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Home Publications Blogs Beat the Press David Brooks Says That Mitt Romney and the Republicans Are Not Very Good at Arithmetic

David Brooks Says That Mitt Romney and the Republicans Are Not Very Good at Arithmetic

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Friday, 15 June 2012 02:12

That probably was not his intention, but that is the only conclusion that numerate readers can take away from his column. He tells readers that:

"But many Republicans have now come to the conclusion that the welfare-state model is in its death throes."

He points to the crises in Greece, Spain, and Italy and then adds:

"In the decades after World War II, the U.S. economy grew by well over 3 percent a year, on average. But, since then, it has failed to keep pace with changing realities. The average growth was a paltry 1.7 percent annually between 2000 and 2009. It averaged 0.6 percent growth between 2009 and 2011. Wages have failed to keep up with productivity. Family net worth is back at the same level it was at 20 years ago."

There are a number of problems with this story. First Greece, Spain, and Italy have among the least developed welfare states in Europe. If someone wants to make an argument that there is some inherent problem with the welfare state model then we should look for crises in Sweden, Denmark and Germany, all states with far more generous welfare states than these Mediterranean countries. In fact, the welfare states of northern Europe are doing relatively well through the crisis, it is difficult to understand how anyone can look at the pattern of the crisis across Europe and conclude that it implies that the welfare state model has reached its end.

Brooks account of U.S. growth is just bizarre. Did he somehow miss the collapse of the housing bubble? If he excluded the period since the crisis then there is not much of a case for a weakening economy. The economy definitely did better in the three decades immediately following World War II, when the top marginal tax rate was between 70-90 percent than it did in the post-Reagan years, but there was a substantial uptick in productivity growth in the mid-90s. The second half of that decade saw the strongest sustained growth since the early 70s, with workers up and down the income latter sharing in the gains of productivity growth.

The economy did turn down with the collapse of the stock bubble in 2000-2002, but it is hard to see how Republicans tie the collapse of this bubble to the death throes of the welfare state, just as it is difficult to see how the more recent collapse of the housing bubble implies the death throes of the welfare state. In principle the Los Angeles Kings victory in the Stanley Cup could also signal the death throes of the welfare state, but it is not easy to see the connection. The more obvious take away from this story is that a corrupt financial sector can wreck the economy.

In terms of the link between wages and productivity growth, Brooks Republican friends seem to be in an inverted world. If this is the concern, then the welfare states in Europe would seem to be the answer, not the problem. Workers have certainly seen more of the benefits of productivity growth over the last three decades in northern Europe than in the United States. If Brooks has a point here, it is very difficult to see what it is.

He then comments:

"Money that could go to schools and innovation must now go to pensions and health care. This model, which once offered insurance from the disasters inherent in capitalism, has now become a giant machine for redistributing money from the future to the elderly. "

Brooks is presumably referring primarily to health care (assuming that he has an idea of the numbers involved), since that has been the sector showing rapid increases in costs. Of course here also the story is 180 degrees at odds with what Brooks has in his piece. All the welfare states in Europe have much lower per person health care costs than the United States. In fact, the average is less than half as much. If the U.S. paid the same amount per person for health care as Denmark, Germany, or Sweden we would be looking at massive budget surpluses.

The idea that Mitt Romney expects "an efficiency explosion" from relying more on the market in the health care sector defies both common sense and a massive amount of evidence. It is more likely that he expects a big jump in profits for private insurers and other powerful interests in the health care sector. 

In short, if Brooks hoped to show why Republicans rationally concluded that the United States should further cut back its welfare state he fell way short of the mark.

Comments (16)Add Comment
Thank you
written by fortunarota, June 15, 2012 5:27
I think the world owes you a public service award for fashioning such a wonderfully pointed response to stick into that gasbag of a column.
Real Welfare State Cuts
written by Robert Salzberg, June 15, 2012 6:26
    Mr. Brooks is right that the excessive portions of the welfare state should end but he fails to identify the real blood suckers that need removal.

     We should end all subsidies for oil, natural gas, ethanol and sugar.

     Hedge fund managers shouldn't get to pay 15% taxes on carried interest.  They should pay a new top tax rate for multi-millionaires of 50% along with payroll taxes. While we're at it, we should tax all investment income exactly the same as wages from work including payroll taxes.

    New nuclear power plants shouldn't get free insurance from the federal government.

   Around 2/3 of the home mortgage deduction goes to Americans that make over $100,000 a year.  The home mortgage deduction along with the capital gains exemption for selling your primary residence should be eliminated.  The net effect of the home mortgage deduction is around a 1% reduction in interest payment.  A much better policy is for the federal government to back home loans for any American that qualifies for a conforming home loan for their primary residence at whatever it costs the federal government to borrow the money.  Essentially the federal government should use it's power to borrow money cheaply to benefit the people.


    But the biggest welfare system of all is for investment banks.  We currently are allowing hundreds of billions of derivative bets to be parked in federal insured banks.  Restoring Glass-Steagall would make investors shoulder the burden of their risks, not the taxpayers.
Whoops, trillions not billions
written by Robert Salzberg, June 15, 2012 6:38
I meant hundreds of trillions in derivatives, not billions.

We should not forget the hundred billion or so we waste every year for obsolete cold war weapon systems and another hundred billion or so in military support welfare for countries that can afford to defend themselves.
...
written by Daniel, June 15, 2012 7:25
Brooks has not made any coherent arguments for a long time. He is delving into issues where he isn't even a light weight. He is with E. J. Dionne on NPR. I hope someone can set Brooks straight.
Tax Collections
written by Ron Alley, June 15, 2012 7:33
Brooks argues that the United States is similar to Greece and he is correct in one respect. One of our greatest problems is that in both Greece and the United States citizens with the highest incomes avoid paying an appropriate share of the taxes collected by the government. In Greece, the wealthy reportedly avoid taxes by paying bribes. In the United States the wealthy reportedly avoid paying taxes by paying for the campaigns of their favorite members of Congress. Tax revenues suffer in both Greece and the United States. Romney and the Republican leaders in Congress have declared that they back this policy. Brooks should give the Republican credit for their vision of the future.
Generational Warfare?
written by Bart, June 15, 2012 8:32

I sense a meme coming, guys, when Brooks talks about "...redistributing money from the future to the elderly."

That money that should go to "education and innovation" should be carved out of Endless War and many of our needless military bases around the world.
blind spots
written by Peter K., June 15, 2012 12:19
Baker is right again. Bobo makes no mention of the housing bubble (private sector malfuncion enabled by the absence of regulation) and the recession caused by its popping.

Likewise is Spain, they had decent government budgets and even Italy had been doing better. Capital flowed into the European periphery caused a bubble which popped and wrecked their government budgets. This is absent from Bobo's narrative.
Norway
written by Frode, June 15, 2012 2:02
Dean,

Is there a reason for you not mentioning Norway as a functioning welfare state (like Sweden and Denmark), besides the fact that it has a heavy petroleum sector contributing to huge surpluses?
Pointers for further reading please?
written by dbc, June 15, 2012 2:03
First Greece, Spain, and Italy have among the least developed welfare states in Europe.

I'd be interested to do some further reading on the comparative sizes of welfare states, but I'm not even sure where to start since I don't know much about this topic. Searching for something like "comparative size of welfare states" doesn't seem to produce much - I suspect I need to look for comparisons on the various components of the welfare state -- pensions, unemployment benefits, education benefits.. and what else? Maybe what I am interested in is behind a copyright paywall?

Thanks in advance to any who respond!

...
written by Mary, June 15, 2012 2:39
Nor do these redistributive societies incarcerate their citizens at anywhere near the rate of the US.
...
written by liberal, June 15, 2012 2:45
Robert Salzberg wrote,
But the biggest welfare system of all is for investment banks.


Hardly. While it's not insignificant (and is also despicable), the biggest welfare system is for landowners.
...
written by fuller schmidt, June 15, 2012 4:01
Great column and comments.
Spot on.
written by Jonathan, June 15, 2012 5:09
Thanks! Another great column.
I feel sorry for Moral Hazard, DB's poor ol' Irish Setter
written by sherparick, June 15, 2012 5:44
He certainly has to put up with so much BS. For 30 years the Republicans have been coming to the American people with the same bet. 1. Cut taxes on rich people and rules on business, and eliminate all those programs that help the lazy, good for nothing, people at the bottom (and now the middle, particularly if older than 60 - all those folks need to get back in the work force and get jobs as greeters, checkers, and stockers at Walmart!!); 2. Then ????? 3. Everything will be wonderful (except for the losers who don't deserve to make it anyway. Really, David Brooks really wants us to bet on the magic unicorn known as the Ryan/Romney budget in the 5th race hileah.
Dave sees a light and shows us the way.
written by diesel, June 15, 2012 6:55
"He would structurally reform the health care system, moving toward a more market-based system. He would simplify the tax code. He would reverse 30 years of education policy, decentralizing power and increasing parental choice. The intention is the same, to create a model that will spark an efficiency explosion, laying the groundwork for an economic revival."

He will bend steel with his bare hands. He will leap over tall buildings with a single bound. He will stop speeding locomotives. Stand back folks, you don't want to get hurt by this "efficiency explosion" elixir he's about to uncork. And just look at that dirt fly as he lays the groundwork and everything...that Mitt, he's some kinda intending wonder isn't he?
I see - those old people should just starve and die then?
written by Carl Weetabix, June 15, 2012 10:36
"Money that could go to schools and innovation must now go to pensions and health care. This model, which once offered insurance from the disasters inherent in capitalism, has now become a giant machine for redistributing money from the future to the elderly. "

And what pray tell are we supposed to do with the old and sick elderly?

Should they all have had 401ks, which would be decimated now (are for most of us)? Were they all supposed to become "entrepreneurs" (god I hate that word) with some unnamed "others" to do the dirty work and then apparently go off and die when they in turn get old and lack retirement/insurance?

What miracle, short of euthanasia does this genius propose to solve the fact that someone or something has to pay for the old and infirmed's eventual non-optional retirement?

Even if one supposes that every American can make miraculous retirement investment decisions (and that some downturn won't bankrupt even those best efforts - leaving the bag to the government), how does one insure an 80 year old elder with a natural, no fault of their own, heart condition in the glorious "free market"???

Even the largest nest egg cannot cover that contingency - a contingency that hits almost every aged person in some way (face it, we're all going to get old, decrepit, and sick - even David "my poo doesn't stink" Brooks).

Ah, but when you live in the world of magical asterisks, all things are possible...



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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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