Is the Tea Party running out of steam
By Nicholas WapshottThe opinions expressed are his own.
Is the Tea Party running out of steam? I ask because there appears to be growing evidence that the Mad Hatters’ wild ride, culminating in Obama’s defeat last month over the debt ceiling at the hands of the Tea Party in Congress,Moncler Pas Cher, has slowed to a trot. Exhibit one, where there is a startling finding,air jordan pas cher. Just two months ago, those who believed trimming the deficit was the nation’s top priority outnumbered those who wanted more spending “to help the economy recover” by ten percent. Today, the number who advocate more government spending to fix the lackluster economy are neck and neck with those who wish to cut the budget deficit without delay.
Why the shift? Well, it seems that some Americans have changed their minds over the issue that lies at the heart of our politics. Today’s great political debate divides along the lines established eighty years ago by . In 1932, when , Keynes suggested a mixture of policies to pump money into the economy to increase demand and get people back into jobs: keep the cost of borrowing cheap so that businesses could expand; invest in public works that directly employs the jobless; and cut taxes to put cash into people’s pockets. Hayek countered that such expansionist policies were unlikely to work and would have unintended consequences. At the very least they would in the long run fuel inflation and, when the government took its foot off the gas, cause businesses artificially boosted by the measures to go bust.
When Obama was elected in November 2008 he faced an economy that was teetering on disaster. His answer was a that meant plunging the nation even deeper into debt than George W. Bush had left it after , enacting a huge tax cut and funding two overseas wars. No sooner had Obama adopted a Keynesian remedy than some of his opponents demanded a Hayekian antidote: paying down the debt as soon as possible. This outbreak of electors’ remorse gave rise to the whose argument appeared to be that if a family has to pay off its overdrafts and credit card borrowings when it is going bankrupt, surely a nation should do the same. The 2010 midterms saw the election of , most of whom had pledged not to agree to anything that would either raise taxes or fail to address the national deficit. The raising of the debt ceiling, which had always been a routine matter between the two parties, became a pitched battle, with the president having to bow to the Tea Party&rsquo,doudoune moncler soldes;s principles or allow America to default on its debts.
But the tide may well have turned. If the trend Pew has spotted is genuine and continuing, what a month ago seemed like Obama’s Waterloo is looking increasingly like the Tea Party’s Chancellorsville. The devil is in the details. Not surprisingly, Democrats still favor spending over cuts by two to one,air jordan. Nor has the Tea Party shifted: four out of five thought deficit reduction the most important issue in June,chaussures air jordan; the same proportion thinks so today. But moderate Republicans have shifted. While two months ago they divided two to one in favor of cuts over spending, now they divide 55 percent to 40. Independents,Doudoune Moncler Pas Cher, too, are on the move,Doudoune Moncler Pas Cher. Two months ago they favored deficit reduction by 54 percent to 39; today they are evenly divided.
What has caused such an about-turn in the center ground,Doudoune Moncler? Perhaps Americans have been taking a second look at Keynes, though I doubt it. Keynesians are in full retreat,Air Jordan, battered and bruised by a savage campaign that has painted them as self-serving spendthrift brigands. Few Keynesians can be found arguing their hero’s corner right now. Perhaps, on closer examination, Americans have concluded that cutting public spending when the economy is teetering on a downturn is a guaranteed way of ensuring a double dip recession. (If you want to see what that looks like, , where a Hayekian experiment is in full swing.) Perhaps an idea that seemed good when discussed around the kitchen table doesn’t sound so great from the mouths of Rick Perry and Michele Bachmann. What exactly is going to be cut? Education,air jordan pas cher? Social Security? The armed forces?
It is rash to invest too much meaning into one set of poll figures. and could easily swing back toward the Tea Party. But if the trend keeps up its momentum, like the demotion of Hurricane Irene to a tropical storm, we may have witnessed the ebbing of a populist movement that for a while caused the nation to batten down the hatches and await an unkind, uncomfortable fate.
Is the Tea Party running out of steam?Adaptation
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Another financial crisis looms for U.S. taxpayers
Another financial crisis looms for U,air jordan femme.S,Moncler. taxpayers, a disaster likely to create even worse human misery than the mortgage fiasco that some of us warned about years before the Wall Street meltdown in 2008.
The crisis next time: collapsing investment incomes for older Americans as artificially reduced interest rates force them to use up their savings and drive more pension plans into failure.
Eviscerating the interest income of savers is the undeniable result of a long-running Federal Reserve policy to reduce interest rates, especially since December 2008. The Fed reiterated on Aug. 1 that it plans to keep interest rates low through late 2014. It says this helps to promote stronger economic growth and bring down the jobless rate.
As in the mortgage crisis, you can see this disaster building by examining the official data.
At the broadest level, 53 percent of taxpayers earned interest in 2000. But by 2010 just 39 percent did, my analysis of? data shows, while high-interest debt has become ubiquitous.
From 2000 to 2010 total interest earned by savers fell 53 percent in real terms, a decline of $134 billion. Average interest earned per taxpayer, measured in 2010 dollars, plummeted from $1,950 to $825.
A drop of $1,125 per taxpayer may not seem like much, especially since the average income reported on 2010 tax returns was more than $56,000. But look at who relies on interest to make ends meet and the problem comes into focus.
RELIANCE ON INTEREST
Americans overall received just 1.5 percent of their income from interest payments in 2010. But among those with tiny incomes – the 37 million taxpayers making less than $15,000 – interest accounted for 9.3 percent of their money.
More than three-fourths of these low-income Americans reported no interest income. This means that the minority who saved relied heavily on the interest their savings earned. IRS and other government data show that minority consists mostly of older Americans who saved during their working years,moncler doudoune, prudently spending less than they earned so they could avoid poverty in their golden years.
The low interest rates paid on savings and bonds are not the result of market forces, but official policy. As readers here know, I favor competitive markets to set most prices, including interest rates.
The Fed has been suppressing interest rates for more than a decade – a major factor in the housing bubble that began in the mid-1990s. The bubble was obvious in official data by 2002 as housing prices grew much faster than incomes, a trend that could not be sustained. But those of us who pointed this out were ignored.?famously claims no one saw it coming, which is true if you suffer willful blindness,air jordan.
Since December 2008, just three months after the Wall Street meltdown, the Fed has kept the federal funds rate at zero to 0.25 percent. The other interest rate the Fed controls, for money it loans directly to banks, is being maintained at three quarters of one percent,Moncler. These, in turn, tend to lower other interest rates.
This Fed policy props up the Too Big to Fail Banks, which pay next to nothing to borrow from the Fed and then use that borrowed money to buy federal debt paying 3 percent or so. Any bank with a 3 percent spread should report healthy profits. The built-in mismatch between taxes and spending in Washington guarantees plenty more federal debt, no matter who gets elected to the? and?, for years to come.
CONCENTRATING WEALTH
Cheap interest also benefits credit-worthy individuals and companies, who can use cheap loans to scoop up assets that collapsed in value after the 2008 Wall Street meltdown,Air Jordan Femme. This is a subtle mechanism for concentrating wealth among the best off,moncler.
For savers, the reverse alchemy of low interest rates turns gold into dross.
As interest income falls, older savers start cutting into their nest eggs. Millions of older Americans relying on interest income will, thanks to the Fed, run out of savings before they run out of time, a prescription for another taxpayer bailout, though this time one with a stronger moral case than rescuing the fortunes of profligate bankers and those who foolishly invested in the companies they run.
Expect more pension plans to fail, too, because their once robust interest income has shriveled thanks to the Fed’s low-interest policy, a subject I’,air jordan france;ll examine in my next column. About 44 million Americans have earned a pension, 1.5 million of them in plans that already have failed, according to .
One effect of the Fed’s low-interest policies can be seen in all those mid-day television ads encouraging older Americans to take out reverse mortgages on their homes, as people desperate for enough money to put food on the table consume the equity in their homes. I say desperate because only someone desperate to survive would accept the stiff interest charges and fees in these reverse mortgage deals.
In the next few years expect news reports, like those I read as a boy a half century ago, about old ladies buying cat food not for a pet, but to get a little protein for dinner.
Holding down interest rates to prop up banks and the economy and help the already rich buy assets on the cheap,Doudounes Moncler, amounts to an official policy to take from the ants who saved for their old age and give to the Wall Street grasshoppers. Given the economic devastation this causes,jordan pas cher, it is more accurate to say to give to the financial locusts.