There is one big way that the Republicans could signal that are changing: they could talk seriously about the jobs crisis in America. But they won’t do that. To some extent, they must believe that the public wouldn’t really buy it. After all, for the last few years (and especially the last couple of months) the Republicans have been hammering on this issue. But it is always in a vague and negative way. John Boehner uses pretty much every opportunity to slam President Obama for not doing anything to create jobs.

The problem for the Republicans is that it has been all to clear that they are against any legislation that would actually help the jobs crisis. Instead, when they talk about jobs, everyone rightly hears, “Let’s cut the taxes of rich people!” So it isn’t surprising that Cantor didn’t touch this issue. The truth is that the only Republican idea for creating jobs is to cut the taxes of rich people. Since they cannot think outside that paradigm, it is probably all for the best to say nothing.

There was one policy proposal that is a decent idea (although I figure by the time the Republicans get through with it, it will be worthless). Cantor embraced an idea that Jerry Brown has been pushing here in California: weighted-student averaging for federal education funding. This would give schools more money for poor and disabled students. Hopefully, this would encourage better schools to go after a more diverse student population. My problem with it is that our educational funding system is broken. This is really working the edges when what we really need is fundamental reform. But any non-crazy idea from a Republican is welcome.

The rest of the stuff was worse and some of it was much worse. Cantor wants to repeal the taxes in the ACA (Obamacare). I see this as nothing more than a backdoor to destroying the program. Regardless, just on the surface, what he is offering is another tax cut for the rich. And then he has an idea of giving states more rights in how they handle Medicaid. This is just a call for partial block granting. In both these cases, Klein sees progress because the Republicans are back tracking—not being quite as extreme as they have been. All I see is a party trying to be a little smarter about optics.

So Eric Cantor did indeed give a rebranding talk. And as I’ve argued over and over again since the election: it doesn’t matter. Mitt Romney didn’t lose the presidency because of the 47% comment or any other gaff. He lost because he was the Republican Part personified: a privileged rich man inside a system rigged for him. And the Republican Party has no interest in not being the party of Mitt Romney. Why would they? If they changed that, what would they be?

Where does that leave the country? We now have pretty much an oligarchy. Both parties are committed to the idea that those who are rich should stay rich. And actually, the Democratic Party is doing a better job because the only way to keep the rich rich is to keep the poor reasonably happy. The Republicans seem to think that they can keep the poor from storming the Bastille with the Very Big Army. And maybe they’re right; they might also be right about just how much pain the poor will take. But I don’t think the Republican effort to rebrand without changing their policies is going to get them very far electorally.

Debt Interest Burden

Dean BakerYesterday, Dean Baker published one of his weekly “Robert Samuelson is an idiot” articles, It’s Monday and Robert Samuelson Is Confused. It’s a good article. I always look forward to Mondays because Samuelson is a Very Serious Idiot and Baker really does have something to say about him every week. So click over and read it, if you like. However, I bring it up, because Baker touched on something that I would like to expand on.

Baker often pushes an important idea that very few people talk about: government debt versus debt interest burden. Let me explain this with an example. Assume a country named Freedonia. Currently, long-term (30 year) bonds on Freedonia debt pay 1%. Freedonia needs to borrow $100, so they issue a bond for it. This means that their debt is $100 and their debt interest burden is $1 (1%) per year. Now let’s suppose that the Freedonia economy starts to improve so that next year, the bond rate jumps way up to 3%. The government still has all its $100 debt locked into a 1% bond, so nothing changes—at least not for another 29 years when the $100 principle will be worth almost nothing anyway.

The person who holds the $100 bond will lose out in this situation. He is now making $1 per year. But if he made the same investment now (in long-term bonds), he would get $3 per year. So his bond is effectively only worth $33 now. Indeed, if he wanted to sell it, he would only get $33 for it (See Afterword below). So the government of Freedonia could borrow $33 (by issuing a new bond) and buy back last year’s $100 bond. Thus, the government would have decreased its debt by two-thirds! Woo! Now Freedonia only owns $33!

But what is Freedonia’s debt interest burden? They would have to purchase a $33 bond at 3%. So they would again owe $1 per year. In other words nothing at all has changed. What this shows is that the raw amount of money that the government owes is meaningless. What matters is how much the interest burden is. And here’s the thing: ordinary people understand this. This is what people do all the time with consolidation loans. They aren’t lowering the total amount that they owe; they are lowering their debt interest burden so that they can pay off what they owe.

The Very Serious People who are forever (and ever and ever) harping on our debt conveniently forget all about our interest burden. Actually, it is worse. Many times, people argue that bond interest rates will suddenly go up and greatly increase our borrowing costs. This obviously isn’t the case with 10 and 30 year bonds.

I think this example clarifies the situation very well. What is our total debt? About 70% of GDP. What is our total debt interest burden? About 1.5% of GDP. With such a manageable “problem,” you have to wonder why these Very Serious People want to inflict so much suffering on the nation. Just kidding: we know very well why they do this.


Bonds don’t work exactly the way I’ve claimed here, but the principles are valid. The truth is that the $100 bond would not sell for $33 the second year; it would sell for something more like $50. That means in reality, the government could reduce its debt only by raising its interest burden substantially. So the real life case is even more ridiculous than the Freedonia case.

Humor on the Court

Sonia SotomayorLast night, Supreme Court Justice Sonia Sotomayor was on Colbert Report to hock her new book, My Beloved World. Because any interview with Colbert is necessarily orthogonal to everything, they spent the first half of the segment talking about bringing more spectacle to judicial hearings.

Sotomayor mentioned that some of the justices do make jokes. (She didn’t mention it, but Scalia is know for his jokes. Hence the humor-asshole connection.) Colbert asked who was the funniest judge. She demurred, but then added, “But do you know that there’s an article that actually measures the number of laughs? I’m pretty low on that scale.” Well my friends, I have found the data!

According to DC Dicta, the number of laughs this term breaks down as follows:

25 Antonin Scalia
19 Stephen Breyer
07 John Roberts
06 Anthony Kennedy
04 Sonia Sotomayor
01 Elena Kagan
01 Clarence Thomas
01 Samuel Alito
00 Ruth Bader Ginsburg

Remember: what passes for a Supreme Court joke is not what most people would call funny. Consider Thomas’ joke. It consisted of 4 words, “Well, he did not…” I could put the joke in context, but trust me: it would not help. Insiders claim it was a jab at Yale Law School. Apparently, Thomas is angry at his old law school for treating him like an affirmative action student. (Ain’t it nice when you can hate both sides in a conflict?) Of course, that makes the joke just as much a bitter remark. Again with the humor-asshole connection!

Regardless, Sotomayor is right in the middle of the field. Not that it matters. I’d take Ginsburg’s fine, open mind any day over the laugh-filled antics of authoritarian blabbermouth Scalia.

Here’s the clip: