As you’ve probably heard, the new Republican House budget uses “dynamic scoring.” In a general sense, this is a process by which budgets take into account the indirect economic effects of the government policies. So if the the government cuts taxes, people will have more money that they will spend, and that will make its merry way through the economy. Similarly, government spending cuts also works their way through the economy — in the opposite direction. I actually have no problem with this. But as I reported back in January, this is not the way things currently work, Republican Disingenuous Changes at CBO. The Republicans are using dynamic scoring when it comes to tax cuts, but they don’t use it when it comes to the negative effects of spending cuts.

But there is an even bigger problem as Josh Barro reported at The Upshot earlier this week, Tax Cuts Still Don’t Pay for Themselves. It is primarily about a study by the conservative Tax Foundation that found that, for example, tax cuts on business investments would increase business investments so much that it would generate more tax revenue that would offset the tax cuts. But it is explicitly reversed engineered to find that. The question is whether the CBO will follow in this direction.

I think it is clear from the way that the Republicans have managed things thus far that if the CBO doesn’t descend into nuttyland, Congress will force them to do so. I wrote about the new budget earlier this week, Another Ridiculous Republican Budget. In it, I focused on how Republicans want to savage the federal government’s budget without a care in the world about the negative effects on the economy. And it is pretty simple. Imagine that you cut both taxes and spending by one dollar. A dollar will be removed from the economy because of the decreased spending. But a dollar will not be added back into the economy via the tax cut. Most of it will, but some of it will be saved.[1] So even such budget decisions will hurt the economy. And this new budget is mostly spending cuts — not that much in terms of tax cuts.

The whole thing is ridiculous. Apparently, the only point of “dynamic scoring” was to allow the one overriding Republican commitment — tax cuts — to look like they don’t cost as much as they actually do. Meanwhile, they continue to claim that no amount of spending cuts will hurt the economy. I’ve noticed this sort of thing often before. And there is a name for it: theology. There’s no economics in sight.

This is the state of things. One thing that bothers me is that it is asymmetrical. I just can’t imagine the Democrats changing the CBO rules to only use dynamic scoring on spending and not on tax cuts. That’s because Democrats are still wedded to reality. The economics profession — regardless of its many other failings — accepts that both kinds of government policy affect the economy. How could it be otherwise? Yet the Republicans just see what they want to see. The question was always going to be whether the Republicans were just going to turn the CBO into a propaganda unit. But we knew the answer to that back in January when they decided to do this one-sided dynamic scoring.

Once again, my mind flashes back to an insight I had long ago: this is how great empires fall. The Republicans fully reflect the shortsighted view of the business community. And the Democrats, when they don’t share that view, are unwilling to counter them on it. Meanwhile, our infrastructure crumbles, our children fall further and further behind, and our poor just die unnecessarily. But it is a great time to be rich! And that’s all the power elite care about.

[1] If the economy were booming, the private sector for use that saved dollar. In that case, the whole example would be a wash. But clearly, the economy is not booming. And the way economic policy is run in this country, the economy is rarely booming.

Last week, the economist Timothy Taylor wrote, When a Summer Job Could Pay the Tuition. He noted that when he graduated from high school (1978), one could work one’s way through college with a minimum wage job: part-time during the school year and full-time in the summer. Now that isn’t possible. He used the graph below, which he took from a lecture by David Ernst. What it shows is a time series of the number of hours a student would have to work to pay the tuition at the University of Minnesota. When Taylor was in college, it was about 300 hours per year. By the time I was in college — just a decade later — it was double that. And today, it is roughly 1,600 hours.

There are two aspects of this: tuition increases and the minimum wage decreases. I went to the University of Minnesota’s website and found this convenient document (pdf) that lists the tuition rates dating back to 1960. I chose a base year of 1968, because that was the high water mark for the minimum wage. The tuition at that time was $294 for instate undergraduates. Today, it is $12,060. That represents an averageincrease of 8.4% — a bit more than double the rate of inflation. If tuition had only gone up at the rate of inflation, it would be only $1,974 now. So tuition is a big part of the problem here.

If the minimum wage of $1.60 per hour in 1968 had gone up at the rate of inflation, it would now be $10.75. If the minimum wage had gone up at the rate of productivity growth (and it always did in the decades before 1968), it would be at nearly $22 per hour. Let’s look at these numbers. In 1968, $294 would have required 184 hours of work. Today, $12,060 requires 1,663 hours at $7.25 per hour. If the minimum wage had just gone up at the rate of inflation, 1,122 hours would have been required. And if the minimum wage had gone up at the rate of productivity growth, 548 hours would have done the trick.

Clearly, both education inflation and the regression of the minimum wage have been major factors in making a college education far less affordable. From the looks of it, I think that the minimum wage is the larger issue. It’s telling that the focus of the educational affordability discussion (even among liberals) is so focused on tuition. Whenever I hear this kind of thing, I think the subtext is, “Those college professors make too damned much money!” I have no special love for academics, but I’m skeptical when the focus for helping the poor is tearing down the middle class. The minimum wage hasn’t been decoupled from the economy so that college professors could make more money.

I have to give credit to Ernst and Taylor, because this is a good way to look at the question of affordable college educations. And I think what it shows is not so much that college tuition is growing too fast — although it is. It is more that the rewards of our economic success are not being widely shared. Notice that a big part of the increase in tuition in state schools here in California is not because education is getting more expensive; it is because the state is paying less and less of the bill. When I was paying $500 per semester in the 1980s, I was paying only a fraction of the cost of my education. Today, students pay a much higher percentage of the actual cost. (Very roughly, adjusted for inflation, students pay ten times what I did.)

There is a weird kind of tension in any discussion of college affordability. There are many people who claim that inequality is just a question of education and if we all got college degrees, everyone would be rich — or at least “middle class.” At the same time, our inequality has made getting an education extremely hard. But I think we have to stop thinking this way. The problem is that we have unsustainable levels of inequality. Making education more affordable is a laudable goal. But it is no substitute for addressing economic inequality head on. And in most cases, I think the loud voices crying about skyrocketing tuition are using the issue as a distraction to keep us from dealing with the more fundamental issue.

I really liked Jeff Madrick’s book, Seven Bad Ideas. Its subtitle was, “How Mainstream Economists Have Damaged America and the World.” It was written at the perfect level for me. And overall, it was widely praised. But some economists had a problem with the book because, they claimed, no actual economists believed these ridiculous ideas. The most vocal critic was Brad DeLong. And I’m sympathetic to this argument. The truth is that most economists don’t believe in things like Say’s Law, which says that supply creates its own demand. But there is a more important level where DeLong was totally wrong: which ideas of economists have poisoned policy decisions over the last few years?

When it comes to the nexus between economics and policy, the question is not what the consensus of economists is. The question is whether politicians can find mainstream economists who are willing to tell them what they want to hear. And they are. It isn’t necessary, as it is with climate change, to set up special think tanks designed only to muddy the water. As I’ve noted in the past, no less respectable an economists than Greg Mankiw is always willing to finesse his arguments for the greater good of his conservative policy preferences.

Monday morning, Brad DeLong himself wrote, Time for a Rant!: Why Oh Why Cannot We Have Better Economists? It is regarding an article by just such an economist, David K Levine. He is the John H Biggs Distinguished Professor of Economics at Washington University in St Louis. Pretty impressive. Yet what he has to say on the subject of monetary stimulus is a fallacy known to economists two centuries ago. As best as I can tell, Levine is doing what I see a lot with libertarians: creating simplistic models of the economy that have never been right and then drawing broad conclusions from them.

In his paper, Levine creates a model economy with four people who barter with each other. Then he disrupts the economy. Then he says that adding money into the economy would not fix the disruption. To me it’s just bizarre. How do you create a model based upon barter to prove that monetary policy doesn’t work? Regardless, DeLong changes the model slightly and shows that — What a surprise! — monetary policy actually does work. It is amazing to me that economists do this all the time: decide that something that seems obvious really isn’t, and claim to prove it with some trick. One doesn’t see climate scientists saying, “There can’t be global warming because the earth has to give off as much energy as it receives!”

DeLong ended his rant by asking a question:

I think we all know why this is. Economics is poisoned by political ideology. And it’s kind of funny, because in my experience, economists are the most pretentious of the soft scientists. But I think these things are related. Economists tend to live in their ideological bubbles even while thinking that they are just looking at the facts. And that’s why economics is so dangerous. Sure, Brad DeLong beat up Levine very badly. But I doubt it will matter to Levine. And it certainly won’t matter to Rand Paul, who will find Levine’s fallacy very useful in pushing his hard money policies.

Jesse Cross-Call at the Center on Budget and Policy Priorities wrote an interesting article, Medicaid Expansion States Are Saving Money. It summarizes a couple of research papers that show that in the five states studied, the state governments themselves saved money. For example, it is estimated in the 2014-2015 fiscal year, Arkansas will save $89 million. That comes to $30 for every man, woman, and child in the state. Or looked at another way, it is about a quarter percent of the state’s budget. So it isn’t an insubstantial amount of money. And remember: this is in addition to all the people who, you know, get health insurance. And it will also stimulate the local economy.

There are two ways that the states save money. The first is that Medicaid pays for procedures that the state would normally have to pay for. Consider a crazy person who has to be hospitalized. Before, the state would have to pay for that treatment. But mental health is paid for with Obamacare. So the state doesn’t have to pay. Very simple. The second way that the states save money is by having tax receipts increased. The extra medical care that is consumed because more people have insurance leads to more tax revenues.

Hooray! Of course, we are left with the same frustrating status: 22 states have not accepted the Medicaid Expansion. This is free money that their citizens are being denied. What’s more, it is money that their citizens are already paying to the federal government, regardless of what the states do. And now we know that these states are also losing out by having to pay for care they don’t need to, and keeping their economies artificially depressed. And all for what? So they can stand up for the principle that they really, really don’t like President Obama? I expect better from kindergarten children.

The states that prefer to have hissy fits are exactly the states you would think: the deep south and the plains states where the population is diffuse but the neo-Nazi and Klan membership is strong. All of this makes me think that their irrational behavior regarding the Medicaid expansion may not be so much about their hatred of Obama and more about their hatred of “those people” and the thought that they might actually get help they need and deserve. The outliers in the pattern are Wisconsin and Maine: two states where the people keep voting in governors who are determined to destroy the people of the state. What is it going to take for those people to wake up?

I wonder how long these states will hold out. This ought to go on at least while Obama is president. But after that, it is going to be increasingly hard to maintain that Obamacare is the penultimate step to Stalinism as they see all the other states getting their people insured, their economies stimulated, and their government costs lowered. Of course, once this does happen, we will be left with the same old thing we are always be left with: complete denial. The conservatives will never admit that they spent years athwart progress yelling “stop” — while all around them people died. It will be the same old thing: new conservatives will say, “Of course it was wrong to be against this free market healthcare law, but this new law?! Never!”

The question is whether America as a whole will continue to act like the voters of Wisconsin and Maine. Enjoying your “right to work” Wisconsin? It’s coming for you too Maine. And while we wait, working poor people will die because of lack of insurance. If you voted for Walker or LePage, well, you’re hopeless. If you didn’t vote, I don’t know what you are doing reading this; you should be out doing penance — feeding the poor, curing the sick, shipping me piles of cash. As for the rest of you, well, I feel your pain.

Sometimes, I feel like beating my head against the wall. Early this month, Seattle published an article by Sara Jones, Why Are So Many Seattle Restaurants Closing Lately? The article starts by discussing five restaurants that have closed or are closing. None of them are closing because Seattle raised its minimum wage. Then the article spends six paragraphs — about a third of the article — discussing “concerns” that local restaurant owners have about the rising minimum wage. It also quotes a hack from the Washington Restaurant Association. And then the article ends with two paragraphs about how great the Seattle restaurant scene is.

The article itself disproves any notion that Seattle is seeing a mass exodus of restaurants because of the minimum wage. In fact, the article disproves the notion that Seattle is seeing any mass exodus of restaurants for any reason at all. Jones reported, “In Seattle, with approximately 2,300 restaurants, that translates to approximately 400 closures or sells expected — ‘in a good year,’ [CEO of Washington Restaurant Association Anthony] Anton says.” Okay, so that’s 33 per month. And this article is about five restaurants closing in the period from February through May — four months. There should be 133 restaurants closing during that time. Color me unimpressed.

DJW at Lawyers, Guns, & Money covered the story, Are Seattle Restaurants Closing in “Record Numbers”? (Spoiler: No). He made a brilliant observation. Jones ended the article with a blitz of news about restaurant openings. DJW:

I figure that the history of the Seattle article was as follows. Anthony Anton, president and CEO of Washington Restaurant Association, sent a press release to the magazine. And editor gave it to Jones. She went out looking for this mass exodus of restaurants closing. She didn’t find such a thing. But she did get some nice interviews with some restaurants that were leaving. So she wrote her article. It should have just been in the style section, “Some Restaurants Leaving Seattle as Others Arrive.” But instead, she created an article with what is a non sequitur about the minimum wage in the middle of the otherwise banal story.

Of course the “news” that Seattle restaurant owners are fleeing the city is big news in right wing media. They already knew it was going to happen. And regardless of whether it has happened or ever will happen, they will always know that it did. The Tea Party News Network reported, Seattle Restaurants Closing in Record Number as $15 Minimum Wage Approaches. It gets the facts all wrong. There is nothing to indicate that record numbers of restaurants are closing and it incorrectly states that the minimum wage is going up to $15 on 1 April (it is actually going up to $11). And then the article goes on incorrectly paraphrasing Seattle and deceptively quoting it.

But the worst of it is the tone that the author knows economics, unlike those ignorant people who want to raise the minimum wage. The article starts, “$15 per hour, hell, why not $50 or $100?” This is a common claim of conservatives. But unless they are going to argue for no minimum wage, it makes no sense. In retort: $1 per hour, hell, why not $50 or $100? It makes no sense. These are actually reasons why modest jumps in the minimum wage don’t just cause inflation: namely because they simply create a more equitable partitioning of profits. Raise the minimum wage too high and prices will have to go up.

Such nuance is anathema to conservatives when talking about the minimum wage. It drives me crazy. To them, “It’s simple supply and demand.” But it isn’t. The people getting the raises are also the people eating at the restaurants. The minimum wage doesn’t just increase the cost to the business, it also increases the demand for the business. But these are the same people who claim that if you raise the minimum wage by 10%, “The prices will just go up by 10%.” No they won’t!

To summarize: Seattle published an article about how more restaurants are opening than closing in that great city. The right wing ran with it claiming that the slowly rising minimum wage is causing restaurants to close. But it doesn’t matter. The people reading those right wing articles already knew that what is not happen was happening. Nothing is going to change that. If this minimum wage hike works out really well and the Seattle economy booms, in five years you will hear conservatives say, “Seattle proved that raising the minimum wage destroys jobs!” Facts don’t matter. And I just want to bang my head against the wall.

On Tuesday, while the elections were going on, Jonathan Chait wrote, Netanyahu Clarifies His Chilling Vision for Post-Democratic Israel. The title refers to Netanyahu’s statement that he is against a two state solution — which he followed with a blatantly racist speech about the scary Arabs who were being brought in to vote in buses. So Netanyahu is an imperialist bigot. Everyone has always known that, but now it is explicit. And more to the point, now that is pretty much official Israeli policy.

Had the center-left Zionist Union managed to put together a coalition, it wouldn’t have changed much from an international standpoint. It would have been far better for the Israeli people. The Likud Party is basically libertarian. And domestically, they have overseen a huge increase in inequality. We know how this works from our experience here in the United States: people vote based upon their fears and while they are cowering in their homes, the power elite rob them blind. At least in Israel, there are actual things to fear. Americans are just pathetic.

But Chait wrote something that I am very skeptical about, “If Netanyahu prevails, the nature of Israel’s diplomatic alliance with the United States will have to change — the US cannot continue to extend its UN veto to a country whose government has formally disavowed negotiations.” I seriously doubt that. Chait seems to think our support of Israel is contingent on its good behavior. That isn’t true. I discussed the fundamental issue just last week, Ever More Anti-Venezuela Media Coverage. What our government thinks of other countries is not based upon them being good democracies; it is based on them allowing foreign investment and generally being positive toward the interests of our power elite. Israel could become an official apartheid state and we would claim it was fine just because. The mainstream media, of course, would follow along as it always does.

Interestingly, advocates for Palestine don’t seem to be upset about the election. Abir Kopty wrote, Knesset Elections Prove Again and Again That a Change From Within Is not Possible. Ali Abunimah at The Electronic Intifada wrote, Why I’m Relieved Netanyahu Won. He provided the take away line that seems to be shared among Palestine advocates, “Netanyahu’s re-election is like the ‘Nutrition Facts’ label on a box of junk food: it tells you about the toxic ingredients inside.”

It must be the case that Netanyahu knows that the United States will never abandon Israel. If he isn’t, he’s playing a very dangerous game. If Israel didn’t have the United States to back it, I’m afraid it would have been destroyed a long time ago. But even with US support, this is a questionable way to move. The explicit repudiation of a two state solution is likely to alienate a lot of countries. Of course, from Netanyahu’s standpoint, that may be great. The more external pressure there is on Israel, the more he and Likud can use it to push their elitist agenda to impoverish the poor and enrich the rich.

H/T: Max Blumenthal

According to Rebecca Shabad at The Hill, House GOP Budget Cuts $5.5T in Spending, Balances in Nine Years. She apparently does not mean this as a joke. And it is true that there is this thing that House Republicans are calling a budget and it offers up general categories where various committees should make cuts to programs that are under their authority. It’s the usual thing from Republicans: don’t get specific about cuts because the people generally don’t like what you would have to cut. And balancing the budget in eight years would require absolutely horrible cuts — cuts that would especially affect all those red states that voted in most of these bozos.

What’s especially interesting in the budget is how it does everything it can to repeal Obamacare. But as everyone should know by now, Obamacare actually saves the federal government money. What the Republicans don’t like about the healthcare law is that it raised taxes on the rich. That’s always been their primary problem with the law. So their attacks on Obamacare are a way to un-balance the federal government budget, in the name of giving — What a surprise! — tax cuts to rich people. Well played, oligarchs; well played!

Michael Hiltzik discussed cruelty of this, House Budget Proposes Repeal of an Incredibly Effective Law. He showed how the budget is at odds with the facts about Obamacare, Medicaid, Medicare, and Social Security’s disability program. As usual, it is all about pushing the same old conservative ideas. This isn’t about balancing the budget. It is about helping their rich constituents and harming everyone else. And regardless of this fact, they will still get roughly half the votes in the next election.

A big part of the budget is the “block granting” of food stamps and Medicare. This is where they just take the money that they are currently providing in these programs and dump them on the states to do with as they please. But as Ezra Klein reported, How Republican Budgets Hide Huge Spending Cuts in Block Grants. The way this works is by locking in the funding levels. We all know that healthcare costs are rising at more than the rate of inflation; so over time, the funding would die out. Similarly, with food stamps, when a recession comes and more people need help, there won’t be any more money available to help them. The Republicans know what they want to is unpopular, so they come up with these kind of gimmicks to hide what they are doing.

Just how serious is the budget? Not very. Shabad reported that Tom Price’s new budget would “reduce $400 billion in spending from [Paul] Ryan’s budget.” That’s the already savage and unrealistic pseudo-budget that Paul Ryan produced last year. You see, it has to be. When Ryan proposed to balance the budget in ten years, many Republicans were against this. How could it take ten years to balance the budget! That was deeply un-serious — a political con job. But still the far right of the party are delusional. So this year, they come back, thinking that the loons might accept eight years. They won’t, of course. They think you just cut everything but the military and everything will be fine. Deep thinkers they ain’t — and I’m not even talking about the social costs; such a move would throw the US economy (and thus also the world’s) into a far worse situation than we were in during the Great Depression. But government is the problem, am I right?!

Note also that if the Republicans did quickly balance the budget and throw the country into depression, this would change the results of the budget projections. The budget uses dynamic scoring — but very deceptively, of course. Price uses it to claim that cutting all this government spending is going to make the economy take off. But that won’t happen. Not only will the budget not be propped up as they suggest, it will go the other way. In fact, it could be so bad that the deficit gets worse because so much less tax revenue comes in.

But the budget is not meant to be serious. Even before the budget was released, Stan Collender at Forbes reported, GOP Has Nothing but Bad Choices on the Budget. He explained that the Republicans are trying to create a budget that can make its way to reconciliation — thus bypassing the Senate filibuster. But who cares? Obama will just veto it anyway. And because of that, there are a lot of hard-line conservatives who probably won’t vote for it. Because, you know, they should just balance the budget this year.

This is the status of the Republican Congress. This is what they call governing. They can’t even make their symbolic gestures work. It’s pathetic. So why is it that they control Congress?