Ben Bernanke Sees Slow Growth, High Unemployment For Years

Last night’s 60 Minutes interview with Fed Chairman is unlikely to inspire any confidence:

FILED UNDER: Economics and Business, Quick Takes, US Politics
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010 and contributed a staggering 16,483 posts before his retirement in January 2020.

Comments

  1. john personna says:

    So, as I say in the other thread, this is the not so secret reason the Dems folded on the tax cuts.

    Given that we will be mired, remove one BS cause. That is “it all would have been fine if we’d had tax cuts for the rich.”

  2. Dave Schuler says:

    Can you give me a concrete example, john personna, of someone who’s actually said that? Or have they said something rather different: that raising taxes on the rich when the economy is sluggish would be bad for the economy?

    Again, just for the record, I think that the “Bush tax cuts” should not be extended for anybody and that, if you’re concerned about the negative impact of raising taxes during a slowdown, the effective tax increase should be offset other tax cuts more likely to stimulate the economy, e.g. a payroll tax holiday.

  3. john personna says:

    Look around, Dave. The argument that we need the extension for folks above $250K, “so that they may create jobs” is everywhere. It’s on TV. It’s in other threads here at OTB.

    All I’ve done above is shift forward to the “look back” position, had they lost. Of course they’d argue that their lost cuts are what held back the economy.

    I think it’s fair to put it on them at this point: “you don’t want stimulus, you don’t want quantitative easing, you just want tax cuts for growth. ok fine, where is it?”

  4. John,

    Dave’s right here. This isn’t a question about giving people tax cuts. This is a question of whether it makes economic sense to allow taxes to increase, for anyone, during a time of what is, at best, incredibly sluggish economic growth.

  5. john personna says:

    Which Dave? 😉

    Mr. Schuler just said “Again, just for the record, I think that the “Bush tax cuts” should not be extended for anybody …”

  6. I was referring to his first paragraph:

    Can you give me a concrete example, john personna, of someone who’s actually said that? Or have they said something rather different: that raising taxes on the rich when the economy is sluggish would be bad for the economy?

  7. john personna says:

    And no, it doesn’t make “economic sense” to use this as our “best weapon” against recession.

    The problem is that voters have a poor grasp of alternatives, and are being told that this is indeed the best weapon.

    Find a Dave who is ready to argue that this is the best path forward. Mr. Schuler just suggested an alternative that does make much more sense. “the effective tax increase should be offset [with] other tax cuts more likely to stimulate the economy, e.g. a payroll tax holiday.”

  8. john personna says:

    OK, to answer that first paragraph again, Mr. Mataconis just made the claim, attempting a Dave sock-puppet.

  9. John,

    What the heck are you talking about ?

    My only point was to point out the terms of the debate over the tax cut as it has played out in the media.

  10. john personna says:

    It seems hard to believe you aren’t following me, but I’m multi-tasking here, so maybe its me.

    I’m saying that we are told repeatedly that we must have these cuts extended to stimulate job creation.

    Put yourself forward to a year from now, with Bernanke’s slow growth.

    These tax cuts for the rich aren’t going to change that one way or the other. The only thing they will change is the political conversation _then_.

    I’m saying that if we’d let the cuts expire, even for just the very top bracket, Republicans would be all over that as a cause for the stagnation. _Then_. In the future.

    But I’m also saying the shoe is on the other foot, you got your tax cut extension, it supposed to give everyone jobs, where are they?

  11. To answer your last question, there was job creation during the 2001-2007 time period. Then the real estate bubble — a phenomenon created by bipartisan bad policy choices and an overly expansionist monetary policy — popped and the economy went in the toilet.

    The point about the tax cuts, as I see it, isn’t just about creating jobs in the future but about the danger that increasing taxes under current economic conditions would have.

  12. john personna says:

    Um.

    Dave and I seem to agree that this path is not the optimal way to stimulate the economy using the tax “lever.”

    Are you defending it as optimal?

    See, this is stupid. Either you are defending a sub-optimal solution, or you are just using the economy as an excuse for your tax cut.

  13. John,

    Again, I’m not talking about what needs to be done to stimulate the economy. I am referring to the fact that allowing taxes to increase under current economic conditions, for anyone, strikes me as a bad policy choice that poses the danger of further dampening economic growth.

    The reasons for the sluggish growth itself ? Frankly I think they’re largely structural and I don’t think there’s any affirmative government policy that can do anything other than provide an artificial, and temporary, boost to growth.

  14. john personna says:

    I find this sentence to be self-contradictory:

    Again, I’m not talking about what needs to be done to stimulate the economy. I am referring to the fact that allowing taxes to increase under current economic conditions, for anyone, strikes me as a bad policy choice that poses the danger of further dampening economic growth.

    I’m pretty sure the reason not to allow taxes to increase “under current economic conditions” is to “stimulate the economy.”

    And now that this is your chosen path, you own it.

  15. john personna says:

    Oops, “I’m pretty sure” should be outside the block quote.

  16. john personna says:

    (I mean really, what part of “current economic conditions” didn’t you understand, if you didn’t think tax cuts were supposed to be stimulative!)

  17. John,

    No, again, you are not understanding me.

    You’ve heard perhaps of the saying First. do no harm ?

    That’s how I feel about the tax cut extensions. Allowing tax rates to increase, for anyone, under these economic conditions is likely to do far more harm than good and, to the extent it lowers economic growth, it could actually lead to lower tax revenue to the government.

    Adopting a policy that has a very good chance of doing harm strikes me as a bad idea.

    Is it possible that extending the tax cuts will help increase economic growth ? Yes, there is, especially since the mere fact that Congress and the President will have made a decision on the issue will remove no small degree of economic uncertainty that is likely causing businesses to hold back on expansion and investment.

    Now, that’s my position. You don’t have to agree with it, but, please, don’t ask me to restate it a third time.

  18. john personna says:

    That’s just hand-waving.

    You are defending a path here. The path is a change from current law (it does not let the tax extensions die a natural death). There were many other paths available. A reduction in payroll tax was one.

    Is it possible that extending the tax cuts will help increase economic growth ? Yes, there is, especially since the mere fact that Congress and the President will have made a decision on the issue will remove no small degree of economic uncertainty that is likely causing businesses to hold back on expansion and investment.

    That’s where I’m saying you own it. This is your path to fix the economy, no other.

  19. John,

    Which just goes to show that you’re not only not understanding me, you’re not reading what I write.

    In a comment above, I wrote:

    The reasons for the sluggish growth itself ? Frankly I think they’re largely structural and I don’t think there’s any affirmative government policy that can do anything other than provide an artificial, and temporary, boost to growth.

    Hence the reason I used the word “possible” in the passage you quoted.

    Again, my position on the tax cut extension is solely because of the harm that would come from increasing taxes under current economic conditions.

    Now, if you’re just going to play rhetorical games with my words you can continue to do so, but I’m done playing.

  20. john personna says:

    The only game here is to try to make you stand for something.

    It’s laughable. You want your tax cuts because of the state of the economy, but you don’t want any responsibility that your tax cuts will improve the state of the economy.

    You don’t think that deserves a WTF?

  21. john personna says:

    (And I call you on it here, because I think it will be a common Republican game for the next year.)

  22. John,

    You are living in an either-or, black-and-white universe that simply does not comport with the way a modern economy works. I am glad you think things are so simple but, you know, they a really aren’t

  23. john personna says:

    I think you meant to say:

    “that simply does not comport with the way a [political hand-waving] works”

  24. mantis says:

    Doug, do you support tax increases during times of economic growth and stability?

  25. mantis,

    I support keeping taxes as low as possible and allowing people to keep the money they’ve earned.

  26. Alex Knapp says:

    That’s how I feel about the tax cut extensions. Allowing tax rates to increase, for anyone, under these economic conditions is likely to do far more harm than good

    What’s your basis for this probability assessment?

  27. mantis says:

    That wasn’t the question, which I’m not surprised you ducked. But the conclusion we can draw, obviously, is that you would never support raising taxes under any economic circumstances. If that’s the case, what would be the point of listening to anything you have to say about tax policy? You aren’t interested in in economics. Your’e interested in conservative shibboleths.

    If there is never a right time, then saying now is the wrong time is utterly meaningless.

  28. mantis,

    If you’ve ever read any of the posts I’ve written about the Bowles-Simpson plan you’d know that’s not true.

  29. Alex,

    It’s rather elementary economics, really. Take money out of the economy and you’re going to slow economic growth

  30. Alex Knapp says:

    Doug,

    It’s rather elementary economics, really.

    According to who? Are there studies?

    Take money out of the economy and you’re going to slow economic growth.

    If taxes increase and lower the deficit without altering spending, doesn’t that just mean there are more dollars available for savings and investment that would have otherwise gone to T-bonds?

  31. Alex,

    It’s fairly basic macroeconomics. Take money out of the economy and you’re going to decrease economic growth. And please don’t tell me that you think the additional tax revenue that theoretically would have come in after January 2011 would’ve actually gone to reduce the deficit. That’s the oldest government lie in the book

  32. Alex Knapp says:

    Doug,

    It’s fairly basic macroeconomics.

    Again, according to who? What’s the evidence?

    And please don’t tell me that you think the additional tax revenue that theoretically would have come in after January 2011 would’ve actually gone to reduce the deficit. That’s the oldest government lie in the book

    Bartlett had a great article just the other day pointing out that yes, when revenues are increased via tax increases, spending historically tends to decrease as well. (http://www.capitalgainsandgames.com/blog/bruce-bartlett/2051/idiocy-starve-beast-theory)

    Do you have evidence to the contrary?

  33. The problem with Bartlett’s theory is that it doesn’t factor in the one trillion dollars in additional spending, at least, that will result from ObamaCare. Nor does it take into account the fact that Congresscritters who may have been in power “historically” are not in power today.

    He’s right that “Starve the Beast” doesn’t work.

    But neither does feeding the beast. The only solution is to kill the beast piece by piece.

  34. Alex Knapp says:

    The problem with Bartlett’s theory is that it doesn’t factor in the one trillion dollars in additional spending, at least, that will result from ObamaCare.

    According to who? Not the CBO, which shows it as a cost savings. I don’t know about your neck of the woods, but around here the GOP was lambasting Democrats for the $500 billion in Medicare cuts that were used to offset the costs of the ACA.

    And besides, if this extra spending does exist, it’s following tax CUTS, not tax INCREASES, thereby confirming Bartlett’s hypothesis.

  35. Except you’re forgetting all the future programs they would have spent that money on. Those CBO projections are worthless because they don’t take into account the fact that Congress always spends more money than it says its going to.

  36. Besides which, you’re making economic arguments that ignore the political realities I tried to explain to John.

    Politically, there was no way the Obama Administration was going to allow a tax increase in the middle of a crappy economy and once the Democrats conceded that, at the very least, tax cuts would be extended for the “middle class,” the debate was over.

  37. Alex Knapp says:

    Except you’re forgetting all the future programs they would have spent that money on.

    Such as what?

    Those CBO projections are worthless because they don’t take into account the fact that Congress always spends more money than it says its going to.

    Always? As Bartlett points out, spending declined relative to GDP following the Bush and Clinton tax hikes. (And that + the tech economy gave us a surplus.)

    Besides which, you’re making economic arguments that ignore the political realities I tried to explain to John.

    I will grant you the political realities. But you made the assertion that raising taxes would dampen economic growth. I’m seen this asserted all over the place but not supported. I was curious as to what you base your opinion on and what the evidence is.

  38. Such as?

    Such as whatever government can think up to spend money on. The only way we’re ever going to get spending under control is to stop spending so much money. Increasing taxes isn’t going to accomplish anything, especially in an era of three trillion dollars budgets and trillion dollars deficits

  39. mantis says:

    I’ve read those posts. This is the closest I can find you coming to endorsing tax increases:

    If we lived in a country with adult political parties, the release of the Commission’s report would serve as the beginning of a long overdue national conversation about how to get our fiscal house in order. Liberals would recognize that social spending would have to be cut, and conservatives would recognize that defense spending cuts and tax increases would have to be on the table.

    You don’t support increasing taxes during sluggish economic growth, and you won’t answer my question about increasing taxes during stable or robust economic growth, merely implying that you wouldn’t. So what is it, Doug? Are you an adult conservative or aren’t you? When are tax increases acceptable, exactly?

  40. mantis says:

    He won’t support the contention, Alex, because he can’t. It’s an article of faith.

  41. mantis,

    Perhaps when your friends on the left finally admit that the Welfare State needs to be scaled back because we can no longer afford it

  42. Alex Knapp says:

    Doug,

    Again, you’re ignoring the fact that historically, the best way to hold spending in check and keep deficits small or non-existent is to have higher taxes.

    Right now taxes are lower than they have been in over 60 years. I don’t see any deficit control, do you?

    Reagan cut taxes and raised spending, and the deficit ballooned. Bush I raised them and cut spending, and the deficit got smaller. Clinton raised them and cut spending, and we ended up with a surplus.

    Bush II cut taxes and raised spending, and the deficit ballooned. Obama’s cutting taxes and raising spending, and the deficit balloons further.

    There’s a pretty unmistakable pattern here.

  43. Alex Knapp says:

    Perhaps when your friends on the left finally admit that the Welfare State needs to be scaled back because we can no longer afford it

    Speaking of political reality, how likely is this when the G.O.P. campaigns against the Democrats for cutting Medicare spending?

  44. Alex,

    The idea that higher taxes leads to lower spending is about the most nonsensical thing I’ve ever heard, no matter how much I respect Bartlett’s writing. His entire argument about the Clinton and Bush years leaves out the fact that defense spending during those years decreased significantly because of the end of the Cold War, not to mention the fact that tax revenues increased thanks to a Tech Bubble that had absolutely nothing to do with Federal tax policy.

  45. Alex Knapp says:

    Doug,

    The idea that higher taxes leads to lower spending is about the most nonsensical thing I’ve ever heard

    Okay, what’s your evidence to the contrary?

    His entire argument about the Clinton and Bush years leaves out the fact that defense spending during those years decreased significantly because of the end of the Cold War, not to mention the fact that tax revenues increased thanks to a Tech Bubble that had absolutely nothing to do with Federal tax policy.

    But your contention is that if spending is cut in one area (say, defense) politicians will just spend that money somewhere else. But that’s not what happened!

    Given that, historically, we face a choice between higher taxes / smaller deficits and lower taxes / bigger deficits, doesn’t it make more sense to go with the former rather than the latter?

  46. Alex,

    No, that’s what’s wrong with American politics, there are not only two choices.

    There is another choice. Lower taxes and lower spending. If the American people demand it, it can happen. If they don’t then we’re just headed for fiscal disaster no matter which of the other two alternatives they choose.

  47. Alex Knapp says:

    Doug,

    You gotta go with the historical evidence. Historically speaking, lower taxes aren’t accompanied by lower spending. It would be awesome if they were. But they’re not.

    So you gotta go with the best option that’s backed by the evidence. And that seems to be that increasing taxes tends to be a better constraint on spending.

  48. Alex.

    And the idea that we can tax ourselves into prosperity is, quite honestly, just laughable.

  49. Alex Knapp says:

    Doug,

    And the idea that we can tax ourselves into prosperity is, quite honestly, just laughable.

    It might be laughable, but the evidence cuts that way…

  50. the evidence cuts that way…

    Evidence? Or evidence of a post hoc ergo proptor hoc fallacy

  51. Alex Knapp says:

    Evidence? Or evidence of a post hoc ergo proptor hoc fallacy

    Do you have any evidence to the contrary?

  52. Do you have any evidence in the affirmative, other than the statement that “A happened, then B happened” which is, of course, the very definition of post hoc ergo propter hoc ?

  53. Alex Knapp says:

    I’m reasoning inductively.

    Your hypothesis is that high taxes lead to more spending, because politicians will just find money for more programs.

    My rebuttal is that during the Bush I and Clinton years, taxes were increased, but spending decreased, and deficits were lower than in years following tax increases, and higher in years following tax decreases–indeed, that SPENDING increases after tax decreases.

    Basically, I’m arguing that there’s no evidence to support your hypothesis.

    I would argue that, based on the available evidence cited above, it seems that historically speaking, the best way to control spending is to raise taxes.

    Your rebuttal is that this is “laughable” — but you haven’t provided any data.

  54. Alex,

    Correlation does not equal causation. It’s not inductive reasoning, it’s just an effort to connect to events that may not have any connection at all, while ignoring the influence of all other factors.

    I’m afraid it’s not very convincing.

  55. Alex Knapp says:

    Doug,

    Obviously, correlation doesn’t equal to causation, but correlation is necessary to PROVE causation. You haven’t provided any data to even suggest a correlation, much less demonstrated your hypothesis.

    It may be that increasing taxes won’t constrain spending in the future, but you haven’t provided any data to support that contention.

  56. Alex,

    My hypothesis is that the only way to decrease spending and actually reduce the size, scope, and power of government is to decrease spending and actually reduce the size, scope, and power of government..

    I know you’re going to tell me that, historically, it’s not likely to happen. But, it’s the only real solution and it makes more logical sense than either “Starve the Beast” or “Feed the Beast”

  57. Alex Knapp says:

    Doug,

    My hypothesis is that the only way to decrease spending and actually reduce the size, scope, and power of government is to decrease spending and actually reduce the size, scope, and power of government..

    And I’m saying that this is more likely when deficits are reduced by raising taxes. That’s what the historical evidence suggests.

    I’m willing to wager that, in our ideal states, my government’s smaller than yours. I really wish that “starve the beast” worked to constrain spending and raising taxes didn’t. But that doesn’t appear to be how reality works, in the United States at least.

  58. mantis says:

    Wow, so many comments and still completely unwilling to even attempt to back up his assertion, upon which everything else is based, that raising taxes always slows economic growth.

    Add to that your unwillingness to answer when you would support any tax increase (though you imply the answer would be never), and it becomes clear to any rational observer that you have no reasons for your stances that are based in reality. It’s all faith, and magic. Not surprising from a libertarian, but still, pretty impressive in its vacuousness.