Friday, July 01, 2011

Fareed on “Fresh Air”

There are a lot of good reasons to listen to this interview on Fresh Air. Everyone knows I like Fareed Zakaria so we’ll skip that part. I like Terry Gross (the host of Fresh Air) and she is known for her great interviews.

Here’s an economic tidbit to whet your appetite.

”If you look at Germany, it's a fascinating role model. The Germans have maintained their manufacturing edge, despite being a high-tax, high-regulation economy. Why? Because the government really set about ensuring that it maintained funding for technical training, technical advancements, apprenticeship programs. It made a concerted effort to retain high-end, complex manufacturing, you know, the kind of BMW model, if you will. And they've done that so successfully that Germany, which has a quarter of America's population, exports more than America does. Think about that. We have four times the population of Germany and we don't export as much as they do. Again, it might be worth taking a look at that country and asking what are they doing right?”

That’s amazing. Especially when you consider that West Germany unified with East Germany in 1990. (Can it really have been 20 years already?) There’s another theme at work here too. What do these three countries have in common? Germany, Japan and South Korea? A boatload of American troops still providing military security.

But what fascinated me most about this interview was the political. Notice the clarity of thought in discussing Islam and Arab dictators.

”And my basic point in the essay "Why They Hate Us" was that in order to understand the rise of Islamic terrorism, you had to understand that in the Arab world, you had had dictatorships for 30 and 40 years that had prohibited any kind of dissent.

And as a result, opposition movements had grown that were within the mosque, the one place you couldn't ban, and that use the language of Islam, the one language you could not censor, and that therefore you had these extreme religious, fanatical jihadist movements rise. And that until we did something about the dictatorships of the Arab world, this was going to be a festering problem.”

That same clarity of thought is applied to American politics.

”Mr. ZAKARIA: Exactly. Because the truth of the matter is we tax at about 18 percent of GDP. We're spending at 23 percent of GDP. There's simply no way you can close that gap entirely with spending cuts. And the worst and most damaging thing that has happened in the last few weeks is that Grover Norquist has decreed - it's almost like Vatican pronouncements - that even the closing of tax loopholes cannot be abided, because closing a loophole is technically raising taxes.

So that stupid loopholes, that are really institutionalized corruption, that have been made in the tax code to favor certain industries or favor certain interest groups in return for campaign contributions - we can't even close those because he says that's technically raising taxes on someone and Republicans have signed a pledge that they will raise taxes on no one. So youve lost the one kind of easy mechanism that the Simpson-Bowles commission found to raise revenues without raising general rates. And as I say, it leaves you with the feeling that the system has now become, essentially, paralyzed.

And, you know, this Republican dogma about taxes is one piece - one very important piece of it because you simply dont, you know, this is not really about politics at this point, you know, political ideology. The math doesnt work. You simply cannot get to closing a deficit and a debt of the nature we have without some additional revenues.”

(How many times have I warned you about Grover Norquist?)

There is much more detail in the interview. You should read it or listen to it.

In the meantime, make no mistake about it, the Republicans are playing a very, very dangerous game. One that could blow up the world.

On what might happen if the U.S. defaults on debt

"I tend to think it will be catastrophic. I think, more importantly, there is a high enough risk here that this is surely a game we don't want to play. ... There are events that economics call low-probability, high-impact events that you don't want to test. You don't want to see if this is one of those things that is an unlikely situation but once it happens could have a huge seismic global effect, because then the cost of dealing with the after-effects is just cataclysmic."”

Don Brown
July 1, 2011

1 comment:

Bob said...

Historically, Congress has been not willing to cut spending hardly at all, except at easy targets, like the poor. So if you cant cut spending, then you must raise taxes, its that simple. Most economists agree that you cant cut your way entirely out of the deficit.

For some reason, conservatives in this country think we are being taxed to death, when in fact we have a very low tax rate in comparision to the rest of the world. I am sure China does not have a low tax rate, and certainly Germany does not.