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Mother of Mercy! Is This the End of Western Civilization?

August 6, 2011

On the floor of the New York Stock Exchange as the Dow dropped 513 points. Are we witnessing the beginning of a long collapse?

The 1931 gangster classic Little Caesar ends with the title character, a petty thug named Rico who briefly became a major thug, expiring in a hail of gunfire. Just before he joins the angels, the dying hoodlum (played to perfection by the great Edward G. Robinson) mutters his famous last words: “Mother of mercy! Is this the end of Rico?”

Rico, played by Edward G. Robinson, takes a warning hit before his fatal downfall.

A big shot to the bitter end, Rico (referring to himself in the third person, like any number of self-smitten big shots) seems stunned that he’s about to lose his exalted status in the world… that, in fact, the world will keep spinning without him. More than pain or regret, Rico’s last words brim with sheer disbelief. He never suspected that he might be mortal.

This week, as both Europe and the United States appear to be whooshing down the long death-spiral (or is it a debt-spiral?) to oblivion, I’ve found myself thinking about Little Caesar and his demise. Granted, we’d be hard-pressed to draw parallels between a fictitious crime boss and Western Civilization. Rico could never have produced anything quite as resplendent as the Parthenon or Monty Python’s Flying Circus. But he seemed to think he’d be around forever. And so did we.

You have to give us credit: for three thousand years we extended our reach around this smallish blue-green planet, built some impressive empires and monuments, trampled more than a few aboriginal cultures, waged bloody wars for reasons that seemed strangely compelling at the time, expanded our knowledge of the cosmos and plumbed the dusky depths of the human soul. But we founded our achievements at least partly on a peculiar system that required us to gamble on the fortunes of companies, and those companies failed us in the end.

Our governments also failed us by spending far more money than they could possibly collect — always a bad practice in domestic life, and disastrous when multiplied by a factor of millions. Let’s give those governments credit for noble intentions: they emptied their treasuries to subsidize legions of citizens who were too old, sick, unskilled, uneducated or just plain lazy to care for themselves. They never suspected that half their population would eventually fall into the needy category, supported by a dwindling and put-upon middle class.

Like the Hindenburg disaster, the collapse of the West makes a mesmerizing spectacle.

Major civilizations don’t self-destruct every day. It’s a sobering experience to observe the calamity first-hand, like being on the ground at Lakehurst, N.J., when the Hindenburg blew up in a rumbling cloud of smoke and flames. The demise of Western Civilization is a slow-motion calamity, of course, but no less compelling, terrifying and perversely spectacular for us eyewitnesses.

Think about it: we could be watching the last gasps of the great pulsating organism born on the shores of the wine-dark Aegean, nurtured on the Agora at Athens and propelled into the larger world by Alexander the Great. It could all end here: with a job-hungry middle class, mountains of public and private debt, downgraded credit ratings and a fatal inability to agree on solutions. China and India, those ancient Asiatic behemoths, are waiting in the wings, grooming themselves for their triumphant return to center stage.

So is it all over for Western Civilization? Is this the end of Rico? I have to admit it looks pretty dire at the moment. Crippled by our economic disasters, short-sighted corporations, greedy plutocrats, incompetent governments and irreversible demographic shifts, we could be declining into a loosely connected archipelago of third-rate states — a source of cheap labor for smarter and more industrious Asian economic powers. Our culture has turned stupid, our character flabby, our will to greatness overcome by our addiction to easy amusement.

So maybe we deserve to join the carcasses in history’s graveyard. Maybe it’s time for us to keep company with the crumbling bones of the Babylonians, Assyrians and Phoenicians. But I think it would be a high tragedy… don’t you?

We might be lost and sputtering at the moment, but it’s not too late to mount a counteroffensive. That means rebuilding a culture that values something above and beyond shallow diversions and short-term profits. It also means agreeing to agree on fundamentals.

Most frequently used words by respondents to a recent poll about the Congressional debt debate. Source: Pew Research Center & Washington Post

Even more to the point, given the recent partisan squawking over America’s national debt, it means that our elected representatives must drop their belligerent agendas and start thinking about the greater good of the republic. Any politician who would risk the future of his country for the pleasure of pulling the rug out from under the opposition is a jackass, plain and simple. By now we know who the jackasses are, and some of us radical moderates would love nothing better than to wrap them up and ship them back to their home states, postage due.

Where’s our pride, our decency, our will to rise above self-interest? Where’s George Washington when we need him? Three thousand years of Western Civilization are depending on us to keep the great chain unbroken. So let’s put our heads together, stop shredding each other with our barbs, go out there and win one for the Gipper — and for Socrates, Shakespeare, Michelangelo and Mark Twain. There’s more at stake here than partisan politics.

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154 Comments leave one →
  1. AMAC permalink
    August 6, 2011 1:41 am

    You can’t help but wonder if this is the “single day and night of misfortune” Plato spoke of. Is this Atlantis sinking? I don’t think so. Maybe I am naive or just perpetually optimistic. I think that this is a wake up call. I hope that this is the moment that begins a new age, if only in terms of ideology. I think that the “western culture” we are talking about is not the same as what began in Greece and was furthered through various other cultures. I think that our culture is similar, but also unique. Our American Culture is a culture that has made more than a few mistakes, but has learned from those mistakes and improved. I think we can work together and come back stronger. We all know how vulnerable we are now and we can move on. Sounds a little sappy, but it’s what I think.

    “The future belongs to those who believe in the beauty of their dreams.”
    –Eleanor Roosevelt

    • August 7, 2011 10:15 am

      “I hope that this is the moment that begins a new age, if only in terms of ideology.”

      I hope so too. If that turns out to be the case, it would be a huge change in how our political system works. It would be a miracle if that happened. Both parties rely heavily on rigid, polarizing ideology to distort reality and distract and polarize average Americans. De-emphasizing political ideology in favor of pragmatism grounded in common sense reality would be a radical change. That would mean that voters come to understand that ideology isn’t the best intellectual framework from which to try to solve problems or to formulate policy. Both parties and most special interests would fight hard against walking away from that status quo.

      One thing is for sure, that kind of attitude change isn’t going to come from the Tea Party folks. They walk away from pragmatic, problem-solving realism. Instead, they choose to proudly walk farther into rigid, hard core, uncompromising ideology. That would be fine if their ideology had a track record of success and offered humane, intelligent ways out. Unfortunately, the track record of hard core conservative ideology (as foisted on us by the Republican party and implemented by its elected leaders) is one of failure, just like hard core liberal ideology.

      Breaking away from reliance on ideology would be a big and fundamental advance in political thinking. I’m not sure the public is ready for such a big change or is conscious that choice even exists. I suspect that, consciously or not, most average voters and non-voters think there are only three options for most issues, liberal, conservative and compromise between the two. The world is much, much bigger and intellectually richer than that, but how to get that point across is not clear at all.

      • August 8, 2011 5:09 pm

        Cal: Great comments. The Tea Party infuriates me with its arrogance. I think they’re drunk on their own power right now. I initially liked the fact that they were from outside the political establishment, but lately they’ve been reminding me of the Nazis in their infancy, deliberately throwing the economy under the bus (or is it the train?) to make Obama look bad and gain more power for themselves. These are ideological fanatics, and I’m a sworn enemy of all fanatics.

        You’re also right that most of us (including a lot of moderates) think there are only right-wing ideas and left-wing ideas… and that if you’re a moderate you sort of look at the two extremes and take the average. Big mistake. We moderates need to outline a philosophy of our own without becoming bound by ideology… just ideals.

    • August 8, 2011 5:02 pm

      I don’t think we’re about to see a knockout punch, but I honestly believe we’ve set the stage for an inexorable decline. Our star is fading, and there’s not much we can do about it now.

      My top reasons:
      1. The great divide within the middle class, with a small portion of it drifting upward and the majority drifting downward (with destruction of wealth and jobs)
      2. Total amorality of the private sector… obsession with short-term profits over long-term equity and employer-employee loyalty
      3. The pervasive corruption of our political class… most of them paid off to favor big-money interests instead of representing their constituents
      4. The great demographic shift… Latinos will eventually outnumber Anglos; the old and poor will outnumber taxpayers. America will gradually resemble a Latin American republic, with a small upper crust and a vast, impoverished lower class
      5. A culture war that could turn into a civil war, with the plutocrats and their Tea Party stooges on one side and everyone else on the other side.
      6. Fatally overextended resources. We can’t police the world and offer reasonable entitlements to our people without raising taxes, yet some folks think the government can just mint money in the cellar.
      7. The rise of China and India: huge economic and demographic markets that eventually won’t even need our business.

      In short… we’re doomed. But it’ll probably be a slow-motion fadeout. At least I won’t be here 50 years from now to view the smoking ruins, but I feel sorry for my son.

  2. AMAC permalink
    August 6, 2011 1:45 am

    Rick,
    Loved the article. I am a big film and greek history buff. Love the two refrenced in one article!!! We can learn a lot about democracy (both good and bad) from the Greeks.

    • August 8, 2011 5:13 pm

      AMAC: Thanks! I appreciate the appreciation, and I always welcome a fellow ancient history buff. I only wish we could gather on a hill somewhere and vote the Tea Partiers into exile.

      • AMAC permalink
        August 11, 2011 11:52 am

        If only it could be that simple! I am afraid they are here to stay at least for the immediate future. I think that we should all study greek history, as so much of our culture and government has ties to it. I especially like to study the greek city-state of Athens. Polarizing politicians, and easily swayed public, and corruption led to the most effective leaders to stay away from politics. Politicians with personal agendas and corrupt personalities were the only people who would even seek office. It would seem we would have a lot to learn from Athens. Lords of the Sea by John R. Hale should be required reading for all high school students. It is not political by nature, but there is much to be learned from studying mistakes made by other democracies. We seem to be making the same mistakes that led to the fall of Athens.

  3. lovetheocean permalink
    August 6, 2011 3:01 am

    I don’t think the end of Western Civilization is afoot, but I do think we are on an unstoppable trajectory towards it. Rick, my cock-eyed optimist friend, where are there any forces in current-day America that could bring us back from the brink? We’re morphing into another paradigm…ain’t nothing’s gonna stop that. But, who knows…maybe some kind of gleaming new global culture will arise.

    • August 8, 2011 5:23 pm

      lovetheocean: It might be that we’ll have to witness the death of Western Civilization while the new global culture emerges. It’ll be a long and rough transition, but it all might work out in the end — assuming we don’t eventually start a global war over our limited natural resources.

  4. Ian Robertson permalink
    August 6, 2011 8:35 am

    Geez Rick, you are getting to be as gloomy as I am, maybe worse.

    Whats a moderate to do? I can only hope that the lowering of the US credit rating will wake people up to the seriousness of the mistake that the GOP/tea party brinksmanship has dragged us into. I do not think that they are all loonies, their basic intention, to want to get into the black, is good, but they are not economists and they are doing this in the wrong way and at the wrong moment. To hold out the possibility of taking an ax to our fiscal integrity, “well, maybe we will just default if we don’t get what we want,” that was a huge mistake. I hope that centrists will see this and that the GOP gets wacked in the next election, but at the same time I don’t want the democrats with another super majority, they can just as quickly lose contact with reality when they own all the political real estate.

    I agree with many of your statements, your values, and your judgement about our economic behavior, but I think you are probably overdoing it here. We are all in shock still from Lehman Bros. et al. to be honest, and even still from 9/11 and now we look at the daily news and expect the next world-changing earthquake.

    Economies go into a tailspin when the parts stop functioning in a coordinated way as an integrated whole, when demand and supply are out of sync, when job creation falls as some sector of the economy, say housing, suddenly hits a bad spell, and then it can multiply as other sectors start to get dragged in. Most of the mechanisms of the New Deal, while they seem to be based on humane behavior, are most of all mechanism to dampen the abrupt and extreme loss of demand and prevent real economic freefall.

    In our vast international economic system, I have to think that there limits to which this storm can go, and then leaders start coordinating their efforts. We can’t all go bankrupt at once and the Chinese are not about to demand California in exchange for our obligations. It will right itself, the human, natural and technical resources don’t just disappear overnight, they are still there, they just get mismatched. It take some kind of a reset to match them up again.

    When you look at certain numbers, like the national debt, its easy to get very depressed. You need to put these numbers into perspective, normalize them to our gdp, compare them to those kinds of stats for other economies.

    Its time to be seriously concerned, but its not time to panic. Panic is a very bad actor in economic scenarios, it creates problems that were not structural to begin with as people start to behave irrationally, they all at the same time want all their money in cash to stick in a mattress and start think of spending most of their life savings on ammunition, bottled water and canned food.

    Lets not do that!

    • August 6, 2011 2:06 pm

      S&P lowered the US credit rating because the deal struck by Republicans and Democrats was insufficient. The ratings agencies made it clear that $4T of spending reductions were necessary and this deal only provides 2.1T. Moodies chose not to lower the US rating – had two ratings agencies chosen to do so many responses would have triggered automatically.

      I am not a fan of the GOP – if they bear less responsibility – it is only in comparison to the Democrats.

      Regardless, the spending reductions were insufficient – whatever you may beleive about the GOP or the Tea Party, the weakness of the deal is solely because the left was unwilling to go farther.

      • Priscilla permalink
        August 7, 2011 12:46 pm

        Absolutely right. The deal dealt only with cuts to discretionary spending, not fixed entitlement obligations, which is what is driving the debt.

      • August 8, 2011 5:36 pm

        Dave: SOLELY because the left was unwilling to go further?? Ahem… there’s the small matter of the right unwilling to raise taxes on the elite and eliminate loopholes for favored corporations. Come on, what decent American could possibly oppose the elimination of corporate loopholes… unless they’re being paid off by the corporations that currently enjoy those loopholes? I’m sorry, but any resistance on this matter is totally unconscionable given the dire nature of the ongoing financial crisis.

      • Sean permalink
        August 12, 2011 5:55 pm

        The “Left”, as you call them, basically capitulated to every demand Boehner made. The problem is that neither side is really ready to make the hard choices necessary to bring down the debt.

    • August 8, 2011 5:27 pm

      Ian: Said like a true-blue moderate (and of course I mean that as a compliment). My anger at the system is definitely leaking out, though I don’t think it’s unjustified. We could use some cool heads like yours. Thanks, friend.

      • Ian Robertson permalink
        August 9, 2011 9:56 am

        And proud to be/have such a friend!

  5. August 6, 2011 2:45 pm

    We are not facing the end of western civilisation. But we are at a cusp.
    Progressives, conservatives and moderates need to decide what they really believe.
    What caused our current mess ? What will fix it ?
    There are only two economic schools that offer and answer about the causes of economic declines. Keynesians claim it is our “Animal Spirits”. Austrians claim declines occur when bubbles burst. Bubbles are cause by too much bad investment, caused by excessive credit, caused by government – typically central banks.
    If you believe Keynes, the debt limit deal was an enormous mistake. We should greatly increase spending. If $1T in stimulus did not work try $2T or $4T – whatever it takes. Put people to work digging holes and filling them in – whatever it takes.
    If that is what you believe then stand up for it. Curse the left for yielding and the right for talking austerity when what is needed is even more spending.
    If you are not prepared to spend another $4T or another $2T, do we continue as we are ?
    Is another $1T of government stimulus the moderate way ?

    Rick is begging for civility and compromise. Is it more important that are political discourse is polite or that we solve our problems ? The only answers we have are nearly diametrically opposite in most every way. Only one is right, and compromise is arguably worse than either extreme.

    • AMAC permalink
      August 6, 2011 7:08 pm

      What if the right answer is in the middle? Spending alone won’t solve problems. If spending is the reason, then how do we spend it. If cuts are needed, then what do we cut? I don’t think the answer is on one side or the other. I believe the answer is in the middle. I am not a moderate to keep from choosing sides or for fear of offending others. That’s the problem with being moderate. People think you have to be conservative or liberal. What’s made this country great is diversity, in thought and in beliefs. If every person chose to follow one ideology, we would surely fail. The truth is no one person or group of people can have all the “right” answers. I have core beliefs but I am also a reasonable person. I can evaluate information and make decisions. Moderate does not mean I am “on the fence”. I don’t think my choices are compromising. I believe that there is wasteful spending to be cut, and I believe there is money needed to be spent to correct the situation. I don’t have to choose one or the other.

      • August 6, 2011 10:01 pm

        Why is the answer in the middle ? Why is it that on a specific issue one side can not be mostly right and the other mostly wrong ?

        I am neither conservative, nor liberal – but I am most definitely not moderate. I believe in individual liberty. Free individuals never all follow one ideology.
        Missing, but implied throughout your response is “government”
        Only government can push us all in one direction. If you are afraid of all of us going in one direction, then you are afraid of government.
        The wasteful spending of others is not my business. But all government spending starts by taking wealth from the rest of us. “Wasteful” or not, every dollar government spends is a dollar that can not be spent by the person that earned it.

        None of us have all the right answers to all problems, but for most problems given only two choices one answer is more right than the other. Further the correct answer is more likely to the left or right of the available choices rather than between them.

        In my experience compromise means the gradual rather than rapid erosion of liberty.

      • August 6, 2011 10:18 pm

        If you believe there is a middle ground – where is it ?
        What spending should or can be cut and by how much ? What spending is worthwhile and should be increased ?

        The federal budget in 2000 was $1.8T, in 2008 it was 2.8T, in 2011 it is $3.8T.
        Has the cost of living doubled since 2000 ?, have wages doubled ? What great thing has government done since 2000 that is worth $2T/year ? Since 2008 that is worth $1T/year ? Over the next ten years the republicans and democrats are fighting over the difference between spending $43T and $46T. Neither party is proposing real spending cuts, they are arguing about reducing the rate of increase. Social Security and Medicare shortfalls will eventually take an additional $400B/year That is still $4.2T not $4.3T, nor does it explain why government is spending $2T/year more today than in 2000.
        There is plenty of pork in the federal budget, but there is not $2T/year of bridges to nowhere. The overwhelming majority of that is because the cost of even beneficial government programs always increases far more rapidly than any benefit they provide.

        I see no benefit government provides – not even social security and medicare, that can be cost justified.

  6. AMAC permalink
    August 7, 2011 1:26 am

    dhlii,
    First, I am not afraid of government, so please do not put words in my mouth. I absolutely believe that one side can be mostly wrong/right. That is why I do not vote along party lines. Many times, the choice comes between the lesser of two evils. You are correct. I simply am explaining that on this issue, I do not believe in two choices. I also do believe that sosial security and medicare are two important programs. Many elderly depend on these two programs. Who would ensure all of these elderly if not for medicare? I don’t expect many private insurers are lining up to ensure them. I don’t accept that most problems have two choices. For instance, in medicare, the choice does not have to be fund it or end it. It will have to be restructured. As the life expectancy continually increases, the minimum age will have to be increased. Some of the coverage may have to be cut. It will also need some additional funding. This is a combination of the two choices. I appreciate your points, but I don’t agree with all you are saying.

    • Ian Robertson permalink
      August 7, 2011 1:52 pm

      Dhlii, given that you have stated your aversion to government and disdain for it over and over, its silly to even have an economic argument with you, you are living in a (to you) beautiful and very naive dream. Your economic principles do not have any merit whatsoever in a modern society, if I take you at your word I’m not sure that even currency would exist, since that is a government function.

      If we start a new society from your principles, on day one everyone will be free, by day ten 1% will control everything, and by day 100, one person will control everything and be free, everyone else will be his slave in some manner. Its not freedom after day, one its slavery.

      No, those principle are not a moderate, and basically, not relevant to anything modern, but it is interesting that they are conservative principles if you put conservative principles on steroids.

      • August 7, 2011 6:17 pm

        My economic principles are those of Adam Smith, Turgot, Mills, Bastiat, Mises, Hayek, Freidman. They are the principles underlying the changes that have occured starting in the west and spreading throughout the entire world over the last 500 years. Despite the progressive influences of the past 3/4 of a century they are still the underpinnings of our entire society today. When the beneficence of government proves to be a boondoggle – as it always does, it is the free market that must bail out progressive government. The twentieth century was the heyday of progressive central planning. It failed in the USSR. It failed in the Social Democracies in Europe, and it is now failing here.

        Your presumption that in a free world everything will gravitate to the few is fallacious in both theory and practice. We all accept that stealing and the use of force are wrong. If there is any legitimate role for government it is in preventing theft and the initiation of force. Absent those the only way for one person to aquire what belongs to another is to trade something of equal or greater value. Free Markets, modern society, and every modern school of economics – not just libertarians depend on the fact that free market exchanges are almost always make both parties better off.
        In practice where do you think the wealth of the poor has come from ?
        More than 200 years ago Adam Smith grasped that free markets were going to improve the lot and political power of the bottom of the economic pyramid dramatically. This is not accidental it is the nature of the free market. By far the largest market is that at the bottom of the pyramid. Sam Walton got richer in a single generation than Tiffany’s has in almost two centuries ?

        As to relevance – those portions of our world that are the freest are those that are working the best. Despite the fact that we are not nearly as free as we could be, it is the freedom that we have that is going to solve all the problems we currently face. Our Debt, our Deficit. All the government programs you love, will be paid for from the wealth creation of the free market.

    • August 7, 2011 5:55 pm

      If I suguested you were afraid of Government I apologize. I am afraid of government or more accurately – I do not trust it. I do not believe that experts in the Federal capitol or state capitol, or even the local city council can make better spending decisions than the people from whom they took the money they are spending.

      You chose Social Security and Medicare so I will use them as examples.
      Social security dates back to the thirties – did everyone die immediately after retiring before that ? Medicare only dates back to 1965 – was there no medical care for the elderly prior to that ? Even if I concede that some people are better off as a result of Social Security and Medicare, it is not everyone, it is not most of us, nor is it even most of the poor.
      If I recall correctly the average person pays almost $150,000 into Social Security during their lifetime. The average person collects just slightly less than that. There is no thirty year period even periods that include the great depression that the stock market did not produce greater than a 0% return on investment. Even a Certificate of Deposit would yeild about 200,000 over 30 years. Worse still Social Security is essentially run as a ponzi scheme. The money has never really been invested – a major factor in the current deficit debate is that Medicare is now costing $200B/year more than its revenues, and very shortly Social Security will cost more than its revenues. The bottom line is that neither program is sustainable as they are currently structured. Given that one believes in them – now is the time to take the painful steps needed to fix them – because later it will get worse. My idea of a fix is to do what should have been done in the thirties and make them optional. The so called social security trust fund – money that does not actually exist, would all (one way or another) have been invested in the real economy had social security never come into being – instead it has all been squandered. Medicare is actually worse. There is a distinct hip in the graph of healthcare costs immediately after Medicare went into effect. Government can not repeal the laws of supply and demand. In every instance where government has tried to impose price controls the results have been disasterous. I was alive for Nixon’s wage and Price Controls. I was not for FDR’s NRA – but the economic results were still abysmal. Look at the price of anything – if it has gone up in real dollars over the past 30 years, you can bet that government is heavily involved with that product. If the price has gone down – often down even without counting inflation, you can pretty much bet that product is lightly regulated. Healthcare is the most heavily regulated market in this country and it has had the most dramatic price increases. Those aspects of Healthcare with the least regulation – Lasik, Plastic surgery – have declined dramatically in cost. Numerous studies over the years have found medicare alone responsible for between 1/3 and 100% of the increases in the cost of healthcare since 1965. Equally importantly, though the cost and the consumption of healthcare for the elderly has increased dramatically, there has been little or no real additional benefit. Essentially the laws of supply and demand are immutable. If you make something free or nearly free you dramatically increases demand.
      Personally, I beleive we should end both Medicare and Social Security – while finding some means of atleast partially honoring the commitments we made when we created these programs. But I do live in the real world, and grasp that regardless of how good and idea that might be the only way it is happening is if we go bankrupt. As much as I would like to reign in government spending, that is not how I hope that comes about.

      At the same time we must ALL – left, right, moderate, libertarian, … admit that the promises represented by Social Security and Medicare that we made – were lies. It still remains to be seen exactly how big those lies were, but unless we can be honest and admit we have made promises that can not be kept we can not fix the problems.

      House Republicans lead by Paul Ryan bravely stepped to the plate on the issue of Medicare – and admitted that as it currently exists the program is unsustainable. In return to that honesty they were treated to commercials showing them shoving Grandma off a cliff. We can all disagree about what needs to be done to fix the problem – but pretending there is no problem is deceipt. Nor do I particularly wish to let the Republicans off the hook here. The insolvency of Medicare and Social Security have been well known since their inception. The current crisis with respect to Social Security and Medicare has arrived early, but we have known that it was coming and approximately when for most of my lifetime.

      I have railed about Social Security and Medicare – but their problems are not unique. We have done the same thing to education – over the past 30 years the cost in real dollars of education has more than doubled, yet the quality has declined. I live near a very exclusive and expensive private school, they have unbeleiveable teachers and facilities, Their tuition cost is nearly the same as the per student cost of my local public school. The numerous other lesser private schools in my area – all still far better than local public schools cost far less – some less than half what public schools cost. Anyone claiming that the solution to the problem of poor quality in public education is more money is lying. Public education is proof that government will make everything it touches both cost more and decline in quality.

      All of us – regardless of labels want excellent education, we want excellent healthcare, we want an excellent retirement, we want ….
      All of us want these things to be affordable, and we do not wish to see anyone want for these through no fault of their own.
      What we disagree about is how to accomplish that.
      Libertarians do not accuse the left (or moderates) of being heartless bastards because their programs to help the downtrodden have universally made things worse. We do not accuse them of being corporate shills because the primary beneficiaries of progressive government are the rich and big corporations.

      Conditions in this country for the poor have improved dramatically over the past century (or thirty years). The poor in the US have more wealth than the middle class in europe. Not a single facet of that improvement is the result of any government program. I beleive you would be hard pressed to find a single government aide program that has not made conditions worse for those it intended to help. There certainly has been no government program that has not cost much much more than projected.

      • Ian Robertson permalink
        August 7, 2011 7:01 pm

        Sometimes when people are wrong they are not lying, e.g., Bush and weapons of mass destruction. You overuse that word lie, dhlii, I will claim now that you are lying when you claim all these govt. lies are made.

        Social security has functioned for 65 years, no ponzi scheme can do that. Due to demographics and economic shifts SS and medicare need a new actuarial basis every so often. SS and Medicare are not based on lies.

        By the way the stimulus, (which had a large component in Bush’s last budget), DID work:

        “In 2008 and 2009, the economy contracted for four consecutive quarters. The last time this happened? The Great Depression. The economy fell .7% in Q1 2008 with the Bear Stearns bailout, but resumed 1.5% growth by Q2. When the banking system imploded in the third quarter, the economy shrank 2.7%. The Lehman Brothers collapse delivered the death blow–the economy dropped 5.4% in Q4, growing only .4% for the year. GDP plummeted 6.4% in Q1 2009. By the second quarter, the economic stimulus package started to work: the economy shrank only .7% in Q2. It finally grew 2.2% in Q3 and 5.6% in Q4.(Source: GDP Current Statistics)”

        The stimulus was accompanied by near zero interest rates, another govt. intervention. It seems you believe that govt. should have done nothing, and you now look at the stimulus almost in a vacuum since you ignore the financial backdrop of the largest economic crisis since the depression and simply complain that the economy is still under stress, ergo, the stimulus did not work. Totally illogical.

        Poor brave Ryan proposed to give the upper level earners a large income tax break while cutting the safety net for the poor and suddenly people called him names. That’s nothin, dhlii two years previously Obama and the Dems made an attempt to make sure that the poor had health coverage and conservatives invented some fictitious clause of his plan that supposedly mandated “death panels.”

        From Sarah Palin: “As more Americans delve into the disturbing details of the nationalized health care plan that the current administration is rushing through Congress, our collective jaw is dropping, and we’re saying not just no, but hell no!

        The Democrats promise that a government health care system will reduce the cost of health care, but as the economist Thomas Sowell has pointed out, government health care will not reduce the cost; it will simply refuse to pay the cost. And who will suffer the most when they ration care? The sick, the elderly, and the disabled, of course. The America I know and love is not one in which my parents or my baby with Down Syndrome will have to stand in front of Obama’s “death panel” so his bureaucrats can decide, based on a subjective judgment of their “level of productivity in society,” whether they are worthy of health care. Such a system is downright evil.”

        I read the same stuff from the CATO institute, its not just Palin. Extending health care to the poor somehow meant that Obama was for Death panels.

        I’m losing my patience.

      • Ian Robertson permalink
        August 7, 2011 8:02 pm

        No reply button in the needed place so I reply to dhlii’s reply to me here.

        The only evidence you seem to give that freedom is the only answer to every economic question is that the word free is found in the phrase “free market.” The “free market” is anything but free and if you can find me an economist of any note that believes it can be made totally free I’ll eat my hat or my words, whichever you prefer.

        This hatred of government you have is not the underpinning of any modern economy. Dhlii, Please point me to a modern economy that functions according to your principles that govt is a boondoggle and the “free” market is the true answer to every economic question. I want a specific answer, a specific country whose economic management you approve of, not a vague and fictitious claim that your principles are the underpinnings of all modern economies. If you water them down to the point that they are unrecognizable then yes, we can find some of your freedoms.

        BTW, Friedman’s idea of a laissez-faire Utopia, Hong Kong, isn’t a country, its a city, with a weird history as a british colony, nearly no natural resources, and a trade advantage that depends on ultra-cheep chinese labor. An appropriate model for the US, or any other major economy? The chicago school of economics, Freidmans home planet, has been specifically blamed by many economists for the 2007 crisis. Although Friedman believed in getting rid of the Fed entirely!! even he never said that banks did not need regulation and hotly disputed that he had.

  7. Priscilla permalink
    August 7, 2011 10:19 am

    To one of Rick’s points, regarding the comparison of our country’s current fiscal situation to that of an smaller, domestic case, I read this the other day : “If you had to rate a potential investment that had an income of, say, $22,000 a year but had costs of $37,000 per year, a standing debt of $143,000, and a contracted future debt that exceeded $1 million, would you give that investment a gold-plated AAA rating and buy its bonds at the lowest interest rate possible, or at all? Of course not, but that’s exactly the fiscal situation of the US, at a 100,000,000:1 scale.”

    Any reasonable person would see the above situation as crazy and unsustainable, but, somehow, when the numbers are exponentially multiplied and the situation has been created by our government, using our money and our future, some of these reasonable people say some pretty unreasonable things…..

    Sure, it’s pretty damn scary, but as long as politicians insist that we can get out of this by taxing the wealthy, or gutting our defense budget, or some other crazy or suicidal such thing, we remain stuck in this.

    Both parties have gotten us into this, but, at this point in time, as Dave mentioned, only one party is seriously talking about getting us out. And, in reality, it is only the tea party wing of that party that is talking about anything even approaching the reality of what we have to do to rescue ourselves, and in particular our children and grandchildren, from almost certain fiscal collapse.

    Why won’t the Democrats propose any kind of fiscally responsible budget or serious plan for entitlement reform? Simple….attacking the GOP as “fat cat loving, granny killing, heartless bastards” is their political strategy for 2012. They were beaten badly in the 2010 elections, when the economy was the key issue and the tea party emerged as a genuine force in American politics, and, the economy has not improved since then, nor is it likely to improve much (if at all) before 2012. What else can they campaign on? That Obama killed Osama BinLaden? That this was all Bush’s fault and we should all be more” patient?” That’s pretty thin gruel with which to run a reelection campaign…..

    I frequently read harsh criticisms of Paul Ryan’s roadmap plan – from both liberals and conservatives. No one, it seems, wants to be associated with the actual details of how we might reform Medicare – it is so much easier to “mediscare” voters. Even Obama, in one of his many press conferences during the debt ceiling debate, alluded to the fact that he would “consider” cuts to Medicare (no details or anything, of course) and was immediately attacked by his own party leadership, for “caving” to Republicans. Needless to say, we didn’t hear him say that again.

    I am not endorsing nor condemning the Ryan plan – it seems workable, but there may well be better ways to reform our out of control spending. But we are not hearing them – we are just hearing attacks and deomagoguery..

    And that is not going to keep us from the end of Rico.

    • AMAC permalink
      August 8, 2011 12:42 am

      Priscilla,
      I agree with your example of an average investment. I think the only difference is that with a country, there is really little chance of bankrupcy (see the UK). Much of our debts are to countries that depend on our resources, consumers, military, etc. There is no collection agency calling in our countries debt. That is what is unique to our country. I am one of those rare americans that owes less than what I make in a year, but am in no way wealthy. I say this because it is a matter of perspective. With the global economy, most have seen this coming for the last 5 years. I am concerned and do not want to discount your points. The debt is out of hand, and has been. But if our GDP was high and growing, the debt would not be an issue (see 1995-1999). At least not the issue that it is today. Again, I do want to state I am concerned about our debt and our spending. You did make some good points that I do agree with. I just think comparing our government to a business is a stretch. Our government has to consider its citizens welfare much more than a business. I did enjoy your post and it gave me much to think about. Thanks.

  8. Ian Robertson permalink
    August 7, 2011 1:08 pm

    This discussion represents the country well, its totally polarized. I’ve come to realize that when the system is radically out of wack there may be no moderate economic view, because the actions needed to prevent a train wreck are not mild ones, a little of this, a little of that. A huge philosophical adjustment is needed in our tax principles.

    Seems that for economic purposes I fall out as a liberal under present circumstances, much to my surprise. Its income disparity and deregulation that drove this disaster and lack of sufficient income into the system. These factors are traced back to conservative principles, not liberal ones. I have made some large mis-statements here and there in my posts, particularly where I said that the stimulus was only a few hundred billion, that was wrong, depending on what you count as stimulus. But one thing I was correct about is that the top 2% of the earners have a yearly income of ~ 8 trillion. We have a 1.8 trillion deficit, and a 16 trillion national debt.

    No one answered my question, it was not rhetorical, how do you expand the economy when the bottom 80% have seen their incomes shrink vs inflation for the last 30 years and they have already been through the predatory lending binge, and also cannot sell their homes for a reasonable price? there is little discretionary income in the bottom 90% of the system, only the top 10% have any appreciable resources on hand and they are sitting on that money, not expanding the economy and producing jobs and growth.

    Priscilla, your example was, in my view wildly wrong, it did not account for our ~15 trillion gdp, it just used income of $22,000, in other word our tax proceeds of `2.2 trillion. So, ask a silly question, get a silly answer. Economists consider the debt as a fraction of gdp, thats how they do it and they do it for a reason. The GDP exists, we have simply chosen to not make use of that resource to the extent necessary because of some fictional idea that the if the rich keep their money, we will all be better off. It ain’t so. So, let the upper 2% race away from the rest of us while the debt piles up, thats our GOP plan. When it gets bad enough we will follow Ryan and give the rich another tax cut, decrease our revenues even more and cut benefits to the poor and old. That is exactly what the Ryan plan proposes. Lets do more of what got us here but make it even more extreme. The hyper rich will surely save us someday.

    No Thanks!!!

    • August 8, 2011 1:03 am

      The last serious deregulation was Carter – the airlines, and Freight trains and trucking – which were wildly successful. No one has credibly argued that the repeal of Glass-Steagle had anything to do with the current mess. And the enormous cost of Sarb-Ox is arguably a major factor in the economic weakness of the past decade – regardless it certainly did nothing to prevent the current mess. The SEC did not catch Maddoff, BMMS certainly did not prevent the Deep Water Horizon disaster.
      Whether the left likes it or not, whether it is politically correct or not, cutting taxes on capitol and investment will stimulate the economy more than anything else. If that troubles your conscience we can continue on in our fragile state – into something knocks us back in or until we gradually gain sufficient strength to pull out.
      I am not sure where your data is coming from but I beleive the IRS data for 2008 has the total AGI of the top 5% at just under $3T, and for reference that is everyone earning more than 159,000/year. You have to get to the top 0.1% to get income over $1M/year. You would have to tax everyone earning over 160K an additional 66% or nearly 100% to balance the budget.
      There is a great debate over the so called stagnation of income in the bottom quartile. Government figures do confirm nearly level (inflation adjusted) income over the past 30 years for the bottom quartile. But other government figures also indicate a significant increase in the wealth of that same group. Finally the entire income disparity argument is ridiculously fallacious. My income in 1981 would have put me in the lowest quartile. Today it would put me in the top quartile (barely). I am well below the top 10% and the past couple of years have been crappy, I can still afford to pay all the things I must – mortgage, food, heat, power, .. and have enough left over for cell phones, TV’s cars, occasional nights out. I forget the actual percentages, but we have enormous income mobility in this country. Only a small fraction of the poor remain poor over long periods, even those in poverty usually only remain their for very brief periods. Contrary to the liberal meme the rich do not remain rich either. The general trajectory for is up for most of us until retirement and then slightly down, but few people remain in the top quartile over long periods of time.
      I do not know where you get your ideas of how much the people make in various tiers.
      These are the income groups according to WSJ in 2006. Median — $25,076 Top 10% — $87,334 Top 5% — $120,212 Top 1% — $277,983 Top 0.5% — $397,949 Top 0.1% — $1,134,849 Top 0.01% — $5,349,795.
      You are correct that capitol is stagnant – would you take a risk in this economy ? I beleive the Fed has pumped significantly more than a Trillion dollars into the banks we bailed out – and that is just sitting. Another example of how effective the government is.
      Finally, the GDP of the nation does not belong to the federal government. You can play whatever games you wish with regard to money, but wealth is created, the value add of government is miniscule – if it is even positive, the primary action of government with respect to wealth is to redistribute it. Whether that is a good idea or a bad one, it does not create wealth.

  9. Priscilla permalink
    August 7, 2011 8:59 pm

    Ian, the example I cited was for the purpose of illustrating why a credit rating agency like S&P downgraded our rating from AAA to AA+. It is not at all surprising, given that deficit spending is now about 41% (and rising) of total government spending, and that percentage is only increasing. The debt ceiling deal did nothing to stop that.

    While your remarks on GDP, income disparity and jobs are certainly relevant to any debate on fiscal policy, the figures that you cite are not really relevant to the downgrade. The head of S&P’s ratings agency said today that “even with the debt limit agreement passed by Congress,the underlying debt burden of the U.S. is rising and will continue to rise over the next decade.”

    The reason that the debt is rising is entitlements, not lack of taxation. You can argue (and you do, as does Rick) that the rich don’t pay their fair share. Well, ok, let’s say that is true. How much would you say is their fair share? 40%? 60%? 80%? 90%? As entitlement spending goes up, which it is programmed to do, do we just keep taxing the rich more and more, ignoring the fact that it is out of control entitlement spending that is the root of the problem?

    And what happens when the rich say, enough – we’re outta here!, and become tax exiles, the way rich folks like John Lennon, George Harrison and Ringo Starr did back in the 60’s and 70’s, when Britain, facing a similar situation raised the tax bracket on the “super-rich” to 95%? (Check out the lyrics to “Taxman” by the Beatles – it could be a Tea Party anthem, lol.)

    And, how do you create more jobs,when you’re taxing job creators out of existence?

    FInally, the Ryan plan, as I read it ( and I have tried to research this pretty carefully) cuts the effective tax rate for middle and high income earners by closing loopholes and eliminating most deductions that currently exist, in a move towards a flat tax that would require everyone to pay about the same percentage of income. I realize that the left continues to say that this is “tax cutting for the wealthy”, but that is not really the case at all.

    In any case, I continue to ask – what is the plan that the Democrats have put forward to address the problem? And the answer keeps coming back the same………raise taxes.

    • August 8, 2011 1:13 am

      In 2004 the bottom 50% of tax payers paid 3% of federal income tax revenue.
      The top 10% paid 68%, the top 5% 57%, the top 1% 37%.
      It is my understanding that in 2010 more than 51% of wage earners (almost all from the bottom) paid no income taxes.
      For those who think that distribution is somehow unfair, rather than set tax rates, what portion of the cost of the federal government should fairly be born by each group. Personally I think the moral hazard created when a significant percentage (far lower than 50%) of potential voters pay no taxes is unsustainable.

    • Ian Robertson permalink
      August 8, 2011 11:29 am

      Its one for you nineteen for me… And when I looked it up, merry old england really had a 95% bracket. George, the “Legal Beatle” wrote that song.

      Dhlii exposed another mistake i had made, this one concerned how much the top 2% earn, my 8 trillion was off by a factor of about three, its more like 2.5 trillion, 8.4 trillion was the entire US AGI. It puts a serious dent in my argument, I won’t say it kills it completely.

      To your question of what upper rate would be sufficient. I would say that the rate that actually redistributes the income such that the upper quintile is not running away from the bottom four quintiles. Its a structural problem with the economy of huge proportions that the bottom 80% are losing relative to inflation, while the top is gaining, leading to both increasing income disparity between “rich and poor” and and inability to expand the economy from “below”.

      My info on tax burden by quinitile Does stand up, it looks like the the upper 1% of the earners paid a 23% of their income on the income tax, although their rate is nominally 35%. This is based on figures from the business-oriented Tax Foundation, who draw on the IRS for their numbers. Its a far cry from the 95% George was vexed by.

      As to how we spin the Ryan plan, simplifying the tax tables and regulations has a nice ring to it but it should not be a ruse for decreasing the burden on the wealthy, increasing income disparity, and lowering federal revenues, especially when we are worried about the deficit. My favorite political columnist, David Brooks, initially praised Ryan and then did a flop in his next column and admitted that it was mostly DOA.

      Given my factor of 3 error on the incomes of the top 2%, I’ll admit its not as easy as I thought to find the extra money to balance the deficit, but the money to do so is still there, we had an 8.? trillion AGI and a 2.2. trillion revenue with 3.7 trillion in expenses. There would be ~1.3 trillion in national saving by my calculations (the difference between 17% and 8% of our 15 trillion gdp) about 50% of which would be Federal savings, if we could ever somehow perform a miracle and get a European style health system.

  10. August 7, 2011 9:56 pm

    FDR grasped that Social Security was an unsustainable Ponzi Scheme when it was first considered, he resisted moving forward with it until the duration of the depression made it a political necessity. The various demographic and actuarial tinkering were predictable from the begining, and the need for most of them has been understood decades in advance. I the eighties we purportedly fixed Social Security until 2035 or possibly even 2050. Yet even without the current recession it would have needed adjustment again in the next few years. From its inception as implemented Social Security depended on each generation being larger than the next. That is pretty much the classic definition of a Ponzi Scheme. Why can’t a Ponzi scheme last 65 years ? The definition of a ponzi scheme is a form of investment where the current investors are paid off from subsequent investors, not the investment itself. Social Security not only is a Ponzi Scheme but it has never pretended to work any other way. Most Ponzi schemes fail quickly because the investment cycles are short and the return on investment expected in the real marketplace is high. Social Security has an ROI of zero and a cycle decades long. Given perfect construction and perfectly stable demographics – it could even be sustainable. It would still be a ponzi scheme. It still would be illegal for a private entity, and it would still offer no return on investment.

    It also fits the classic progressive definition of unsustainable. Current demographics pretty much guarantee that all too soon there will be 1 person on Social Security for every 3 workers. That is unsustainable.
    Any private program structured similarly would be shutdown by the DOJ as fraudulent.
    I chose the word “lie” deliberately. I do not mean FDR lied, or democrats lied or progressives lied, we are all guilty. We have all lied to ourselves.

  11. August 7, 2011 10:28 pm

    There is very little I would defend George Bush on. He – as well as many others of both parties and the federal reserve, bear the responsibility for creating the bubble that triggered this mess.

    Though I have not polled them I think the majority of economist today would be happy to argue that the stimulus did not work.
    Even by Keynesian standards it was structured abysmally – Paul Krugman will be perfectly happy to lend whatever credibility he has left to support that argument.
    Myriads of mainstream economists – not libertarians or Austrians are suggesting or even flat our stating that not only did the stimulus not help – but that it actually made things worse.
    Regardless, The federal government is spending $1T/year more than in 2007 and $2T/year more than in 2000 – $1T is just under 10% of GDP. Are you trying to claim that absent the Stimules GDP would have declined by 10% ? That has only happened once in the past century – 1932.

    If you want my agreement that we had a very serious crisis – strongly resembling the great depression – Absolutely. In fact I would characterize this as a Depression rather than a recession. In fact it is a pretty classic depression – a boom in a long term asset triggered by excessive credit. You can find economists writing about that type of failure BEFORE the great depression. At the same time there are significant differences – the economy is far larger, and actually stronger. While I am not happy about the Federal Reserves response it has been clearly better than that of the Fed/Treasury during the Depression. Austrians would prefer that the money supply was out of the hands of government, but I do not think there is any economist that would advocate tightening the money supply as a response to an economic bust. At the same time Hoover tried all the same things we are trying now, FDR put them on steriods, and the great depression lasted almost two decades. Japan has stimulated itself almost sufficiently to make Krugman happy – and is in its second decade of Funk.

    As to my personal views – absolutely in 2008 I was scared to death. I beleived that the bailouts, TARP and the stimulus were bad ideas – but I hoped I was wrong and that they would work anyway. I hoped when Obama was elected that somehow everything would workout. I would have greatly preferred to be wrong.

    At the barest minimum Neither the Bailouts, TARP,. not the stimulus did anything even close to what their advocates predicted they would. The closest to a favourable spin you can claim for their advocates is that things were far worse than they anticipated. But that begs the question – if they were unable to grasp the severity of the situation why are we to believe they were right about the solution ? If you go to a doctor with abdominal distress and he perscribes an antacid, and you get worse and find you have stomache cancer – you look for another Doctor rather than congratulate him.

  12. August 7, 2011 10:47 pm

    The attack on Ryan was specifically focused on the claim that his plan would radically alter social security and medicare. If you want to debate the stupidity of the ACA or of raising taxes on capitol and investment – ever much less in a recession. I would be happy to do so. But are you honestly prepared to argue that Social Security and Medicare are sustainable without change ? Almost everyone short of Pelosi, seems to grasp that some changes will be necessary to Social Security and Medicare – in fact Ryan’s changes are probably insufficient. Regardless, Ryan can defend himself and that is not my issue. The issue is that the attacks on Ryan represent more than politics, and more than lying about the GOP or Ryan. They are knowing baldfaced lies about the current state of medicare and social security – L-I-E. If somehow I am a terrorist taking hostages for believing that it would be a good idea to get our fiscal house in order before we charge another $2T onto the credit card, then pretending that medicare and social security are not going to need any reform is lying on a grand scale.
    Regardless, there is no possible solution to the problems of Social Security and Medicare – until we atleast admit there are problems.

  13. August 7, 2011 10:48 pm

    I am not a big Palin fan, but opposition to ACA is still significantly above 50%.

  14. August 7, 2011 11:06 pm

    The ACA does not extend healthcare to the poor. It is about insurance not healthcare Contrary to political claptrap no one is denied healthcare in this country. We have had SCHIP for years – hospitals struggle to get the poor to sign up for it, or medicaide or any of the myriads of other benefits they are entitled to – because that would allow the hospitals to get paid. They fail because the truly poor get no benefit. They will get their medical needs met regardless.
    The are few true beneficiaries of ACA. The primary objective is to bring healthcare further under the control of the federal government. There is a tangential issue of forcing people who have chosen to decline insurance cover to buy in anyway.

    Further Dr. Berwick is absolutely correct, “The decision is not whether we will ration healthcare” Healthcare – like every other commodity in existence is rationed. The only question is who will decide and how will those decisions be made. In a free market the rich pay for the bleeding edge expensive, risky, low percentage procedures. As those that actually work are sorted out, they become cheaper and readily available to all of us – again look at Lasik.
    Dr. Berwick proposes that those decisions be made by unappeasable experts who will weigh the costs and benefits and decide what the government is willing to afford for you. Even if you are rich – your only alternative will be to leave the country. In reality the rich will continue to remain politically connected – and the poor will not and nothing will change – except that costs will actually grow – because the only efficient system for allocating scarce resources is free markets. You do not have to like that, but nothing else has worked.

  15. August 8, 2011 12:06 am

    Ian,

    If the word free bothers you try liberty.

    My views are my own – they are shaped but my experiences, as well as what I read, and I read nearly as much from those who hold differing views as those I tend to agree with.
    For the most part I evaluate something as reasonable or not irrespective of the credentials of its author.

    As to concurring economists of note, Freidman and Hayek both have Nobels, and most people consider Adam Smith noteworthy. Depending on the specific points in dispute I can add John Taylor and Robert Barro on the failure of the stimulus. I can even cite Christine Romer to the effect that taxes on capitol and investment cost $2 in GDP for each $1 or tax increase. Even Larry Summers found a temporary negative effect to upper margin tax increases – though his study was limited only to CEO’s of fortune 1000 companies. Further google is pretty wonderful, and on almost any issue I can probably find a Paul Krugman quote supporting my views.

    I do not “Hate” government. I just believe its legitimate purpose is limited and outside that arena it fails. I think I share that view with most of our founding fathers – even most of the federalists.

    The median income in Hong Kong (and Singapore, and South Korea) is just under that of the US and UK, unless you beleive that the median income there has skyrocketed in the past decade then the argument that HK is dependent on cheap chinese labor is fallacious.

    A very recent study by the world bank has found that those nations with the greatest freedom outperform their nearest developed neighbors by approximately 1%/year – that may not seem like much, but over 30 years that is a 35% disparity in standard of living. Conversely the same study has found that a strong social safety net correlates with a 0.3% decrease all other things being equal. Again this may not seem like much but over 30 years that is a significant increase in the wealth of the poor.

    The modern Chicago school and that of Friedman are radically different. I have not tried to claim some ideological kinship with them. Freidman was a monetarist. He most definitely would not have held rates down as Greenspan did. He probably would have responded Much as Bernanke has – atleast to a point. I doubt that he would have supported TARP and all the bailouts.

    Whether Business of whatever form needs regulation is almost a moot point. Though I would be happy to argue that in a proper free market regulation comes from competition and common law – I have no problem with holding individuals and businesses accountable for the damage they have done. i have no expectation that we are on the cusp of some anarcho-capitalist Utopia. I make a point of completely ducking the great libertarian dilemma – how little government is necessary, because I have absolutely no exception of ever being able to explore that as anything other than a theoretical issue.

    You demand that I provide some example of a working economy using my principles. There is not one, and there will never be, and it is a false question. The only relevant question is which direction do we go from here ? We already know what is to the left. Those countries with less liberty than we have are worse off. Communism failed. Socialism has failed. Everything progressives seek has been tried and failed. You are asking me to believe that if only we do it right this time somehow it will succeed – and the example of right is the ACA – a 3500 page abomination that even those who voted for it did not grasp, and we are still trying to figure out.

    In the thirty years since the collapse of the USSR most of the nations of the world have taken steps towards greater freedom. Most are still far from the freedom we enjoy – though they may have had systems that were more fair or equal than ours. But universally they are dramatically better off than they were. The world still has a great deal of problems – many are serious, some deadly serious. Yet in almost every measurable way most of the world – particularly those that have taken steps toward greater freedom, are better off than before.

    Does that mean nothing to you ? What kind of empirical evidence do you need ? I can not and never will be able to produce libertopia. But I can readily produce examples of nations all along the spectrum to to our left, and even the best of those are not better off.

    • Ian Robertson permalink
      August 8, 2011 11:34 am

      Hi Dhlii,

      I made a reply to you, for some reason it is stuck in “your comment is awaiting moderation” never happened to me before,no naughty words…

      Oh well, good things come to those who wait.

      • August 8, 2011 12:34 pm

        I am not responsible for moderation here. I look forward to your comment. Alternately if you or anyone else wishes to take the entire debate private – I think we are somewhat off topic. I can be reached dhlii at dlasystems dot com

        I will also note that there are many independent facets of this debate.
        I will be happy to defend my personal economic values, but the failure of the current system is demonstrable within almost all economic schools of thought.

        What I was trying to say when I started, was that it is increasingly obvious to a majority of us – independent of labels like libertarian or moderate, that the current fiscal compromise is insufficient. If you accept then the so-called terrorists and hostage takers on the right rapidly become the only sane people in the debate.

        I personally fully expect the GOP to return to their own slightly less profligate ways at the first rational opportunity. Both parties are well aware that federal spending is political power.

        But our current problems are not likely to end soon. Despite my ranting, Medicare is only a small part of the current problem, and Social Security is not at all. But they will be increasingly large problems moving forward.

        We are in a perfect storm. The debt and current deficits are unsustainable – there are few economists of any ilk that do not predict increasing economic malaise as debt increases as a percentage of GDP. Worse it is a vicious circle – higher debt is a drag on growth. The current economic situation is not as bad as the great depression, but many aspects are similar. We are in an economic trap. We have a weak a fragile recovery – almost anything could send the country back into recession. The engine of the economy is overloaded. It is highly unlikely to build steam quickly, further we are currently on the straight and level, but there is an increasingly steep grade ahead.

        For the record I am pessimistically optomistic. I think there is little chance we will get the changes that we really need. At the same time the engine of free market capitalism is incredibly powerful. We are not likely to crest the peak ahead with a full head of steam, but we are likely to make it – tossing tissue paper out the window to lighten the load when we really need to cut loose a few cars.

        For a non-libertarian perspective try
        http://www.telegraph.co.uk/comment/columnists/janetdaley/8685945/If-we-are-to-survive-the-looming-catastrophe-we-need-to-face-the-truth.html

      • August 8, 2011 8:09 pm

        For some unknown reason a comment will occasionally get stuck in my mailbox, “awaiting moderation.” It must be the WordPress police dogs sniffing out suspected spam. Anyway, I unstuck the comment earlier today.

  16. August 8, 2011 1:55 am

    There is another fallacy within the progressive argument. Lets assume for the sake of argument that we have a national responsibility to provide some minimum support – income, healthcare, … for the impoverished – old or otherwise. Why does that translate into a government requirement that everyone pay for an benefit from an abysmally managed government provided retirement fund ? Why is the government paying the healthcare of everyone over 65 ? Why is the government requiring all of us to get healthcare, and specifically the healthcare they approve ?

    If you really want to cut government spending get rid of the broad based entitlement system entirely. Let people who are capable of paying their own way do so. eliminate medicare and social security taxes and increase income taxes sufficiently to pay only for those who are really and truly needy. There are troublesome edge conditions as well as the moral hazard that people will choose dependence – but those problems are already present. For a mere $390B/year – 2 times the current Medicare shortfall, half the official stimulus, half TARP, a little less than the Fannie Mae Freddie Mac Bailout, a bit more than 1/2 the budget of the department of defense, a bit more than 10% of the entire federal budget, we could raise the income of everyone living at or below the poverty level to the US median income. For about $150B more would could provide every illegal alien in the country the equivalent of a minimum wage stipend.

    This is not done, because the purpose of entitlements has never been the benefit of those in need. The purpose is the political power associated with managing (badly) the money and benefits of the entire population.

    The point is regardless of what progressives claim this is not about poverty. The critical problems addressing poverty are not cost, they are avoiding making poverty attractive. If the current system is our solution to that it is horribly expensive and works pretty poorly.

    • Ian Robertson permalink
      August 8, 2011 3:59 pm

      I agreed with almost every word of the post beginning with “I am not responsible for moderation…

      The exceptions are the idea that the so-called hostage takers and terrorists are the only sane ones and the idea that the GOP is slightly less profligate, to my surprise, they outspend the democratic administrations when they are in power and pile up more debt. Obama’s spending does not count in my opinion because he is trapped by Bush’s decisions and the perfect storm you describe very well above, even now.

      My most serious issue with your analysis in general is your belief (in common with Friedman) that the free market is the solution to every problem and that government is always inefficient.

      What sane person does not believe in the power of the free market? but you take it to an extreme. If the free market is good then 100% free market is better and govt should never interfere. Yes, Friedman thought in a similar way, but this is no longer an economics, its a political philosophy, a belief system.

      It is not found in any economic text book I know of because its a belief, not a law.

      Freidman won his Nobel for monetary policy. It is hard for us little fish to comprehend how Nobel winners, Friedman, Krugman, even Einstein, can be so brilliant in one area and so wrong in others. Wasn’t it Friedman who wanted to privatize the US army?

      Taking this idea of the infallibility fo the free market as a central dogma of the rest of your beliefs is extreme and it leads to error, notwithstanding the fact that you are obviously highly intelligent, very knowledgeable and fanatically hard working, you still have the error of extremism at the foundation of your economic thought. How will the free market work in health care, are you going to put your cancer surgery out to the lowest bidder? Health care costs are growing at what percentage rate per year is it 6%, 7%? The free market is not working there. Medicare has an administrative cost in the area of 10% for non-govt insurance its more like 25% or higher. Countries with govt run health care systems have much lower doctor salaries and spend much lower fractions of their GDP on health care and yet have longer average lifespan and lower infant mortality.

      Taking distrust of govt to an extreme with not conceding that in some areas the free market fails us and needs hearty govt interference and regulation is your mistake in my book.

      That the system is broken and that its the concencus of economists that we need a serious change in our behavior is agreed.

      My wife is beginning to show signs of restlessness at my recent economic obsession, It would behoove me to write less and garden more at present!

      • August 8, 2011 9:34 pm

        Pres. Obama is as responsible for his own spending decisions as George Bush for his.

        Reagan gets credit for the debt he ran up despite inheriting an economy that was far worse than this one.

        You don’t care about the free market uber alles argument – fine. I have already conceeded I really do not care about debating whether 100% free market is better than 95% – The direct cost of the federal government is 25% of GDP. The indirect cost may be nearly that much.

        My question is whether we can agree on the end why can’t we agree what direction to go from here.

        You want to dump more of this on Republicans than Democrats – I think you are terribly naive -don’t get me wrong Republicans bear a share in the responsibility, but with the exception of Medicare Part D and Defence spending every single government program that is haemorrhaging money was created by Democrats. Bush added $4T to the national debt in 8 years. Obama has matched that in 2 and 1/2.

        But if it makes you happy to dump all this on Bush – fine Bush was a spendthrift.

        Friedman may have wanted a private army but our founders emphatically wanted NO standing army. Again what does it matter. We are going to be very lucky to cut defence spending by 1/3 – I will be happy to agree to more, but it is not going to happen.
        In the 19th century what we call economics today was called “political economy” and included ethical and moral components. Of course Liberty is about more than economics – it is a value. It is sufficiently important a value that I would argue for individual freedom even if freedom had negative economic cost. But it does not. Further though liberty is a value, and I will concede that its economic costs and benefits are not established with absolute certainty, there is actually a substantial and building body of data – as well as philosophical and logical argument that atleast in the forms of government we have tried, greater liberty means greater wealth AT THE BOTTOM. Again something Smith was certain of more than 200 years ago.
        For the record Krugman’s nobel was in esoteric areas of trade. Hayek’s nobel was in the areas of monetary systems AND economic fluctuations. James Buchannon’s was in economics and political decision making. Friedmans was for consumption, monetary and stabilazation issues.
        I am not trying to argue that Friedman or Hayek were universally knowledgeable about everything. I have read Adam Smith, and he makes a number of errors that almost anyone could spot today. At the same time “the Wealth of Nations” is the first serious attempt to explain free markets – which were relatively new at the time, and it did an excellent job.
        I would not ask Einstein to fix my blender, but I would probably defer to him on all issues involving physics and mathematics.
        You specifically asked for respected economists that shared my arguments. I will freely admit that the majority of economist do not share my views – just as the majority of economists do not share the views of this administration.

        How will a free market work in Healthcare ? The elephant in the room is insurance not healthcare. Those aspects of healthcare that are not covered by insurance have declined in cost over the past 30 years. But insurance is not incompatible with free markets. What is incompatible is government control. Price controls don’t work – ever. They always lead to increased costs and artificial scarcity. If you want a model for free market insurance – try auto insurance. You can buy it across state lines, you can buy on the web, it is far too government regulated – but alot less than health insurance. Outside certain government proscribed minimums – mostly the coverage you must have to protect other people, you are free to package your auto insurance as you wish, reduce coverage, increase deductibles, basically make your own choice. Why should everyone have exactly the same coverage ? We are not the same.
        If we must have Health insurance for the poor or the old, do exactly what almost every business has done – convert from defined benefits to defined contributions.
        There is more – but mostly it does not matter, so long as people are free to buy the coverage they want or can afford – or not, the market will provide them with what they want. I personally think low or no deductible insurance is ludicrously stupid – but you are perfectly free to choose differently – with your own money. But quit forcing me – or my employer to make your choices for me.

        The Medicare has low administrative costs argument has been debunked myriads of times. First Medicare serves a population that has enormous demands for health insurance. further since the inception of Medicare the demand for health care by the elderly has trippled – with negligible effect on outcome. Further as almost any hospital administrator as well as any private insurance company can tell you Medicare does not pay its own costs. Medicare is subsidised by higher costs for private insurance.

        Europe measures infant mortality entirely differently than we do. I would not suguest having a seven month premie in the EU. The US has far higher death rates from non-healthcare related causes. The US has far higher obesity. The US has ….. And after all that the difference in life expectancy is minor – I am pretty sure that it is lower in the UK.
        The US pays the lions share of costs for all medical research world wide.
        Just as we subsidise the defence costs of most of the world, we also subsidise their medical costs.
        With few exceptions european plans even though statist centrally imposed mandatory plans are more rational than anything here. Many have significant mandatory copays – I believe Switzerland is 30%. Further most have significant hidden subsidisation of their healthcare system. I think it is fairly well documented that the British NHS costs are under reported by 100%.
        Your point about Doctor’s salaries is mine. How are you going to bring Doctor’s salaries down – the only way to guarantee it, is to dictate to Doctor’s what they will be allowed to make. There is already a shortage of Doctor’s.
        In a free market Doctor’s try to figure out how to bring their income up – and the way to do so is to provide more and better care for less. Numerous chain stores have been moving towards low cost clinics. Maybe this is not the best care – but it is good care cheap. In Europe – particularly the UK you get what you get when they want to give it to you – maybe, but your cost is nothing.

        Who needs to change their behavior ? Individual behavior is the point of free markets – within very broad limits I can behave as I please in a free market – given that I am willing to pay the cost. If I can not afford the cost then I must constrain my own behaviour to what I can afford. Is it perfect freedom – no. But my inability to afford what I desire is not the same as government dictating what I must have.

        The system is broken – but where do you get the idea that we actually live in a free market ? What parts of the system are broken ? What works well ? My best point is that those parts of the system least touched by government work the best. That should give us a huge clue where the problem is.

        Economics is the science of human behaviour. When economists start talking about government acting to alter our behaviour they cease to be economists.

        I do not hate government, but I grasp that power corrupts, and government power corrupts as readily or more so than any other.
        For the record I will concede that business will endeavour to co-opt and corrupt whatever power government has. Again that is a natural aspect of free markets. But the solution is not to attempt to constrain business – something that is impossible, because the very people attempting to constrain business want everything business has to offer them. The solution is to limit government. Corruption in business is tolerable – inefficiency is punished. In government inefficiency is tolerable, corruption should be punished.

  17. Ian Robertson permalink
    August 8, 2011 10:08 am

    Youza, and I thought I was posting maybe too much!

    I’ve made (am still making) an attempt to read every word you wrote. You certainly do your homework, I tip my hat. Still, its Amazing how different our two sets of tax figures are, my tax rate figures, including the table I posted under another topic, came from a Tax Foundation paper:

    http://www.taxfoundation.org/files/wp1.pdf

    which I will admit was based on figures from 1991-2004. But their 2008 figures on income tax do not look all that radically different.

    http://www.taxfoundation.org/news/show/250.html#Data

    You state that in 2004 the top 1% paid 37%. My tax foundation figures for 2008, show that this figure was 23%: 392,149 in income tax divided by 1,685,472 of AGI (figures in millions). I do not know the reason for the discrepancy, different years don’t explain it. You are figuring differently.

    I’ve been looking this a.m. and I cannot reproduce my figures on the earning of the top 2%, unfortunately I did not bookmark my source. But I was obviously wrong,and you are correct, the total AGI from taxpayers returns with a positive AGI in 2008 (last year the tax foundation data reports) show a total AGI of 8.4 trillion and the top 5% had about 2.9 trillion. They don’t give a figure for the top 2%, lets estimate 2.5 trillion, as the top 1% made 1.6 trillion. I was off by a factor of 3. I would say that I was, as I often say to Priscilla, “wildly wrong.” This puts a good sized dent in my argument with Priscilla, although I will not say that it completely changes my thesis that we could impact the debt by taxing the highest brackets.

    I’m not sure whether to try to make a separate reply to each of your posts, I’d do that if the system would be so kind as to place each reply under the appropriate post. But it places them in odd places that make it hard to follow.

    So,

    On ponzi schemes, no! SS does NOT fit the definition of a ponzi scheme, a ponzi scheme is a putative INVESTMENT as you stated, run by criminals who pocket the proceeds, to say the least, non transparently. That is not a description of SS. I think the distinctions are huge and obvious. You have done a lot of work reading and collecting figures and references, but if you cannot see the distinction between a ponzi scheme and the SS system, then your reasoning faculties are faulty, no matter how much data you supply them. The other two choices are to leave each to fend for themself and good luck, or to have a national investment system. The first option may be more “free” but would have huge social and economic costs. You know, the system exists, people have factored it into their plans, its not going to be yanked out of from under them, as you seem to wish. The other alternative, investing in the stock market, A, would put people’s retirement at the whims of the nearly hysterical nature of the stock market, and B, make such a huge redirection of the pool of money invested in stock as to completely change the nature of that system, with results that I guarantee would be thoroughly unpredictable. Its not a reasonable plan. we have the SS and we are going to continue to have it.

    As far as I know, every thinking person who is dealing with the world of actual facts and figures knows that SS and medicare have serious difficulties if things are not changed.

    With SS it is not as severe, but with Medicare (Medicaid) clearly the biggest factor is the constantly rising and totally unreasonable cost of health care. We are at 17% of the GDP, our nearest competitor is Switzerland, at 13%. Average for first world economies is 8%. All those countries that have such a lower cost are suffering under the “oppression” and “loss of freedom” that come from “socialized medicine.” They also have longer life expectancies and infant mortality rates than the US. Which example, on its own, seems to put a serious hole in your argument that government does everything worse than the free market. My father tells me that his eye doctor drives a Lamborginni. I have anecdotes to fill pages with. Doctors must be making up a considerable proportion of our cherished top 2% bracket.

    I’ll end this here and take a breath.

    • August 8, 2011 11:06 pm

      I did not read the 123 page report from the tax foundation. My quick scan did not indicate any major discrepancies, though they chose to frame questions and look at data in the light most favorable to their interests. I am not sure specifically where I got the data I shared – google is wonderful. Regardless, there is an enormous amount of information available directly from the IRS. Of course that information from the Bush era is shaped slightly towards the conclusions they wanted you to find, and the current IRS tries to spin it differently. Regardless the raw data is readily available. With minimal effort you can find groupings for any year you wish.
      Another possible area of difference is that some figures are solely for Income tax and others are for all federal wage taxes. Further some places (properly) count the employer portion of SS and HI towards the employee, and others do not – again depending on what they want as an outcome. Regardless, Social Security and Medicare taxes are supposed to pay for Social Security and Medicare respectively. They are supposed to be run fundamentally as an insurance program – essentially the taxes pay for a benefit – particularly if you are still arguing they are not a ponzi scheme that is a fiction you likely want to stick with. If they are not insurance but merely another part of the federal budget then they are horribly regressive taxes. Before you can decide how fairly the cost of government is distributed, you have to decide whether Social Security and Medicare are the largess of government or a benefit you paid for. What year you look at matters – but not a huge amount. The trend is that in good economic times high wage earners pay a larger share of the cost of government. It is also loosely true (but not perfectly true – the laffler curve is a CURVE) that lower taxes on capitol tilt the proportion of taxes paid by high wage earners higher. This also results in higher GINI index numbers, and …. I do not want to waste alot of space on the details, but the relationships of the distribution of taxes, to tax rates, to growth in GDP to GINI indexes to Federal revenue are relatively well if not perfectly understood – even the CBO grasps them but is forbidden to use them in its projections. You can pick the tax rate you wish to change and the amount you wish to change it by and have a reasonably good chance of predicting its effect on GDP the distribution of taxes, and federal revenue. The results are not perfect, there are time delays, further whether the changes are viewed as temporary or permanent has an effect, as do myriads of other external decisions – like causing a recession.
      Regardless, if you do not like my numbers or the way I have structured them go to the IRS, not the tax policy foundation, or Cato, or Heritage or ….. these institutes don’t lie but they are creative in structuring their data.
      I am also getting significantly different data on standard of living, median income, … from different source. I have just avoided comparing information from different sources. as an example the CIA world databank has numbers for median income in the US, UK, and Hong Kong, yet the US number is off by 1/4 from numbers from elsewhere.

      From the SEC web site:
      A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.

      That pretty accurately describe Social Security.
      Is Social Security an investment ? It claims to be insurance with a resemblance to whole life insurance. Most people would call that an investment. the SSA keeps track of your contributions, and your benefits are based on those.
      Current Social Security recipients are paid from the investment of future recipients.
      The SEC would (and has) prohibited any business from offering anything using a similar model. Charles Ponzi’s original scheme rested on a legitimate foundation – a pricing discrepancy in international postage. There have been myriads of legitimate investments that were based on similar disparities. There was absolutely no reason that Ponzi could not have delivered significant return on investment for as long as the pricing error existed. Ponzi’s mistake was to promise a 50% return in 90 days – which was also possible if he could maintain a high enough transaction velocity. It was actually the popularity of his investment that did him in. He had more investors than he could handle and rather than reducing the return he started paying old investors directly from new investments. With each cycle his problem got worse.

      The differences between Social Security and a classic Ponzi Scheme are the length of the cycles and the promised Return. But the key facets are still there. SS essentially promises a 0% ROI, what investing it has done is in government IOU’s, you could argue that is investing, but as the government spent the money rather than investing it, the government has no way except new taxes to pay those IOU’s. Though there have been minor issues from the start hence the rate increases and other adjustments over the years, SS was premised on the expectation that the population would grow continuously.

      Since that offends you I will take Ponzi scheme off the table. While it fits perfectly. it does nto really matter.
      In the end SS is a lousy investment with fatal flaws – all of which were foreseeable (and foreseen).

      Beyond that you are positing false choices, and presuming there are only two. Plenty of people have pensions and an assortment of other retirement investments. I can think of numerous alternative between SS as it currently exists and total laissez faire.
      Even your presumption that there would be enormous economic costs to allowing people to “fend for themselves” makes the presumption that the overwhelming majority of people would behave stupidly with respect to their own future. The existence of all other forms of retirement investment demonstrates not only that that is false, but that most of us think SS is a lousy investment.

      As to economic consequences consider the positive economic benefits that would have occured if SS had actually bee run like a real investment. Money collected from individual contributors would have actually been invested. Adding trillions of dollars of capitol to the marketplace. even the most pathetic return on investment would have yielded far higher total returns. social security takes huge amounts of money from the economy. Over the years that it has been in existence all of us would be far more wealthy without it.
      Beyond that I did not specifically claim that the money should be invested in the stock market. Here is the Dow since 1974 http://www.the-privateer.com/chart/dow-long.html. Here it is since 1900 http://stockcharts.com/freecharts/historical/djia1900.html. There are actually very very few legitimate investments of any kind that will not result in a ROI a bit less than economic growth plus inflation over a long time frame. Further even SS’s zero percent return is dependent on the underlying economy. Government is not the foundation of the economy, but the converse is true – there is no financial promise that any goverment can make and keep if the economy does not perform. You can bitch about the volatitly of the stock market, but absent a long term upward trend – absent long term economic growth regardless of periodic quirks government money is worthless.
      The title “The Wealth of Nations” was no accident. Governments can print money they can not create wealth. You think I hate and fear government, but you hate and fear the market place. Yet every benefit you think you get from government must come from the marketplace. Government redistributes wealth, it does not create it.

      I do not believe most people have insurance covering their eyes. I pay less for lighter fancier glasses today than I did thirty years ago. I suspect your father’s eye doctor got his Lamborginni the normal free market way – by providing better and/or more service cheaper.

      • Ian Robertson permalink
        August 9, 2011 9:14 am

        I trust government to do what it does best and there ARE things it does best and I trust the “Free” market to do what it does best. they both have their place. Conservatives want a bare bones government with as little regulation as possible, Liberals want to head towards actual socialism. So, I am a moderate, I hope to avoid these two extremes.

        I don’t stereotype all liberals and conservatives as being crazy or bad-hearted, you meet enough of the horrible examples online or by reading commentary, but I did not jump on the Bush as the devil bandwagon and have not jumped on the tea party as a loonie bin bandwagon. There are many sincere and decent people in both camps and people tend to be a product of their environment, I can’t blame people for who their parents were or what state they were born in.

        I know that I believe that government needs to provide an economic safety net, not just out of humanitarian reasons but to prevent free fall when the economy goes south. Its worked for 65 years, the population that are on SS has experienced booms and busts before. Its been a very stable economic period if you compare it to our prior history.

        The economic position that WWII conferred on the US, a position as the worlds largest economy and the most dominant nation in all of history over this short period, has slowly, slowly, slowly evaporated. You know way more economic history and detail than I do, tell me was there ever another modern nation who’s currency escaped being valued based on import/export ratio because it was essentially the international currency that everyone used for trade and thus would not devalue even if US economic parameters went south? I did a tiny little bit of FOREX trading and was doing spectacularly well until the crisis unfolded, then the worse the US economy got, the STRONGER the dollar got, because its the safe haven currency you go to when you are scared $#@&^%, which I did not foresee and goodby my profits.

        My point being that the US economy is still slowly rejoining mortal economies following our WWII based unnatural preeminence. OPEC rose up, Japan, then China, at some point I think it was about 20 years ago some geniuses decided that we would have a “service economy” rather than a manufacturing economy and now the American working class is alive and well… and living in Bejing. I said at the time that I did not see how we are going to export services in return for products.

        Our military philosophy has to change I finally understand that. I’ve always been for a strong defense, I know enough history to understand how the US slowly got saddled with world cop status, I even served in the Nat Guard infantry, and if there is one thing I dislike most about liberals its their tendency to see the US as an Evil! and not have any understanding of what true evil is or how fast it becomes a cancer. Yet, we cannot afford to shoulder the burden of defending everyone anymore, we need to stop it with these costly discretionary wars. Even more, we need to reform health care and contain its costs. It can’t be done without political agreement by a broad section of the country and right now the country is so divided between hot-headed righties and lefties that there seems very little chance that we are about to have a constructive national bipartisan effort to reform ourselves.

        That most of all is why we are headed for a serious time, its because we cannot have a constructive dialogue and work together, which is a thing the rise of the center could help to change. If only.

      • Ian Robertson permalink
        August 10, 2011 11:14 am

        Dhlii, It does make a difference whether the top earners pay 37% or 23%. You are a very interesting thinker, I do not say this to berate you, its just an observation, but armed with an impressive array of facts you have settled into positions that are, in my opinion, not tenable. You say that the Ponzi description fits SS perfectly. I am sorry, but if SS is a Ponzi scheme, then an Apache Helicopter is a lawnmower, as they both work on the same principle, right?

        Its faulty reasoning and armed with such (impeccably researched) faulty reasoning it is easy to slide down a slippery slope of false conclusions, even if each statement in and of itself seems true, or at least could be considered reasonable by like minded persons.

        Your over reliance on Wealth of Nations distorts your views. Adam Smith was head and shoulders above the work of other such thinkers of his time. But 98% of the material in a modern economics textbook was not known in 1776! By analogy, most of what modern physicists do has little to do with Newton’s laws. They could not do without them of course, but the big questions of modern physics concern other sets of laws that were unguessed in Newton’s time. No one would pay much attention to a subatomic physicist who put most of their emphasis on Newton’s laws. To talk about economics and place such emphasis on Wealth of Nations just puts you in an archaic backwater of economics. Modern economic reality is ever so much more complicated than it was in Smith’s time, he was talking, most of all, about a world of small businessman.

        Wealth in our time is created in ways that often would be impossible without government. Yes, its a truism of economics that wealth is created in the private sector. But I can say from personal knowledge that no private sector person or concern would ever invest in the kinds of hyper-expensive research in particle physics or molecular biology on the scale that exists via government funding. The financial return could never justify the investment in something like CERN. But building super colliders definitely generates wealth, both financial and intangible. You have absolutest tendencies that lead to the weaknesses of your arguments, If the private sector and its wealth creation were all that was available we would still be living in a very simple world, that for better or worse, we are not living in.

        The entrepreneur is your god, but I do not see how they will expand the economy when they cannot get a loan in this economy without God as their cosigner. The presidents ( and other key officers) of banks are very often compensated via stock shares in their banks. Do they promote lending that will risk the value of their stock? They already have a large portfolio of loans that are teetering on the verge of bankruptcy, a downward spin of the economy will send teetering businesses into bankruptcy, banks into distress, and bank stock in a downward spiral. So do you think that in this environment bankers are going to front entrepreneurs money and that they really going to create jobs and wealth and pull us out? Really? It’s a religion you are talking about, its not a practical solution to our trap.

        Finally, the world may have ticked in 1930 without Medicare and SS and most seniors may have retired somehow; still, we are not going to return to that simpler world. Dental hygiene is also a relatively recent phenomenon and people somehow lived in a world without toothpaste or toothbrushes, X rays, anti-cancer drugs, etc., but time moved on and we are not going back to the old ways that we somehow survived in simpler times.

        I really am not berating you, I admire you, I have tendencies to be an anachronism myself, it’s a charming outlook, but your economic views, for the most part, while extremely well informed, are poorly applicable to the modern situation.

  18. Priscilla permalink
    August 8, 2011 2:50 pm

    Dave, I was going to link that very same article. I don’t think it is off topic in the context of this discussion at all and it is a very sobering analysis.

    Ian, I’ve been “stuck in moderation” too….it might just be a quirk of wordpress…….

    • Ian Robertson permalink
      August 8, 2011 4:49 pm

      Hi Priscilla, I read the Janet column, she is obviously intelligent and has some good points.

      I looked up her background and she has a degree in Philosophy from Berkeley, has written novels, been a political columnist, lectured on journalism.

      But nothing about her economics credentials.

      Which may explain why she describes SS as a Ponzi scheme. (Grrr).

      Just in case I may have had the wrong idea about a Ponzi scheme, I looked it up:

      “A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organization, but from their own money or money paid by subsequent investors. The Ponzi scheme usually entices new investors by offering returns other investments cannot guarantee, in the form of short-term returns that are either abnormally high or unusually consistent. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going.”

      I’m don’t know how to say it in a nice way in cordial company that if a person cannot see that is is not the definition of SS then they are *&^%$# and furthermore have a serious *&^@#?> problem with their #$~!@!!!

      But seriously, how can one be taken seriously when when they fall into this sort of, er, nonsense?

      SS is transparent, deliberately and wisely does not involve INVESTMENT (how is the stock market down today?) and no criminal person is running of to Rio on their loot. Its a plan that has been stable for 65 years and is one of the bases for the stability of the US system. Sorry if our system is not so PERFECTLY stable that a nearly perfect combination of really bad budget decisions and lack of regulation cannot throw it for a loop now and then, but that is life.

      • August 8, 2011 11:39 pm

        You are getting hung up on fraud and investment. Something is not fraudulent because it is not transparent or because it is done by a crook.
        A person is a crook because they engage in a fraud. An activity is fraudulent or not regardless of the character of the person engaged in it.

        Investment is trading the present benefit of wealth for a possibly greater future benefit. All forms of insurance – but particularly those like Social Security fit that definition. Social Security is essentially a combination of a variety of different forms of insurance with life insurance and an annuity.
        If you made it private I think myriads of insurance companies would be happy to offer identical terms.

        The FRAUD in a ponzi scheme is that it pays old investors from the investments of new investors. That EXACTLY describes SS.

        As to the loot – our government has already spent it, and Social Security and medicare are starting to present their IOU against money that is not that – I guess maybe you are right – nobody did INVEST the money, so now it is not that.

        Why do you think the stock market is down ? Is it animal spirits or is it lack of faith in government ?

        I want to re-iterate one point again. Wealth is created in the market. Without that wealth creation government has nothing. The guarantees of government are precipitated on the creation of wealth by the economy. Government can waste wealth, it can destroy wealth, it can create money, but it can not create wealth.

        Let us assume as you are so worried that from now this point forward the economy fails, Growth is universally a small percentage negative, the stock market tanks – how is the government going to pay social security ?

        My faith in the market is justifiable. If for no other reason than because real long term economic failure is unthinkable, probably impossible, and if possible outside of governments ability to fix.

        Your faith in government is dependent on the market you do not trust as well as trust of the people within government.

        Going one step further – the economy, the market – is us. I trust the market because I trust myself. When I say the market produces wealth – that is you and I producing wealth. If we, and our friends and neighbours and people we do not even know do not continually produce wealth there is no economy and nothing for government to spend. I trust individuals to manage their own health insurance, and retirement, and …. because if they are not trustworthy enough to do that – then they are not trustworthy enough to produce the wealth we all depend on.

  19. Priscilla permalink
    August 8, 2011 11:15 pm

    Ian, the similarity that SS bears to a Ponzi scheme is this – new investors pay off the original investors. As long as enough new ‘victims’ are brought into the scheme, it keeps growing. But when the new investors run out, the Ponzi collapses.

    The slowdown in population growth after the Baby Boomers has put tremendous pressure on Social Security and Medicare – that is undeniable.

    But as long as the economy grows, the economic output of the country rises, and government spending and borrowing remains stable, then a fairly minor cut in benefits, combined with a relatively small increase in taxes might be sufficient to bring the whole SS program into balance (Medicare is a whole other story).

    But we do not have a growing economy, we have a contracting one, and government spending is far from stable. So, the Ponzi-like nature of Social Security is real…. the program will not be able to recruit new “investors” fast enough to continue paying promised benefits to previous investors, because each year there are fewer young workers relative to the number of retirees, Social Security will eventually collapse, unless it is reformed.

    • August 9, 2011 12:11 am

      A return to solid growth will push forward the day of reconing with respect to both Social Security and Medicare.
      Pres. Obama is the victim of a sort of perfect storm. He was elected at the start of a downturn. This downturn does differ – despite the fact that in myriads of ways the early 80’s were worse, there are structural differences, The recession of the 80’s was fundamentally a failure of Keynesian economics. The Phillips curve proved to be a fallacy. Once the reluctance to abandon Keynes was overcome the fix was simple and obvious – bring inflation under control.
      The current situation more strongly resembles the great depression. I think it is reasonable to call this a depression rather than a recession. It is structurally different.
      Regardless, the destruction of wealth from the housing market collapse, the stress of the prior debt, the new debt from bailouts, and stimulus, and the collapse of growth have substantially advanced the clock on the failure of social security and Medicare.
      Social Security is not trivially fixed, I believe we are headed for a long period with three or less workers supporting each social security recipient. The problem there is enormous, but it is spread over a very long period of time. And not actually here yet. Medicare’s problems are more immediate, and not going away any-time soon, nor is there any easy way to delay them.

      Pres. Obama did not create this mess – at-least not in anyway other than he fervently believes in the Ponzi scheme that is failing.
      You do not have to accept my views on economics to grasp that what Obama has done – and what Bush before him did did not improve things. At the very best they may have prevented things from getting much worse. But whatever the right actions that allow us to pass through this quickly = though not necessarily painlessly, it is clear we have not done those.
      Absent a quick recovery the President – whether he grasps it or not is really left with only one choice significant cuts in spending. At the ratio of debt to GDP increases it is increasingly harder for a government to extricate itself from an economic mess. We are not in Greece’s predicament, we are not in Europe’s we are not in Japan’s – but we are headed there and fairly quickly.

      The negative economic impact of taxes on capitol are fairly well known. If some of you really want to try them – what the hell go ahead. I will pray that I am wrong and you are right and we can Robin Hood our way out of this. And when my prayers are not answered I suspect this will not be something we try again.

      You do not have to be libertarian or classical liberal, or adhere to Austrian Economics to grasp the only choices left. You can embrace your inner Keynes and spend like a drunken sailor, with the realisation that if you are wrong not only are we F*$%D but the entire world is. The alternative is to cut spending and pray hard for economic growth because otherwise you must cut even more.

    • Ian Robertson permalink
      August 9, 2011 9:32 am

      Priscilla, Of course I see that one point of similarity, but a Ponzi scheme is the whole set of characteristics. I’m sorry, you know me, I get cranky about some things, one of them is that rational discussions are not based on wildly inaccurate derogatory hyperbole, it makes me QUITE cross when SS is called a Ponzi scheme, I’m not “hung up on investment” I’m hung up on respect for reality, and in this case that defining word investment precludes talking about SS as a Ponzi scheme. Talk that way with fellow conservatives/libertairians if you wish, but if you talk that way to the rest of us, we will immediately devalue your future opinions. You should seriously consider this!

      It is not a good point in my evaluation of conservative arguments that conservatives wish to just discard the SS safety net and have no rational mechanism to replace it with. Its vandalism in my view. And it really does provide a basis for that view of conservatives as people who are just indifferent to the little fish. SS is not magnificent (I double pay mine since I am self employed, Ouch) but it does actually keep millions of people who were not born on third base, from starving in their old age.

      As a (cranky) moderate I am not about sitting quietly while conservatives make these attacks on the essence of the new deal. To me, the 1930s were NOT the good old days.

      • Priscilla permalink
        August 9, 2011 6:43 pm

        Ian, conservatives do not advocate “discarding” Social Security. That is a hyberbolic statement, and one without any merit or basis in fact, that Democrat politicians use to win elections, by getting people who don’t do their research to believe that the other candidate is out to hurt them. I would think that, with your high regard for facts and figures, you would not be taken in by that sort of demagoguery.

        If you want a simple admission of the fact that no one intended to defraud anyone when SS was structured, then fine, you’ve got it from me. (And I believe that I’ve already alluded to my belief that, given different demographic and economic trends, bringing the program into balance would be a whole lot simpler). Part of what made SS viable initially was the fact that the retirement age was set higher than the average life expectancy. In other words, many would pay in, but never collect. SInce then, things have changed – People live a lot longer and retire at the same age or earlier.

        So, if a private pension plan were to be structured today the way SS is, it would be declared a fraudulent plan, because liabilities would exceed assets, and the only way to only continue is would be to get additional investors who would not be guaranteed to ever collect benefits. THAT is what people mean when they compare SS to a Ponzi or pyramid plan.

        So, how about this – I’ll stop using the term “Ponzi scheme” and you stop calling fiscal conservatives indifferent and callous. Ok?

      • August 9, 2011 7:11 pm

        The link I provided to the UK journalist was not intended to demonstrate that refering to Social security as a ponzi scheme is not uncommon.

        googling social security ponzi scheme yeilds 1,980,000 hits. Many of these are arguing why Social Security is not a Ponzi Scheme – but if you have to make the argument then it is perfectly rational to believe that it is.

        Arnold Kling – a credible economist, if not a Nobel Laurette, questions whether the entire federal budget is not a ponzi scheme here http://econlog.econlib.org/archives/2008/12/madoff_as_metap.html

        Social Security has been sold from Day one as an insurance program.
        Googling “insurance ponzi” will produce myriads of hits.

        Alternately it can be viewed as a pension plan – insurance is investment, as is a pension. and there are myriads of google hits for “pension ponzi”

        Wikipedia has an entire section on Social Security as a Ponzi Scheme the formal resolution is that it is not because it is transparent – essentially it is not fraud to defraud someone if they could or should know they are being defrauded to begin with.

        It does not matter what words you get hung up on. Social security fits.

        I too get really ticked when words are seriously abused – as in the recent debacle when being unable to borrow was equated with defaulting, and the 14th amendment prohibition of default was equated with unlimited permission to borrow. I believe the most recent issue of Time noted that the unfunded liabilities for Social Security are $77T that is over a many decades but that is an enormous number.

        Many of us – including myself and I am most definitely NOT a conservative. If you wish to harp on the misuse of words it would be extremely wise not to confuse conservatives and libertarians. The fact that libertarians and some conservatives share common ground on some economic issues does not make us peas in a pod. Politically libertarians are most accurately centrists as in partway between progressives and conservatives – but the presumption that political orientation is on a linear scale is pretty fallacious. Yet I can go almost any left leaning blog, or media outlet and get lumped together with Jerry Falwell, Rick Santorum, Pat Robertson, Ann Coulter, ….

        Nor do I particularly like it that my belief that the best interests of this nation would served by paring government far more than the debt limit deal – the effect on the 2012 budget is to reduce the already scheduled increases by between $7 and $36B. In other words there is no reduction in real spending, and the change is between 0.2% and 1% – this according to the left will mean mass unemployment and the end of western civilisation.

        Regardless of all the debates there are only two numbers that really matter – the amount the debt limit was increases by – $2.1T, and the change in the 2012 budget. All the changes to the subsequent 9 years are not real. They are trivially inside the power of the next president and congress to change. The rest of the deal itself is unenforceable – it is even technically unconstitutional as past congresses can not limit the actions of future congresses – no one is going to court over it, because it can just be ignored.

        This is a big part of the reason the markets are tanking.

        As to replacing Social Security – lets say we wiped it off the face of the earth tomorow – would we morally owe those who paid in but did not collect, something ? Of course we would. But we have ended the program and now there is no money to pay them with – because we never invested their past contributions, and we are paying current beneficiaries from the INVESTMENT of current recipients – does this give you a clue why it is a Ponzi scheme. Any financial arrangement that uses present contributions to pay past obligations is an unsustainable ponzi scheme. It can not be terminated without catastrophe – it is immoral from the start.

        But there are ways out – in the 80’s Galveston TX allowed civil servants to opt out of Social Security and into a Private Pension. People making $50,000/year took home approximately 4 times as much as they would under Social Security. People making $20,000 took home a little less than double what Social Security would have paid out. It is trivial to construct an alternative under those circumstances.
        I am not going to propose a specific alternative, because I believe the best alternative is to stab it right in the heart and kill it before we somehow get it back again. But you and I both know that is not what we are going to do – and there are myriads of credible ideas out there, and BTW conservatives have proposed numerous workable alternatives.

  20. Ian Robertson permalink
    August 9, 2011 9:40 am

    Sigh, the system will NOT put my replies in the appropriate places. God knows where this one will wind up.

    Dhlii, you are making a lot of good points and I really thank you for this discussion, I’ve had to learn a lot to participate in it.

    We actually do agree on some things, the perfect storm, Bush’s unhelpful actions.

    Cutting spending seems likely to be the outcome. I can “pray hard for economic growth,” but I have NO IDEA where its going to come from, thats what makes this the perfect storm, every part of the economy has now been crippled, we would need Keynes to get us out, but there are no resources for that. We are trapped, buggered. Yes, lets pray.

    • August 9, 2011 8:03 pm

      I know exactly where growth is coming from – the private economy, particularly small business, That is where is always comes from, that is also where most new jobs are created.
      And I can tell you when it will happen – when small business believes they can invest with a half way decent chance of making a profit.
      ObamaCare scares the bejeezus out of them. Though I believe it will be pretty bad, from purely a small business perspective it will not be nearly as bad as the expect – but the rules are still not set, and uncertainty means death to investment.
      The bailouts scare the crap out of them. Big business is the competition for small business. When small businesses fail, no one gives them a do over. The message the bailout sent was if big business fails small business gets to pay for it – again does that inspire you to invest ?
      The EPA is still dancing arround threating to regulate CO2 – right down to your home lawn mower. They are doing this at a time when the scientific consensus for AGW is disintegrating right in front of their eyes. That potentially effects every small business.
      This president has made clear since his election that he intends to make energy very expensive. One of the greatest competitive advantages the US has is that our energy costs are the lowest in the world, and energy is productivity. Threaten energy and the economy tanks.
      In many parts of this country your children can not open up a lemonade stand without a license – where do you expect growth to come from when most anyone starting a business in his garage starts as a criminal ?
      This president has made it clear that at the first chance he is raising capital gains taxes, corporate taxes, and upper margin taxes. These are taxes on investment. If you increase the cost of something you decrease the demand – the first law of economics. When you factor in risk and every %1 increase in taxes on capitol increases the required return on investment by several percent. Nor is this some secret. Possibly as much as 75% of the upper bracket tax payers are small business owners – which means their “income taxes” are actually business taxes not really wage taxes. The percentage is debated, and the “fact checkers claim the real percentages are unknowable. But a simple thought experiment should give you an idea ?
      Who gets paid a million dollars a year ? Fortune 1000 CEO’s, CFO’s, … I beleive you go well below $1M in income long before you get to the fortune 999. But lets say you don’t and maybe 5 people at each of the top 5000 corporations in the country make $1M/year or more – that is 5,000 people – The Summers study in the 80’s estimated that CEO’s and CFO’s – corporate management made up approximately 1/3 of top tier wage earners – but he included Corporate managers down to about $200K/year. So who else do you have ? A tiny fraction of people who make substantial money off investments, and small businesses – that is pretty much it.
      Try a different thought experiment – how many people do you know – from real life, not TV making more than 100K/year ? 200K ? …. I personally know very few people making $100K/year that are not small business people. I know no one making more than about $150K/year that is not a small business person. Not a very scientific sample, but unless Lancaster, PA is some hotbed of entrepreneurship I suspect that atleast in general terms it holds up.

      Taxes – particularly the “soak the rich” type the president rants about are a very big deal – if I cede to you every other argument about fairness, and who is paying what part of the cost of government – which I will not, in the end taxes on capitol are economically deadly.

      Ask any small business person what government needs to do and the answer – the same answer for my entire life, has been lower taxes and get out of the way. That is it. The only time small business takes a serious look at the largess government offers, is when taxes go up. Unless you have run a small business you can not possibly grasp the extent to which a small business has perfectly legal control over taxable revenue. Raise taxes and small business will reduce taxable revenue. There are myriads of ways to do it. Most are slightly harmful to the business – but often not nearly as harmful as the tax savings, all are also economically harmful. Taxes are a bad idea economically.

      If you want to know when things will improve – pretend you have $1M or even $10K to invest, to start a business or whatever. Things will improve when circumstances have changed such that you believe the benefits of investing that money significantly outweigh the risks. There is an enormous amount of capitol in this country right now just sitting. The left is ranting and raving about evil bankers, corporations, and small businesses that will not invest their money to make things better. If it was your money would you ? When that answer becomes yes for a large enough number of us the economy will start to recover.

  21. Ian Robertson permalink
    August 9, 2011 10:10 am

    I really am trying to read all that you have written Dhlii, I strongly disagree with your basic premise, but you are an excellent writer and put huge effort into this, I would not insult that effort by not reading it and thinking about it.

    I do NOT trust myself, every time I have a little extra money another musical instrument appears in my house or another boat is sitting on my lawn, and then next month I am scratching. My wife is no better, she spends much more on seeds and soil than she would spend just buying her vegetables in the store, its not a rational choice.

    And we are intelligent and well educated persons. It gets worse. I certainly really do NOT trust the judgement of the obese person standing in front of me covered in grease at the convenience store who spends five minutes choosing which 15 types of %$#@*& lottery tickets he wants to go with his beer and cigarettes.

    If we all paid for are own bad choices, then it would be just I suppose to let those whose nature or nurture were a disaster to just fold up and die. But we live in a society where everything is connected and I don’t those lottery ticket idiots breaking into my house when their money runs out and stealing my guitars. And I don’t want to experience all the other negative externalities that go along with just letting idiots rot.

    We are absolutely NOT trustable to make good decisions, where on earth did you ever get that idea?!?

    I think we could print this argument up and sell it as a book, if Rick is game, we may all profit from our hobby.

    • August 9, 2011 8:57 pm

      But I trust all of you.
      If musical instruments and gardening are what you value – what right has government to tell you to change your values ?
      If that obese person in the grocery store values lottery tickets and twinkies what right have you or I or government to tell him otherwise ?
      Contrary to popular belief old people did not all die from lack of medical care before 1965 – they do little better health wise today, but the spend 3 times as much.
      People did not starve when they retired prior to 1935.
      In fact prior to Social Security the 90% of corporate stock was owned by ordinary people.

      Certainly all of us make bad decisions. But so do politicians, bureaucrats and regulators – and the consequences of their bad decisions are far worse. Hayek will give you an excellent explanation as to why on the whole our leaders are more likely to make bad decisions than we are as individuals. Further there are many ways to make bad decisions. Misunderstanding risks is the norm for most individuals – and is at the root of the housing collapse that caused this mess. But risk avoidance is also a bad decision – worse because we never know what we have lost. The FDA is willing to see thousands suffer or die rather than risk approving a medical device, procedure or drug that might kill or harm a few. Aspirin would not be able to get FDA approval today. Drugs that are safer than Aspirin have been rejected or pulled from the market because of their risks. Nor is the FDA unique. And in less frequent instances risk avoidance actually induces risks – as in the SEC and Madoff.

      For the record, the free market is NOT a meritocracy. Although there is a strong correlation, between skill, effort, and intelligent risk taking and success, one that leads those who succeed to believe their success represents moral superiority, and others failure is at their own hands correlation is not causation. Almost no one succeeds without trying, but some who fail are victims of circumstance. Further the market does not reward the best ideas – it rewards those ideas that best meet the needs of the marketplace – it is about giving us what we desire not what we should have – though I am not exactly sure how that differs from politics.

      But after my disclaimer, the free market is still the only truly effective means of raising the standard of living of the poor – and that is why you should trust it.

      You berate me for my lack of trust in government – but government is made of people. Worse it is self selecting for the wrong types of people. Government employees are strongly self selecting for risk aversion. Politicians are strongly self selecting for aquisition of power.

      I like Obama, Gietner, Boehner, …. but are these the people you would have make the decisons in your life ?

      I trust you – not to get it perfect, but to get it good enough. In truth the vast majority of us get it right the vast majority of the time. Further most decisions we make as individuals are not all that important. Very few decisions we make in life have life changing consequences. Most of the decisions politicians make have life changing consequences for some or all of us.

      I trust you even if you do not trust yourself. I don’t think of everyone else as stupid or idiots. History includes alot of bad decisions – but somehow we got to where we are today, and it is better than 10 years ago, 50 years ago, 200 years ago, 2000 years ago. So we must have made far more good decisions than bad ones. Though I would point out that most of that progress has occured since the rights and responsibilities for making decisions were wrested from kings and pharohs and vested in individuals. Despite the difference in the means of reaching power, there is no special reason to expect that presidents and congressmen and treasury secretaries are any better at making decisions for us, than kings and dukes and barons. The argument that some elite would should make our decisions for us begs the question of why a modern elite would be better at it than those in the past. Is there some magic to democratic elections that improves the quality of the decisions that elected officials make ? Does passing a civil service exam confer miraculous powers of discernment that ordinary people lack ?

      In the free market businesses are born, grow and die – even big businesses. Big business benefits from the economies of scale, but it suffers from risk aversion, and though the decision makers tend to be better the consequences of bad decisions are greater and big business is actually less redundant, less resilient, and less quick to correct its own mistakes, and the mistakes take effect faster. This is why absent government even big businesses die.
      There are differences between business and government, but economies of scale, risk aversion, the consequences of bad decisions, ….. are all the same. The bigger and more broadly involved government is, the greater the certainty that it will make a catastrophic mistake. The bigger government gets and the more concentrated decision making is the more certain (no matter how low the odds are) that a bad decision with devastation consequences is coming. Your bad choices only rarely extend past you. It is only when they do that government has a role. The bad decisions of the local city council effect thousands, the state millions, the federal government hundreds of millions.

      Contrayr to popular beleif the market actually works effectively to contain bad decisions. Organizations that are “too big to fail” can not come about without government assistance – they fail first. Nor do they all fail concurrently. They fail because of their own decisions not those of others. Systemic failure requires large numbers of large players to be moving in the same direction at the same time – with no regard to naysayers. In the free market someone always bets against everything (in the stock market that is called shorting). The scale of those contrary voices is our greatest assurance we are on the right path – when they are too numerous the wave shifts direction. Getting everyone moving lockstep requires government. The current mess was foreseen by few despite being glaringly obvious in hindsight, because government was pushing and pulling. In some instances with a club but in most with a carrot. Almost everybody wanted a housing boom. Almost everybody wanted to increase home ownership, everyone wanted the less creditworthy to prove to be good risks. But they chose to follow their desire rather than prudence because it was public policy and because government structured things so that money would be made – and lots of money was made giving government exactly what it wanted.

      This is how you break an economy – get everyone moving the same direction. Worse make the bubble in an asset, worse still a long term asset, worse still increase credit beyond what has been earned. For reference that in a nutshell is the boom portion of the Austrian theory of the business cycle. Keynes offers the only other – “animal spirits”. Which do you wish to chose ?

      I trust you more than I trust government.

  22. Ian Robertson permalink
    August 10, 2011 9:56 am

    Sigh,The systems will not allow my to reply to you Priscilla in the appropriate place. I mean no insult to you personally you have made it clear that you personally are talking about putting the system back into wack, not removing it. As to conservatives not wishing to put an end to SS, I am just not following your basis for saying that that is not something that many conservatives have proposed (and and least one prominent Liberal Democratic senator,Patrick Moynihan, thought worthy of at least investigating). Its a fact, those proposals were made under Bush and some conservatives have not given up on them. As well, the Ryan “Path to Prosperity” plan, which got near unanimous support from house Republicans and passed easily would end medicare as we know it, not tinker, but privatize, —> end. We can quibble about words, but its not unreasonable to say that Ryan plan would end Medicare after 2022.

    Its a small scandal in my family that after promising left-wing beginnings, as an adult I turned out to reject that part of the family culture and became a moderate and I even defend conservatives at times, at least some of them. My father, quite a brilliant man and the soul of decency, just hates Republicans/Conservatives/Southerners with a bright blue flame and it is not easy to get him to admit that the group is not a monolith.

    I don’t wish to sound like a lawyer,or Bill Clinton, but I choose my words carefully when I made my statement about conservatives and SS, and I am going to stand by them. They are an attempt to be objective, the conservative position on SS does provide some basis for the people who believe (as my father does, bless his otherwise very reasonable soul) that conservatives (I did not say fiscal conservatives, we are not breaking them out of conservatives) do not consider the plight of the little fish and in fact are indifferent to them.

    I, alone among my family, do not lump all conservatives together and can see many different groups within conservatives. I do not for example, put fiscal conservatives into the same category as conservatives or their smaller vile subset, right wingers. I try to be careful and blame right wingers for the worst actions and not conservatives, or blame conservatives and not Republicans, as there and Democratic conservatives as well. Perhaps I don’t always succeed, but that is my intention.

    The Republican party and its admirers, e.g., the WSJ, fell flat out in love with the Ryan plan, to their surprise, the Medicare portion of it turned out to be toxic, and even their own voters did not as a group support them, and they got burned in the polls as a result and were glad of a summer democratic sex scandal to distract the public.

    Finally, callousness and indifference are in the eye of the beholder, along with the stronger accusation, heartlessness. I supported welfare reform (moral hazard) which led to me being called heartless by some. To me, if a single woman has one child and needs public assistance, she needs to put a lock on her parts till she can afford to support more children, having a multitude of them, who then turn around and have their own multitude on Welfare was a disaster. Liberals would call me heartless, and not only for the purpose of political gain but becasue they really honestly feel that way. The people I know who go out into the woods and with great joy blow Bambi’s little head off, seem heartless and callous to me. But, if they did not do that the deer would multiply till they all slowly all starved to death, also heartless.

    The point I tried to make to you was that the denigration of SS by the term Ponzi will get you Amens most likely in a conversation with conservatives, but among liberals or informed moderates these attacks, and we do view them, Not Without Reason, as attacks, are something we will fight back against. Not to mention the Ryan plan! Attack our new deal safety net and we will not be quiet about it, we will attack back. That is the way it is.

    If SS is a Ponzi scheme, then an Apache helicopter is a lawnmower, they both work via rotating blades, its the same deal.

    Peace, and please realize I am not trying to offend you, I’m just describing a reality of political philosophy.

    • Priscilla permalink
      August 10, 2011 11:28 am

      No offense was taken, Ian, I was essentially agreeing with you that name-calling is not an effective way to debate. It is the last resort of politicians and idealogues who have no facts or evidence to support their position, and that is why the “tea party terrorist” meme has become the new talking point for the Democrats…

      As far as Paul Ryan wanting to end Medicare, if you have 6-7 minutes to spare, I found this clip of Ryan himself explaining why that misperception is out there, and how his plan attempts to reform Medicare – it also has footage of the outrageous (but funny) Dem campaign ad showing a Ryan look-alike pushing granny over the cliff, haha – it’s worth watching just for that ;)

      I am not here to defend Ryan or his plan. But he has had the political courage to put a detailed plan out there, and I’m still waiting for the Democrats to respond with anything other than scare tactics. http://americanglob.com/2011/05/26/paul-ryan-obamacare-will-destroy-medicare-not-my-plan/

      • Ian Robertson permalink
        August 10, 2011 12:20 pm

        I’m glad we are still on cordial terms!

        I don’t know at what official level a plan is really a plan, or even which particular plan we mean, the 2012 budget? but Obama has certainly proposed detailed plans along the way and the Democratic Senate wrote their bill, is it not a plan?

        Since appropriation bills must originate in the House which is strongly Republican at present I am not sure under what venue the Democrats will be able to satisfy your hunger for their plan.

        Politics is so childish, the leader of the band I play in is married to a woman who nearly became our governor. She put me on her mailing list and i started getting campaign literature. She is a very decent and intelligent person, but the campaign literature was just the same old stuff I can’t stand to hear; childish accusations are the currency of our political campaigns.

        As childish as political campaigns are, its hard to believe it, but they are still about huge principles, SS and Medicare, among them and it matters who wins, society could take two very different paths, each of which pure torture to one group of partisans. Each group is, in its way, totally sincere in their feelings when they make their attacks.

        I read about the Ryan plan and the privatizing of Medicare on Wikipedia. If I were doing Ph.D research (again) I would not consult Wiki, I’d go to primary data. For my present purposes I consider them to be trustworthy. I consider them to be accurate for general questions and they do at least have a process for removing blatant bias.

        As to bias, I do have a liberal bias to my moderate views that is coming out under the present extreme circumstances, its hard to erase lifelong tendencies, some beliefs are ingrained during childhood. I don’t regret mine. But I loathe left wingers and fear an absolute liberal victory, so I think its fair for me to call myself a moderate.

  23. August 10, 2011 3:50 pm

    Ian;
    Don’t try to read everything I have written.
    Don’t accept what I say. I am not the ultimate authority on much of anything.
    But do open your eyes, explore for yourself, get past what our leaders have said of how things were supposed to work. get past the lies that but for:
    Evil republicans
    Greedy corporations,
    unforseen economic downturns.
    unforseen demographic shifts,
    …..
    This government program or that one would have worked and if we just tweak here and twist there and elect people whose hearts are in the right place then it will work.
    Government does not work. A key reason for limited government is that if government must be inefficient – and it must either be inefficient or corrupt or both, then we should atleast confine it to those very few things were only government should be allowed to act (primarily issues related to the use of force – police, defense) and tolerate the innefficiency and protect against corruption.
    But again, do not beleive this because I or Hayek, or Smith or Bastiat or … says so.

    Check it out. Today more than ever in my life the success or failure of every government program is knowable to anyone.

    While I would be happy to suggest a reading list of real experts – their primary value is in providing a coherent explanation for data that is increasingly readily available.
    We live in an amazing information era. When I was young information about government failures was hard to come by – not because the failures were rare, but because With the limited bandwidth of the three networks, and two local newspapers, only the most egregious incidents made the news. And even after you heard or read those stories, weeks and months later they were at best vague recollections.
    The Internet is the most cosmic shift the world has ever know. Not only has knowledge continued increasing at a prodigious pace – but all of us have ready access to it. Propaganda has always been critical to government – and the Internet is an excellent means of evangelising the world. But in its efforts to sell its self government also exposes itself. We have far more information on government than ever before.
    I can google the federal budget for 2001 and 2011 and within a few links find exactly what I want in the form I want. If I am ambitious I can cross check against multiple other sources.
    And one thing I find is that the budget has increased by approximately 70% since 2001. Defence has increased 70%, Medicare has increased 70% discretionary spending has increased 70%, …… Or put another way, the claim that Medicare is exceptional and at the root of all our budget problems is a lie – Medicare is increasing at an unusual rate – in comparison to the rest of the economy, but its increases are normal for government programs.
    While I am using Medicare as an example the real point is that whatever the issue, we can get past what our leaders, our heroes, our pundits, etc are telling us and come fairly close to finding the truth. I am an enormous proponent of individual privacy and government transparency. Government is not as transparent as it ought to be. But it is far beyond the ability of the federal government with its myriads of agencies, to sell itself to us through the internet without leaking enormous amounts of information.
    Forty years ago we had a few high profiles of egregious government failure – today pick any policy or program and google will show you how it failed in a few minutes. The failures are not always egregious, but they are virtually always net negative.
    Even Krugman is trumpeting the fact that only a few percent of the “Stimulus” actually went to anything remotely economically stimulating. What he does not grasp is that is not an accident. Google tells me that a substantial portion of the federal money for weatherization never made it to actual weatherization projects. It was spent on bureaucrats and lawyers – and that ignores the fact that what actually went to contracts was spend with abysmal efficiency.

    The point is that the failures of government are not accidents, they derive from its nature.
    Google whatever aspect of government you wish, you will eventually trace it to failure – using information the government provides.
    Once you have explored government programs sufficiently to grasp that the appearance of good intentions is not ever sufficient for success, then what you can read from classical liberal (libertarian) thinkers like Bastiat and Hayek will explain why.

  24. Kent permalink
    August 11, 2011 1:48 am

    Rick,

    I ran figures on the U.S. balance sheet over 5 years ago. To balance the spending and debt (plus interest) verses the revenue you have to force a high tax rate across the board on everyone. The average rate for every working person….high paid jobs and low paid jobs needs to be at an combined average 50% tax rate for all working Americans. Wealthy at extremely high 90% and those making less close to 45%. Most are not wealthy. Therefore, the 1% that are wealthy pay 90% and everyone else close to 45% should provide close to 50% of the money flowing in circulation to cover all debts. The wealthy have a lot of wealth per individual, but the majority of taxpayers/workers as a community have more wealth (spread around) because their are more taxpayers/workers than there are wealthy.

    You also have to cut the “bleeding”. This means the U.S. spends only what it collects. The U.S. also has to find a way to cut and raise taxes across many programs (Corporate, Social Security, Medicare, etc.) You can’t keep importing more than you are exporting without covering your losses and it isn’t by covering the losses with a loan from China or making more I.O.U.’s in bonds.

    Yes, cutting in programs will hurt all retired and future retirees. Medical patients will suffer. Corporate will suffer as the tax money is given to Government from the people who buy their products. Working people will suffer and be forced to work harder as the Debt continues to compete with the GDP. Cutting back means suffering if you have been living an excess.

    • August 11, 2011 10:44 am

      “The effect of taxes on aggregate economic activity is one of the least contested areas
      in theoretical macroeconomics. Both neoclassical and Keynesian theoretical models, for
      example, predict that higher taxes reduce economic activity.”

      This is from a recent economic paper on taxation and economic activity by Fuceri and Karrass. It is one – probably not the last of myriads of papers and studies across the decades attempting to discern the effects of taxes on the economy. There are myriads of complications because different taxes have different effects. One of the more noted studies was by Romer & Romer (Christine Romer – former chair of Obama’s whitehouse economic council). That study specifically found that taxes on investment – High marginal tax rates, capitol gains taxes, and corporate taxes had the greatest economic impact – as great as $3 in reduced GDP for each $1 in increased taxes.
      Romer did not examine the effect on Tax revenue, but with government at 25% of the economy it is likely that the tax revenue effects of investment taxes would at best be small and might well be negative.

      The economic consensus refered to in the original quote does not mean there is a consensus on the details. Different studies address different taxes, They get different negative multipliers, they rank the impact of increasing different kinds of taxes differently.

  25. August 11, 2011 10:28 am

    Kent: Those tax figures seem extremely high to me. How did we manage during the Clinton era, when we still had moderately low taxes and managed to balance the budget? Maybe we’d need those extreme taxes if we wanted to eliminate all our debt in a single year, but our goal should simply be to cut into the debt a little more each year by taking in more than we’re currently spending. And yes, that means raising taxes. But we can also cut more from the annual budget — not just entitlements but military spending as well. A nation with a crippled economy can’t afford to police the world. (Let China do it for a change.)

    • Kent permalink
      August 12, 2011 1:11 am

      Yes, that was based on completely eliminating debt in about 10 years. You would have to do major cuts across the board. Cancel programs and defense spending programs. Raise taxes to major percentiles for all workers.

      14 Trillion in current debt + 2.4 Trillion (allowed to add via recent law) = 16.4 Trillion by 2013.

      1.5 Trillion current yearly deficit x 10 year (per Government debt reduction plan) = 15 Trillion (2011-2021)

      16 Trillion + 15 Trillion = 31 Trillion. (2021)

      Government plan to save 2.1 Trillion with passage of current law over 10 years.
      Our debt will be around 29 Trillion in 2021.

      Republicans and Democrats call this responsible accounting of national debt?

      Given the fact that people don’t want to eliminate debt and the Government doesn’t want to reduce it, but just “slow it down”. I would say that a majority of Gen X, Y and I will be working their whole life for the Governments pleasure. No wonder the young people are pissed off at the Baby Boomer politicians.

    • Priscilla permalink
      August 12, 2011 8:54 am

      Rick, the problem I have with your position is that you appear to be saying that discretionary spending cuts – including military spending – can solve our long term debt problem, when it cannot.
      We have unfunded liabilities which add up close to $100 trillion. Even if we cut all discretionary spending, revenue still would not cover the other 2/3rd’s of our spending.

      Interesting point, Kent, about the Baby Boomer politicians….you would think that there would be more anger at these guys, who are literally trying to saddle the next generation – their children’s generation! – with such a crushing debt burden that those children will never be able to climb out from under and have the same opportunity that their parents had. I’ve heard liberals scoff at the notion of “generational theft,” but that is exactly what it is – stealing from the future to pay for today’s spending.

      And that, Rick, is why so many people mistrust the government – not because they “hate government” per se (although they may certainly hate politicians), but because, as big government spending has continued to grow out of control, there have been few serious attempts to address the oncoming fiscal disaster. Our government, which is supposed to represent the will of the people, instead appears only to represent its own interests and those of the corporations that fill its campaign coffers.

      • August 13, 2011 11:36 pm

        Presuming the US does not default, the problem has become sufficiently immediate that it is no longer our children but us who are going to be saddled with the debt. But it is worthwhile looking at who will benefit – who owns our debt.

        http://www.optimist123.com/optimist/2011/08/pie-chart-of-who-owns-the-national-debt-mid-2011.html

        You can find pie charts like this all over (and this does not cover unfunded liabilities), but I would note that for the most part we owe ourself.

        Social Security and Medicare are somewhat self fixing. Either we raise revenue or we cut benefits. There are no other choices. The IOU’s to Social Security are meaningless, just as the so called trust fund or Al Gore’s lock box has never existed.

        If we pay our debt who benefits – mostly ourselves, our pensions, our state and local governments, banks – in one form or another us.

        The debt is a very serious problem, but it is not generational theft.

      • August 16, 2011 10:26 am

        Priscilla: Oh, plenty of people seem to hate government per se — primarily libertarians like dhlii and Ayn Rand. I think they see it as an encumbrance on gifted individuals, throwing obstacles in their way as they seek self-fulfillment through the free-market system. I’m being only slightly facetious here, but I think this essential animosity toward government-as-meddler is an issue that needs to be addressed.

        The alternative to government, of course, is anarchy. Would even a classic libertarian deny that we need basic public-sector services like police, fire departments, public schools (not everyone can afford to go prep) and even a national park system? Only a diehard extremist would oppose them.

        Is our government wasteful and overgrown? Yes, definitely. But has the government simply ignored the mounting debt problem? No. Obama and the Democrats have repeatedly called for an end to tax breaks for the rich, which were set to expire by themselves. But the free-market right refuses to budge on this issue, so they must share accountability for our staggering debt.

        I think (it was about 40 comments ago, so I can’t be sure) dhlii questioned whether there could be a moderate position on the national debt. Yes, of course there is: cut spending AND raise taxes. The solution is so obvious that it takes a simpleton like me, who never got past Economics 101, to come up with it!

  26. Ian Robertson permalink
    August 12, 2011 11:44 am

    What none of our resident deficit hawks here on the New Moderate are addressing at all is the fact that we have a very serious problem NOW with high unemployment and a very sluggish economy. That is also a good part of the reason the stock market is tanking.

    If anyone really believes that the GOP is concerned with debt reduction, just ask them to raise taxes on the wealthy to generate new revenue and see how they react to an actual debt reduction measure. As to the idea that cutting taxes stimulates the economy, I would say that this idea has been strongly disputed by a majority of economists, I’ve looked it up, its a majority view of economists, including many (David Stockman!) who were advisers to Reagan and the Bushes, that tax cuts that create large deficits are harmful.

    Cutting spending, shrinking the hated government, “starving the beast,” these were all preexisting aims of the GOP prior to the crisis of 2008 and they are now using the crisis to further their arguments instead of solving the problem of unemployment and low job creation.

    Sorry to have become a partisan myself, but GOP economic policies, in my view, are the problem. I started saying under Reagan that if you don’t like tax and spend liberals, how are you going to feel about borrow and spend “conservatives”? Cause that is what the last 30 years have shown about the GOP.

    Fix the crisis that so-called “conservative” economic policies have created, expand the economy and get our unemployment rate down to normal levels then worry about the 30 year plan.

    • August 12, 2011 3:09 pm

      The current federal Budget is $3.8T – up over $1T in 3 years. In what way is the federal government worth $3.8T/year ? Has government increased its value over the past 3 years ? by 25% ? Despite the rhetoric only a miniscule number of people are actually talking about actually cutting government spending. The GOP and Democrats are fighting over reducing the rate of increase.

      I have no interest in defending the GOP.

      What do you believe the current crisis is ? Debt ? Growth ? Employment ?

      Regardless, what is your prescription ?

    • Priscilla permalink
      August 12, 2011 3:47 pm

      Big government is big government, whether it is Democrats or Republicans in charge…There are 2 reasons that I currently (and ‘currently’ is the operative word, here) assign more blame to the Dems : 1) the explosion in government spending since Obama’s election is unprecedented, even if you account for the fact that TARP was passed while Bush was still in office and that Bush had already added enormously to the debt, by expanding entitlements and government bailouts. Obama has doubled and tripled down on that . 2) There is no motivation or urgency within the Democrat Party to seriously address our economic problems, because it gains more political advantage by letting the GOP propose solutions and then attacking those solutions.

      It’s a whole lot easier to scare suffering people and create class envy and hatred than it is to propose real solutions. When Obama stops with his strawmen arguments (“some want to do nothing”) and the Democrats in Congress get behind a real budget plan that addresses the long term debt, well, then we can start talking about whose ideas are better…….

      • August 12, 2011 4:03 pm

        The relevant question is less who was to blame but whether spending was the right choice.

        While I would like to actively reduce government spending to the greatest extent possible,
        I really do believe there is very little government can do to make things better – though much to make this worse.
        There is little government can do, but do nothing and the market will fix itself.

      • Ian Robertson permalink
        August 14, 2011 10:20 am

        Priscilla, Does any class hatred, or just plain old hatred come from the enormous truly right wing talk radio/FOX movement led by Rush Limbaugh et al? When the hardcore believers in the GOP and the majority of GOP primary election voters are raving hateful Glen Beck lunatics, and the more genteel section of the GOP, led by the WSJ, are also really extreme in their positions…. Well, I’m a moderate, I did not come to New Moderate to support the Democratic party, who will go on an expansion of Govt. services spree any time they can get a majority, but the idea of a Republican president who will do his best to satisfy the right wingers and the WSJ editorial board is a horrible and actually terrifying prospect.

        These posts replying to the ideas of extremely conservative economic positions that only focus on cutting spending and have no reply to the current economic situation with its joblessness and the lack of prospects or mechanisms for growth are pushing us (me included) into liberal and conservative postures, when what we are actually aiming for is an expansion of moderate power that will counteract the extremes.

        Where is the middle ground, what does it look like? Personally I want all parties and their economists to come to the table and find a plan that will slowly shrink the chokehold that medical spending has on the US economy. I want a non-ideological plan that the majority of economists can support to do that. I want an end to discretionary wars and although I have hawkish tendencies I do not see why our country has to account for 50% of the worlds total military spending and outspend our nearest competitors, China and Russia by something like 6 times. As well, the crazy situation where nearly every product in my local hardware store or electronics store was made in China, and our balance of trade has been wildly negative for nearly forever has to be faced, its not even a subject of the conversation.

        Although economists are a quarrelsome lot, and propose a seemingly impossibly contrary set of opinions I believe that that an illusion created by the media. We need to set up some means of finding out what the “average” of the economic opinion is and ask congress to hit numbers that are based on what the majority of economists believe is correct. Putting the economy in the hands of political ideologues, who are not trained in economics and just find a way to adapt economics to what the primary voters want to hear is the problem, .

        Is it really impossible to find a path out of both our current economic crisis and our long term debt? I don’t believe that is so, the problem is not that there is no economically viable solution, its that the possibility to find the solution is ruined by partisan politics.

  27. August 12, 2011 3:34 pm

    For developed nations growth in GDP decreases between 0.5 and 1% for each 10% increase in the size of government.

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1734206

  28. August 12, 2011 4:16 pm

    The federal Budget when Hoover took office was $2.9B, and the top tax bracket was 25% when he left the budget was $4.7B. and the top tax bracket was 63%. Tax revenue dropped from $834m to $427m

    In 1936 FDR in the “soak the rich” act, increased the upper tax rate to 93% as well as significantly increasing corporate and other taxes on wealth. The Federal reserve was seeing signs that the Depression was ending, but then unemployment went from 14% to 19%. Government revenue dropped $500m.FDR triggered a recession in the midst of the great depression.

    • Sean permalink
      August 12, 2011 5:51 pm

      Yet this same 90% top marginal tax rate continued on during the 50s which was a robust period of American prosperity.

      • August 13, 2011 8:39 pm

        FDR dropped capitol gains taxes from 40% to a little over 20% between 1037 and 1941. Truman dropped the upper margin rate from approx. 95% to 82%. Tax increases in 1951 produced a brief spike in receipts, but they quickly returned to 16-17% of GDP, almost 2% lower that the “low tax” 1980’s and 90’s.
        During this robust period of prosperity, There were recessions in 1945 (winding down the war), 49, 53, 58, and 60. GDP growth from 1945-1960 averaged 2.3%, from 1980-1999 it was 3.3%. The average rate of growth from 1790 through 2010 has been almost 3.8%. For the 19th century growth average 4.2%. For the 20th century the average was 3.2%.

        The 50’s were an improvement over the great depression, There are many positive things that can be said about the 50’s, but there are also many very negative things.

        The relationship between increases in taxes on investment and declines in GDP is pretty well established. It is rational to assume that taxes will follow supply/demand curves just like everything else. There have been myriads of studies, on the US specifically other OECD countries generally. If you do not like the conclusions blame economists such as the Romer’s – not me.

  29. August 12, 2011 5:38 pm

    “No country save Britain at the height of its empire has ever recovered from a debt-to-GDP ratio of over 150% without a default. None. And the reason is simple arithmetic. Even a nominal interest rate of 6% means that it takes 10% of your national income just to pay the interest. Not 10% of tax revenues, mind you; 10% of your total domestic production.”

  30. August 12, 2011 6:18 pm

    For those of you who still beleive that somehow the Debt Ceiling deal was some slash and burn by the GOP throwing the poor under the bus.

    http://www.economist.com/blogs/democracyinamerica/2011/08/deficit-reduction

    This is NOT a conservative rag. The takeaway essentially is that whatever you may think “the Tea Party got rolled”. In every way, spending still increases. The only significant issue is that it rules out stimulus spending – atleast in the short run.

    This is not “starving the beast”.
    I consider it a pretty damning indictment of the rhetoric of the president and democrats.

    None of the GOP proposals actually constituted real cuts in spending – rather than reductions in the rate of increase. The closest anything came to actual cuts was the Ryan plans changes to Social Security and Medicare. Medicare was essentially converted to a defined contributions (like most private plans today) rather than a defined benefits plan. I believe both included some ability to opt out – so long as that was a choice can not possibly be construed as a cut.

    • Ian Robertson permalink
      August 13, 2011 9:26 pm

      Oh rot.

      Sorry dhlii, Even your hero Martin Feldstein is not with you, he believes that revenues must be increased along with cutting spending:

      http://www.nytimes.com/2011/08/13/business/economy/voices-faulting-gop-economic-policies-growing-louder.html?_r=1&src=me&ref=general

      “Among those calling for a mix of cuts and revenue are onetime standard-bearers of Republican economic philosophy like Martin Feldstein, an adviser to President Ronald Reagan, and Henry M. Paulson Jr., Treasury secretary to President George W. Bush, underscoring the deepening divide between party establishment figures and the Tea Party-inspired Republicans in Congress and running for the White House.”

      Another quote:

      “In a column in The Washington Post on Friday, Bill Gross, who runs the giant bond-trading firm Pimco, lashed out at Republicans and “co-opted Democrats” for setting aside widely accepted economic theory.

      “An anti-Keynesian, budget-balancing immediacy imparts a constrictive noose around whatever demand remains alive and kicking,” he wrote. “Washington hassles over debt ceilings instead of job creation in the mistaken belief that a balanced budget will produce a balanced economy. It will not.”’

      Despite your hard work gathering facts, your fundamental underlying model is absolutest and truly radical, and not in a good way.

      • Ian Robertson permalink
        August 13, 2011 9:38 pm

        Ooops my face is red, your hero is not Martin Feldstein, but Milton Freidman. Too many damned MF Reagonite economists out there. Argument is still valid though.

      • August 13, 2011 11:17 pm

        Ignoring Feldstien, Friedman is not my hero either – he is just right far more often than wrong.

        Keynes was wrong about the relationship between inflation and unemployment. I believe pretty much all economist today accept that in the long term you can not trade inflation for employment.

        I think Reagan has a well deserved excellent reputation as a president. That does not necessarily extend to his advisors.

        The remaining issue is whether government demand side stimulus works.
        I believe history both recent and past is pretty damning to that portion of Keynes’s theory. but you will have no problem finding economists that disagree.

        I believe there are really only two major competing views on economics. Trusting free individuals, or trusting top down central planning. But economists do not tend to divide quite that way – not even the republican ones.

        You have to make up your own mind.

  31. August 13, 2011 5:00 pm

    Make your own budget choices and compare them to others.

    http://marketplace.publicradio.org/features/budget_hero/

    • Ian Robertson permalink
      August 14, 2011 9:22 am

      Sorry, its too funny, how did Reagan get us out of our bad economic situation, he massively increased spending and ran up a deficit at a rate unknown in previous non-war times. Government spending pulled us out of our economic funk —> Reagan was a Keynsian!!! president whether he called himself that or not!

      You can ignore Feldman, since he is saying those words you don’t want to hear, and you can ignore the threat of our looming double dip recession and claim that small businesses will provide the magic that will lead to new growth in the economy. But your beloved small businesses will be going OUT of business at a nasty rate if we double dip, and that sector will not make a serious recovery until After the general recovery begins (if it ever does).

      • Priscilla permalink
        August 14, 2011 10:23 am

        His “beloved small businesses”?? What are you now, Ian, the voice of the proletariat? (Don’t get mad, I’m only teasing, but, seriously, what do you have against small businesses? You don’t think that they are job creators?)

        You are partially correct about Reagan, he definitely employed some Keynesian spending to get the economy back on track…….BUT, he also slashed tax rates and let the Fed prevent inflation by practicing a strict monetary policy. Both of those latter approaches are rejected by Obama.

        I’m frankly a bit suprised that, as a self-described moderate, you appear so committed to backing a monolithic big government spending approach to the economy, particularly given the fact that it has been such a failure so far. What is your objection to a mixed approach in the Reagan mold?

        “Nothing is more senseless than to base so many expectations on the state, that is, to assume the existence of collective wisdom and foresight after taking for granted the existence of individual imbecility and improvidence.” ~Frederic Bastiat

  32. Ian Robertson permalink
    August 14, 2011 12:34 pm

    Dhlii have yacked our fool heads off to such an extent that I cannot blame anyone who isn’t following every word. I have asked our resident conservatives many times how they plan to revive our economy and generate growth and jobs. The only specific answer I ever got was dhlii saying that small businesses will expand our economy and save it. Thus my reply, his “beloved small businesses” are going to go down the tubes as a group in a double dip recession, there will be a lot of failures and they will not start to generate new growth (or more accurately simply recover their old positions) until after a recovery is well underway. Do I believe in small businesses, yes, of course its a significant sector of the economy. But they have no magic answer to turning this present crisis situation around and counting on them to do that is foolish.

    The problem is, where is the mechanism that will generate new growth in the economy and create jobs?

    I would love to know how anyone who has read a good percentage of what I have said would find that I favor a huge monolithic big government approach? Can you point to anything I said? I can point to many many things I’ve said that show I favor letting govt. do what its best at and the private sector like wise.They both have roles. The idea that govt. is best at next to nothing is a radical conservative idea and its wrong.

    This is the New Moderate, its not the New Conservative and I do feel that the topic has become a debate with several folks who are extremely economically conservative. I react to debate these ideas, but I shouldn’t be reacting, I should be talking about what a moderate approach might be, which I did attempt to do above today, but our conservatives only seem to lead the conversation back to the usual two position idiot dichotomy.

    !!!This Is It!!!, I’m not going to debate radically conservative ideas any more, it gives them center stage, and they don’t deserve it, certainly not here and really, not anywhere.

    On to a discussion worthy of the New Moderate!

    • Ian Robertson permalink
      August 14, 2011 12:38 pm

      God, how I wish I could edit these posts. That was supposed to be Dhlii and I have yacked…

  33. Priscilla permalink
    August 14, 2011 8:36 pm

    Moderates of good will can disagree…..it is true that we all come here with our predispositions. Mine may be more to the right than yours, but I would still describe myself as a moderate and not a conservative. Certainly, I’m not a radical conservative! If I were a Republican, I’d probably be called a RINO ;)…but, I’m not a Republican. I’m not a believer in Keynesian economics, but like you, I am open to ideas that work. Like you (and pretty much everyone), I think we are headed in a very dangerous direction and, so far, not much has been done to successfully change course.

    My position is not so much right-wing as it is cynical….the 2009 stimulus act was not so much a Keynesian stimulus program as it was a giant pork barrel giveaway to Democrat interest groups and unions. Who knows, maybe if it had been a genuine “shovel-ready” jobs act, it may have done the trick….but it’s too late now.

    Not only did it not provide jobs, it was pretty much single-handedly responsible for the tea party. Like them or not, most tea party people want what we all want – an effective government that works for the people, not big corporations, unions or special interests. You may disagree with their insistence on spending cuts and entitlement reform before any tax increases, but it is a reasonable position, largely formed by their distrust of politicians who pass bills like the failed stimulus and who agree to spending “cuts” that are not cuts at all. I get that, which is why I don’t hate the tea party. But I don’t always agree, and, sure, there are extreme factions of the tea party movement, for sure. But that goes for every movement…..doesn’t it?

    • Ian Robertson permalink
      August 15, 2011 11:41 am

      Priscilla, it may depend on the environment that one finds oneself in, e.g., I have a contrary streak and can be quite conservative in a very left-leaning environment. You may laugh, but a scientific colleague with whom I carried on a correspondence about American politics once asked my to write a book with him that he proposed to call Conversations between a liberal and a conservative. I(!!!) was to be the conservative. He was no liberal, he was Howard Zinn reincarnated. (I declined, I did not consider myself conservative unless in relation to my friend and also I did not wish to kill my parents by appearing in public under the heading of a conservative spokesman).

      I think that as intelligent adult experienced people we should be believed when we rate our selves as moderates, I know what a liberal is, you know what a conservative is and if we were those things we would call ourselves by those terms. I respect that you consider yourself to be a moderate, it must be based on your beliefs on social issues outside of economic ones. I have read everything you have written on economic issues and can hardly find a word that is other than very conservative. I used the term radical in regard to the strength of your distrust and disgust with government, you seem to me to rival dhlii in that regard.

      Its unbelievable that some look at the economic policies of the US government and label them as a categorical failure, as both you and dhlii seem to do. If I am mischaracterizing your opinions, its my mistake, but that is how I interpret your comments.

      The US economic system, including government, is not generally defective, it has functioned pretty magnificently when one considers that it has managed to absorb many really terrible blows since WWII ended, our expensive struggle against Stalinism, our duties as the World Cop (not always justified and getting continually less so), our loss of energy independence since the mid-1970s, our horrific trade imbalance, the demographics of the baby boomers hitting retirement age, our inability to contain health care costs by finding some national solution to paying for health care, several financial catastrophes that were due to insufficient regulation of banks, our increasing income and wealth disparities that create expensive social problems, and last but not least, our political dysfunction. We have a political system in which ideologues control the political parties and our political culture really IS a wreck that most people distrust because it is nearly useless in regard to solving our serious economic problems.

      When you consider all the body blows our economic system has absorbed, its a wonder we are doing as well as we are. Its quick and easy just to call the system a failure; it takes a little effort to apply some perspective and see how many achievements it has. And they are NOT all due to the “free” market!!

      Again, on to the Moderate Question; what solutions will we put in place if moderates can wrest control from the hyper-partisans? What would we do if macroeconomics actually turns out to be a real science that can make some true and verifiable predictions that are beyond partisan considerations of the methods we need to use to escape both our short-term and long-term economic crises?

  34. Ian Robertson permalink
    August 15, 2011 12:20 pm

    Here is a prolonged quote from a Warren Buffet piece in today’s NYT entitled “Stop coddleing the super rich:

    OUR leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.

    While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

    These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.

    Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

    If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.

    To understand why, you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.

    Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

  35. Ian Robertson permalink
    August 15, 2011 12:25 pm

    Continued:

    “I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

    Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.

    The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains. Some of my brethren may shun work but they all like to invest. (I can relate to that.)

    I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.

    Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.

    Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

    But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

    My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.

    • August 16, 2011 10:58 am

      Ian: I saw this piece, and I admire Buffett for his openness about the tax breaks available to the super-rich. I think all income needs to be taxed as income, whether it comes from work or capital gains. (And I speak as an investor, albeit a semi-ruined one, who enjoys that low capital gains tax rate.) It’s absurd and obscene that someone like John Paulson, who personally pockets several billion dollars a year as a hedge fund manager, should pay a measly 15% (if that much) on his income while his secretary pays twice that rate.

      That said, labeling a family with $250,000 annual income as “rich” is probably overstating the case, and I think Obama lost a lot of support for his proposed tax hike because of the artificially low cutoff point. Let’s say we double it to $500,000 — I think we can agree that anyone at that level and above can afford to sacrifice a little discretionary income to help keep our nation from drowning in debt. The rest will have to come from cutting government programs… I’d start with foreign aid and military spending. As I’ve probably said before, a country up to its ears in debt can’t afford to police the world.

      You have my gratitude, by the way, for holding the moderate line against the libertarian/conservative/slightly-right-of-center opposition here — without losing your composure. With 90-odd comments on this post so far (and a 7-year-old to manage at home) I just haven’t been able to keep up. Well done, sir.

      • Ian Robertson permalink
        August 16, 2011 11:48 am

        Well, I’m trying (sometimes I’m very trying, ask the wife).

        The thing is to turn the conversation to the center instead of debating what I consider very conservative economic principles. I don’t want to be pushed to the left of center, even if those roots come out under pressure.

        What does the moderate position look like, as distinct from a liberal or conservative economic position? What do moderates want, just some artificial middle or something distinct? I as a moderate want to make sense of what the “average” opinion of reasonable economists is, what do the majority of reasonable and non partisan economists recommend? Throw out the most partisan opinions, the tails of the bell curve and ask the professionals what should we do to escape the long term and immediate problems. As a moderate I want science, not ideology and I acknowledge that ordinary citizens such as myself cannot make truly informed macroeconomic decisions, the system is far too complicated for the layman.

        Right now we all just cherry pick the opinions of the economists who share our own political sympathies and claim that they are the majority opinion. Its interesting but not very enlightening, we produce a cacophony of non-professional echos of the most partisan economists, the media stars. That’s not what we need!

      • August 16, 2011 10:48 pm

        Ian: How do we define a moderate position on economic issues? I’d say the ideal moderate-friendly economy would favor no one class over any other class. That shouldn’t imply equal outcomes across the population, but it also wouldn’t artificially tilt the odds in favor of the rich, the poor or anyone else. Right now the system is artificially tilted in favor of the rich (low capital gains taxes, no expiration of Bush-era tax cuts, minimal regulation of Wall Street, undue lobbying influence, runaway salaries for CEOs and other beneficiaries of our winner-take-all economy) and against the middle class (outrageous banking fees coupled with zero interest on savings accounts, exorbitant college tuition, no access to special investments offered to the rich, jobs outsourced by corporate elite). So yes, a true moderate would want to roll back the blatant favoritism toward the rich and create a more equitable system.

        How do we shift power away from the plutocracy in the face of stubborn opposition from the right? Here’s where moderates have to dare to become radicals in the interest of moderation. Sounds paradoxical, but we can’t simply endorse the status quo and call ourselves moderates; we’d be signaling our tacit approval of an unjust system. So do we join the left and clamor for class war? No, we just hold out for the kind of reforms that would create the moderate-friendly economy I described above. But we insist on them and don’t settle for less.

        I don’t read economists, by the way (that much should be apparent), so my ideas are based on what you might charitably call empirical observation. To me, that makes more sense than swallowing the hidebound theories of men who never had to work a regular job. Example: Nobody, not even Jesus or Queen Elizabeth, deserves to earn 5000 times more per hour than anyone else who works for a living. That’s just plain wrong from a moral, ethical or any other kind of perspective. The government can’t dictate salaries, but it can tilt the balance toward fairness by insisting that corporations include actual workers on their boards to stop the madness. That’s just one example. A moderate government would simply create the climate for a more equitable economic system, because we’re destined for a two-tier society of lords and serfs if current trends continue unchecked.

  36. Priscilla permalink
    August 15, 2011 5:08 pm

    Hey, I’m all for coddled billionaires paying their fair share (and I would suggest that Buffet sign over a big check to the IRS immediately, in place of the foundation that he currently runs, lol) ! It’s the small businesses that file as individuals and successful middle-class earners who make 250K (often because they are two-income filers) that don’t deserve to be lumped in with Mr Buffet and his mega-rich friends as “wealthy.”

    Mr. Buffet sets the “wealthy” bar at $1 million. Mr. Obama sets it considerably lower….

    End loopholes and institute a flat tax and we all pay our fair share, that’s how I see it. Or even drag out an old idea of Friedman’s, the “negative income tax,” which would guarantee the lowest earners a minimum subsidized income in a flat tax system.

    I’m curious to know how you feel about flat tax or fair tax plans? I don’t consider them to be “conservative,” but I am interested in your take.

  37. Pat Riot permalink
    August 15, 2011 6:00 pm

    An intelligent economic discussion above! I think a book could indeed emerge from it—perhaps from all the back and forth a few nuggets of common ground would emerge that “everyone” could agree upon.

    To answer Mr. Bayan’s original question:
    No, America is not like Ricoh in the final moment! America is more like the soft, distracted, former champion Rocky Balboa of Rocky III—after he has been knocked out and must once again find his edge to work his way back! Sure America’s worse and more complicated than that, but I was looking for a movie symbol.

    Although we are not seeing the end of Western Civilization, we are seeing the end of Western Civilization “as we know it” or as what we have too-passively, too-trustingly, and ignorantly allowed it to fester into (does anyone dispute this?), and I say GOOD RIDDANCE to some of the excesses! We are going to get back “closer to the heart” in this country because we have to. People who have been offering luxury services to the middle and lower classes are already hearing crickets. (The rich can still afford them.) Americans have been spending WAY too much time with “entertainment,” anyway. Used to be the circus came to town every few years. Lately the circus has been every day.

    We’re not dying; we’re learning and changing, in many ways, and fast. It’s scary and it’s exciting.

    • August 16, 2011 10:44 am

      Pat Riot: I hope you’re right… maybe we just need to regroup and get ourselves back into fighting trim. But it’s pretty clear that we’re doomed if we stay on the current course.

      You make a good point about our continual need for “circuses.” When I was growing up, in a solidly middle-class suburb back in the ’50s and ’60s, we lived so much more simply than the middle class of the past 30 years. No designer clothes, no gourmet food, no Caribbean cruises or jet flights to Europe. Vacations would be road trips to interesting places, and dining out meant fried clams or “Salisbury steak” at Howard Johnson’s.

      I think the rise of the dual-income family in the ’70s changed all that, along with our expectations of what a middle-class life should be. Maybe we should all acknowledge that the past 30 years were an anomaly, and that from now on we’ll be living more like those no-frills suburbanites of the Eisenhower era (as long as we’re not all financially ruined, of course).

  38. Priscilla permalink
    August 17, 2011 8:22 am

    Hey Rick, Nice of you to weigh in ;)

    I couldn’t ‘reply’ to your last comment (I guess wordpress is structured to accomodate only a couple of replies per comment, and your comment section is becoming quite the hotbed these days……..

    I like the way you begin your description of a moderate-friendly economy by saying that no one class should be favored, and that equality of outcomes should not be the a goal. So, what you are saying, if I read you correctly, is that equality of opportunity is what we want to encourage, and that the rule of law should be applied whenever anyone – public or private, one would presume – tries to restrict one group of people from having equal opportunity to be successful and prosperous. Or to allow one group of citizens to have greater access to prosperity.

    The thing is – I firmly believe that not only moderates, but that all liberals and conservatives of good will want pretty much exactly what you are describing. And I also believe that most people are of good will. Sure, there are the whacko lefties, who would slaughter the rich and “spread the wealth”…and there are the fringe right wingnuts who would put control of things into the hands of religous leaders or supremacists. But these are the tiny minority of Americans, don’t you think?

    I think that the current meme that the right, in particular the ‘tea party right’, is an extremist group with an extreme ideology that all government is a bad thing, is a gross distortion of what is a grassroots movement towards more economic freedom and fiscal responsibility. Likewise, I believe that the conservative view of Obama as a Marxist, bent on destroying the free economy in order to consolidate power and channel all private money into government coffers is wildly exaggerated.

    As with all stereotypes, there are elements of truth in both of these characterizations….but what I see, more and more, is the general public – the People, if you will – being encouraged to believe that the ‘other side’ is BAD. Not just wrong, not just misguided…but evil. Bad. Dangerous. They are the enemy.

    This is what moderates should reject. Otherwise we are well and thoroughly screwed. Not because we are going to become a nation of lords and serfs. But because we are going to be a nation that is at war with itself.

    • Ian Robertson permalink
      August 17, 2011 9:49 am

      Hi Priscilla,

      Yes, its not easy under this system to reply in the right place.

      I’ve been arguing with liberals for the last years who think I am wrong to equate the ills of the left-wing and right wing nuts. (If you are really interested to see the tenor of that argument you could read my 2-star review of the book “Idiot America” on Amazon and its follow up comments.)

      One point the libs have me on, its just a fact, conservatives outnumber liberals 40%-20% extreme conservatives outnumber extreme liberals by about 15% to 5% and, (this is important) extreme conservatives are far more likely to work within the GOP whereas far lefties despise the democrats. This dynamic is a part of our political system, like it or not. I do find many of the far righties to be out of their bloody minds, if not actually Tim McVeigh evil, and they make up 15% of the voters and are a huge percentage of GOP primary voters. Thus, even sane GOP politicians and party functionaries have to kiss Rush Limbaugh’s ring. The angry far right are not just some small factor in our politics, they have huge influence.

      As to the tea partyers, I think you overlook some of their charcteristics; Here is a quote from New York Magazine:

      “In 2006, long before costume shops first began selling tri-corner hats to early adopters of the tea party movement, professors David E. Campbell and Robert D. Putnam “interviewed a representative sample of 3,000 Americans” about their “political attitudes.” By re-interviewing many the same people this summer, they were able to determine what type of person eventually became a tea partier. Some of what they found is about as shocking as an episode of Full House: Current tea-party supporters were likely to have been “highly partisan Republicans,” and “even compared to other white Republicans, they had a low regard for immigrants and blacks long before Barack Obama was president.” One finding that is actually revealing, though:

      Next to being a Republican, the strongest predictor of being a Tea Party supporter today was a desire, back in 2006, to see religion play a prominent role in politics. And Tea Partiers continue to hold these views: they seek “deeply religious” elected officials, approve of religious leaders’ engaging in politics and want religion brought into political debates. The Tea Party’s generals may say their overriding concern is a smaller government, but not their rank and file, who are more concerned about putting God in government.”

      http://nymag.com/daily/intel/2011/08/tea_partiers_care_more_about_g.html

      I note that most of my own cherry picked data and information seems to come from New York.

      As to religious people, I’m not one of them, but I have been sad to see the organized atheists,the ACLU etc. really go after them for the last 40 years and now you can’t even sing a Christmas carol in a school setting. Angry intolerant liberals have gone out of their way to poke religious conservatives in the eye at every opportunity, whadyaknow, now the religious right are an organized movement. If I were liberals I would not have done that and I would stop now.

      But this is a huge fault line in American politics and its not going to go away.

  39. Ian Robertson permalink
    August 18, 2011 7:16 am

    Today’s interesting read is from an angry moderate republican, Allan Sloan, a senior editor at CNN Money and Fortune Magazine. He puts the wood to both the tea party and Obama in no uncertain terms:

    ‘If I sound angry, it’s because I am. Think of me as an angry moderate who’s finally fed up with the lunacy and incompetence of our alleged national leaders — and with people stirring up trouble from which they hope to benefit politically or financially. Some policies and statements you hear from Tea Party types about the economy and the debt markets are utterly insane. Any competent economics instructor would give you an F if you asserted the same sort of nonsense on an exam.
    But all that aside, at least the Tea Party people have a story and a message. The Obama people have none — at least none that I’ve been able to discern. They don’t even know how to spread good news, which actually does exist. One example: This spring I was assigned to figure out how much taxpayers would lose on the Troubled Asset Relief Program — the much-maligned TARP, that supposed financial sinkhole. To my surprise, I discovered that TARP actually stands to make money for taxpayers. During my research, I found that the Treasury had reached a similar conclusion, but had put the information into the public domain in such a low-profile way that few people saw it. Why wasn’t the Obama administration spreading the word that taxpayers had made money saving the world financial system? Beats me.”

    For the rest of a lengthy moderate diatribe see:

    http://finance.fortune.cnn.com/2011/08/18/how-washington-is-destroying-the-economy/?section=magazines_fortune

  40. Priscilla permalink
    August 18, 2011 4:53 pm

    Ok, so we “we modify Social Security and Medicare formulas” “eliminate the alternative minimum tax,” and ” broaden the tax base by drastically reducing itemized deductions. Only about a third of taxpayers, primarily higher-income types, itemize deductions, so only they would be affected. Do this right, and you end up with more tax revenue from high-income people (which allows the “tax the rich” types to be happy) but lower rates.” \

    Pretty much exactly what the “push-granny -over -the -cliff” Paul Ryan plan, passed by the House does. So why is the Ryan plan a crazy right wing scheme, but this guy gets to call it moderate?

    I mean he kinda mentions “modifying” SS and Medicare” as if that would be no big deal. And I would have liked to know a little more about how the taxpayers (and which taxpayers) made money from TARP. The devil is always in the details, my friend……

    Thanks for posting the link, Ian, it’s an interesting read. You are right, he goes after everyone.

    I am getting weary of so many angry folks, though. Sheesh, we always had angry righties and angry lefties. Now even the people who were supposed to be keeping their head while all about them were losing theirs….hell, they’re angry too :(

    • Priscilla permalink
      August 18, 2011 5:13 pm

      I should clarify that I DO think Sloan’s ideas are good…and moderate. My point was that I think most of Ryan’s are good and moderate too. The general outline of a plan to rework the tax structure by making it flatter and reform – or modify, if you will – entitlements is what we need. Moderates, like Sloan, who see this should put one forward that addresses the shortcomings of the Ryan plan.

      • Ian Robertson permalink
        August 18, 2011 7:43 pm

        I’ll be honest with you, Priscilla, I’ve been reading economics till it comes out my ears (lately Raghuram Rajam’s book Fault Lines) and at this point I’m so numb that you (anybody, I mean) might be able to sell me anything if you phrase it nicely. Economics is not a science it seems, its method of studying the economy. We are better off having economists (I guess, maybe) but they still aren’t much good for anything but arguing among themselves and confusing the rest of us.

        I guess it comes down to the amateur opinion of what one feels in ones “bones”. Deregulation seems nuts to me, especially that bit about letting investment banks play on commercial bank terms. There are more absolute free marketers than I would have guessed, (though they are not a majority and have gotten a black eye in the recent fiasco) but all they have are beautiful theories that comfort those in business but have no proof and are counterintuitive to any one who is wired like I am.

        The question is still, no matter what we do about taxes, where is the recovery going to come from? Who will spend now? To debate whether one should have a Keynsian stimulus or not is academic, cause it ain’t gonna happen. We have paralysis, nothing is going to happen and we will see if that, somehow, is what the economy really wanted.

        Its going to be a horrible unbearable campaign season and what ever answer we get, I won’t like it.

        I’d drink, but I never do that when I’m gloomy, then your just gloomy AND you have a headache. We’ve got a headache enough already, its called politics.

  41. Ian Robertson permalink
    August 19, 2011 10:16 am

    I’m very good at ignoring sensible questions in others posts and then ranting about whatever is on my mind. This morning I looked again at the Ryan plan to try to understand your question Priscilla about why the Ryan plan is demonized by democrats. The devil seems to lie both in the details and in the big picture.

    Big picture: There is a monstrous battle going on between the remaining free market absolutists and those who favor regulation. Its fair to say that this is a liberal-conservative question in political terms, one that liberals have (one of those rare occasions) the upper hand in at present, especially since the global financial crisis. The Path to Prosperity (Ryan plan) in most ways reflects the conservative position on deregulation, most strongly on the Medicare, Obamacare, and tax issues. As well, it projects continuation of the Bush II tax cuts basically forever. The Economist published a lengthy article about why the PP revenue projections that would allegedly balance the budget are not at all realistic. So liberals and others (including myself) who think that more deregulation and another bout of supply-side economics are a poor idea are not going to be thrilled with the PP. It seems terribly destructive and goes directly along the same rhetorical and theoretical path that got us into the mess we are in now.

    As to the details, the PP would have the private plans that seniors buy pegged to the overall rate of inflation, rather than the rate of inflation in health care costs, which rise much more steeply. Since economists tend to look at things from the standpoint of incentives, this PP privatization would seem to give seniors an incentive to get into hot water with their health care costs, which many ultimately would not be able to pay, with, according to democrats, disastrous results. As well, medicare handles administrative cost much more efficiently than the private plans do, so privatization would ADD trillions of dollars in inefficient private administrative costs to the cost of health care, just making matters much worse, according to democrats and their economists

    As well, the tax simplification scheme in the PP would favor upper income earners and thus lower US tax revenues, according to democrats and their favorite economists. At the same time it would sharply cut discretionary spending on programs to help the poor. Since the rising disparity in income and wealth is seen as a threat to the economy by many (including myself), for precisely the reason that it becomes awfully difficult to make the economy grow when only the rich have increasing real income and thus money to spend, and that increase comes at the expense of the rest of us. I’ve believe that I’ve heard dhlii argue the free market absolutist dogma that income disparity is good and makes everyone better off, if you believe that, then it follows that we should give the rich tax cuts and federal revenues will go up!!! I’m learning that there is not almost any single point that is not hotly disputed in the free market absolutists battle against reality and that a case can be made for almost anything.

    It also repeals Obamacare, which you cannot expect democrats to like. Their pollsters claim that most Americans favor the concepts in Obamacare. Republican pollsters say the opposite. The courts may make the point moot on its central pillar, requiring people to buy health insurance, which may not pass constitutional muster. But Hawaii has done it for 40 years and almost no one in Hawaii seems to want to get rid of it and it has not been thrown out in court.

    So yeah, the Ryan plan proved to be toxic. Most Americans do not believe in its mechanisms, especially regarding medicare. I think it has only superficial resemblance to what Sloan said in his article, while incorporating most of the idiotic notions he was angry about in tea-party economics.

    • August 21, 2011 3:00 am

      You are correct that there is probably not a single point with respect to the views of “free market absolutists” that is not in dispute by someone. For the most part by those who got us into this mess in the first place.

      Why would one expect anyone who actually believes that government can be a positive force for good, to not be opposed to free markets – the two views are irreconcilable.

      The major fallacy of twentieth century progressivism, is the mistake belief that you can have essentially centrally planned capitalism – that there is such a thing as socialism lite.
      I have discussed this before, but capitalism by its very nature will co-opt and corrupt any power it can, competition mitigates this. Government has a monopoly on those powers we grant to it. Whatever power we grant to government WILL be co-opted and corrupted by capitalism. Those pushing for campaign finance reform, limitations of corporate speech etc. are essentially reacting to that. They are correct in diagnosing the existance of a problem. They fail because so long as government continues to hold power that can be usefully manipulated by business, capitalism will find a ware to manipulate that power – and that outcome is in the best interest of both business and politicians – though not the general public.

      The solution is not myriads of new laws restricting our individual liberty – and law restricting what corporations can do are laws restricting individuals. A corporation is nothing more than a group of people with a common interest. Restrictions on corporations are restrictions on free association, they are based on the assumption that we can not gather collectively to assert more strongly what we are free to do individually.

      The solution is to limit the scope of government. What government can not do, can not be co-opted or corrupted.

      I will also point out that there is a radically different understanding of “rights” between the left and the rest of us – particularly libertarians. This surprised me when I first encountered it.
      The US declaration, as well as the entire 18th and 19th century classical liberal tradition, roots rights in man. What ever our rights are, they are either god given, or natural. Regardless, they precede government. We agree to tolerate some limited restrictions on some of those rights in return for the benefits of living in society – the social contract. Thomas Paine addresses the distinction between those rights that can be moderated, and those that are “inalienable”.
      For the left the source of rights is society – government. There is no such thing as an inalienable, natural, or god given right. Rights are what we collectively through government decide are rights. Often they are not held individually, but by classes. Many are not even aware of the distinction. But this distinction is core to the animosity between libertarians and liberals – despite many shared objectives. The right is far more tolerant than libertarians of infringement on individual rights, but despite frequent weakness and selective blindness on the strength of some rights, conservatives and libertarians both accept an origin for rights external to government.

      This disagreement may sound somewhat academic, but it is critical, if rights are defined collectively they can be anything – or nothing. If they originate outside government, government then every undertaking of government comes at some small cost in your rights, and government must justify that cost with a greater benefit.

    • August 21, 2011 3:58 am

      You complain about supply side, as if this were some disreputable vodoo.

      Economic exchanges have to sides – supply and demand. This is where the term supply side comes from. To some extend they are like the chicken and the egg, Yin and Yang. What is supply without demand ? What is demand without supply ?

      Though they are essentially balanced in all transactions, theoretical issues with respect to each have practical consequences.

      Say’s law – badly misrepresented as supply creates its own demand, is part of the underpinning of virtually all economics, and certainly the classical liberal and Keynesian traditions. This is not some vodoo invented by Jack Kemp in the 70’s and 80’s.

      Keynes did not outright reject Say’s law, but built a new approach around government managment of the demand side. Ignoring the veracity of Keynes, the shift to demand side solutions is incredibly appealing to politicians. The demand side of economics is consumers and voters. The supply side is producers – business. The reality is we are all on both sides, when we work we create wealth and we are producers – we are the supply side. But the purpose of production is consumption. We work to create and consume wealth. And that is how most of us self identify.

      But whether you emphasise the supply side or the demand side matters.
      What do you believe is the cause for economic disruptions ?
      On the supply side that is misalocation of resources – busts are the natural collapse of artificial booms. If you talk about the S&L crisis, the Housing Crisis, the internet bubble, any economic bubble – you are implicitly echoing a supply side meme. When you speak of demand shocks, collapse in confidence- permutations on Keynes animal spirits your are echoing a demand side meme. Even when you take a pro-regulation stance as a means of averting economic disruption, you are implicitly adopting a distorted supply side view. Demand failures are irrational, they do not arise from foreseable misallocations that can be regulated. We just all collectively get up one day and decide we are tired of buying houses and we are going stop.

      Keynes’s demand side emphasis has the matching implication that if failure is a psychological failure on the demand side, then it can be repaired by propping up demand – stimulus.

      If you believe economic downturns are the result of bad choices – regardless of who you blame for those choices, you are endorsing supply side views.
      If you believe that bad choices sometimes have consequences, and that we have to work our way through those consequences to get back on track – you are endorsing a supply side view.
      The Demand side essentially claims that whatever the causes of failure – and we may not and need not know them, that prosperity can be restored simply by restoring demand.

      Progressives have spent more than a century demonizing production. They either misunderstand or deliberately obfuscate the fact that each of us is both a producer and consumer. Capitalism is the greatest force for raising the quality of life for the least of us, because we are ALL producers. It builds on our nature. It embraces the understanding that whether we are Bill Gates or migrant farm labor – we produce to consume. We are eacch entrepeneurs. We each seek to maximize our advantage. We as producer sell our labor to business as a consumor, for the most we can get, in order to consume from other businesses the things we want. When rail about greedy and unscrupulous corporations, we are maligning ourselves – for we are all producers too.

      We have 70 years of experience with Keynesian demand side economics. On atleast two critical measures it has failed. Keynesian economics claims that you can trade inflation for employment. The consequences of this failure were the stagflation of the 70’s and the cure was painfully reigning in inflation resulting in the longest sustained prosperity in our history.

      In myriads of instances throughout the world keynesian demand side stimulus has been sold as a cure for economic calamity. I am not aware of a single instance in which it has worked. Arguably it has made things worse than doing nothing.

      Essentially the demand side focused model, has failed repeatedly in numerous ways and though it still has myriads of adherents.
      While supply side solutions have succeeded whenever then have been tried.

      The Bush tax cuts are taken by the left as the divine repudiation of supply side. But the Bush tax cuts – like the tax cuts in the recent stimulus, were primarily demand side – and demand side tax cuts have proven ineffective.

      For reference a supply side tax cut would be one that encourages producers to produce. – reducing taxes on investment. While a demand side tax cut would be one that encourages consumers to buy things. The Bush tax cuts were a mix of demand and supply side cuts. The stimulus was almost exclusively demand side tax cuts.

  42. jess permalink
    August 19, 2011 4:18 pm

    Here is a moderate political platform I proposed: http://atcs.newsvine.com/_news/2011/07/13/7042740-could-you-support-this-politcal-party-platform-poll

    Comments are welcome.

  43. Priscilla permalink
    August 19, 2011 5:30 pm

    Jess, I’m off to work at the moment, will read your proposal tonight, and look forward to commenting.

    Ian, I would suggest that you read the actual Ryan plan and judge it on its own merits and shortcomings, not by the ideological and political attacks on it. (The Roadmap is Ryan’s original plan, the Path to Prosperity is specifically devoted to the legislation passed by the house, which is based on Ryan’s plan) It is fundamentally identical to what Sloan is calling for….

    http://www.roadmap.republicans.budget.house.gov/

    http://budget.house.gov/

  44. Priscilla permalink
    August 20, 2011 12:18 am

    Jess,

    Wow. An impressive proposal. I was totally expecting a typical “centrist-but-really-liberal” document, and this is much more serious than that.

    Kudos on putting specificity around the abortion issue – it will not be enough for the right and it will be far too restrictive for the left, but it makes sense. I would actually stick with the first trimester as the most reasonable time frame for discretionary abortion, but I could support the 22 weeks….I think.

    I don’t really get the health care proposal. Are you saying that children shold be covered by the government and then spun off to private insurance at a certain age? What if their parents want to cover them under their private insurance? And what if they don’t get a job by that certain age? Would you continue Medicaid and Medicare? And would it be funded as it is today?

    Are you saying that our foreign policy should be dictated by the UN?

    I think the science and technology proposal is too vague to be useful.

    Also confused about the no term limits for presidents. Given the expansion of presidential power over the last century, how does this maintain a balance of power? I think it is reasonable to say that Bill Clinton has had a successful career after his presidency, no? Plus, I think that any sitting president has distinct advantages in any election, which might be expanded by executive authority in the wrong hands. I disagree with that idea.

    Don’t take these questions and concerns to be anything more than commentary. I applaud your willingness to put specific proposals on the table, and I agree with much of what you’re proposing.

    • August 21, 2011 2:22 am

      Real Political parties do not get candidates elected – particularly at a national level by being specific. The political machinery of both parties is owned by their extremes. These are the people necescary to do all the leg work, all the get out the vote operations, …. But actual moderates – somewhat to the right of this blog, cast the deciding votes.
      A majority of americans can be found to agree on almost any general issue. But once details emerge support diminishes – and BTW I think that is a good thing. There are very very few issues that we are in broad agreement, where the details are not critical.
      All of us agree that Healthcare reform is needed. The numbers actually supporting ACA are in their upper 30’s.

      One of many facets of the libertarian argument for less government is that there are very very few government programs where the majority of Americans support the actual policies implemented rather than the broad version sold to the public. Democrats are found of spouting off about democracy. If you really want democracy then you must pass legislation that as written has the support of a majority of voters. That is a criteria almost no legislation can pass.

  45. Ian Robertson permalink
    August 20, 2011 4:17 pm

    OK, Priscilla I have gone to the roadmap page you supplied and read quite a bit, very eye opening. I also downloaded H. Con. Res. 34, which is the bill itself and did selected reading in it and downloaded the Congressional Budget Office Report Ryan himself requested, as well as a synopsis of that report from the Center on Budget and Policy Priorities. On top of that I have read Reagan’s OMB directer David Stockman’s comments on it. Add that to the review of the projections I read in the Economist, and I guess I have done my time on this. Below, find a quote on how radical this proposal is from the Center on Budget and Policy Priorities, which is simply a factual and accurate account of statements that are in the CBO report, which is in turn based on what Congressman Ryan gave them to analyze:

    “House Budget Committee Chairman Paul Ryan’s budget plan specifies a long-term spending path that means that, by 2050, most of the federal government aside from Social Security, health care, and defense would literally cease to exist, according to figures in a Congressional Budget Office report[1] that was released on Tuesday.
    CBO’s report, prepared at Chairman Ryan’s request, also reveals that, as explained below, his plan envisions additional Medicare cuts that were not disclosed in the documents that the chairman released on Tuesday; and his Medicare “premium support” and Medicaid block grant proposals differ substantially from — and have much deeper cuts than — the “Ryan-Rivlin” plan of last fall, which itself was rejected as too severe by the Bowles-Simpson fiscal commission.
    On the chairman’s plan to dramatically shrink the size and scope of government, the documents that he released show that his plan would shrink federal spending to about 20 percent of Gross Domestic Product (GDP) by 2015 and to 14.75 percent of GDP by 2050 — the lowest level since 1951, a time when Medicare and Medicaid did not exist.
    Yet, Medicare and Medicaid would actually fare better than most of the rest of the budget. Perhaps the single most stunning piece of information that the CBO report reveals is that Ryan’s plan “specifies a path for all other spending” (other than spending on Medicare, Medicaid, Social Security, and interest payments) to drop “from 12 percent [of GDP] in 2010 to 6 percent in 2022 and 3½ percent by 2050.” [2] These figures are extraordinary. As CBO notes, “spending in this category has exceeded 8 percent of GDP in every year since World War II.”[3]
    Defense spending has equaled or exceeded 3 percent of GDP every year since 1940, and the Ryan budget does not envision defense cuts in real terms (although defense could decline a bit as a share of GDP). Assuming defense spending remained level in real terms, most of the rest of the federal government outside of health care, Social Security, and defense would cease to exist.”

    Can you please tell me where Sloan proposed to do away with the Federal Government outside of defense and health care and SS?

    Because I am pretty sure I cannot find anything along those radical lines in Sloan’s rather brief plan.

    You’ve done me a service Priscilla, the sources I was using were far too neutral about this plan. Now I can see what the Ryan plan is, well, lets let David Stockman say it:

    “Trapped between the religion of low taxes and the reality of huge deficits, the Ryan plan appears to be an attack on the poor in order to coddle the rich. To the Democrats’ invitation to class war, the Republicans have seemingly sent an R.S.V.P.”

    I’ve now spent altogether to much time of my life on Ryan’s preposterous radically ultra-conservative plan to eliminate the deficit by more or less eliminating the Federal Government. If you really think its a moderate plan, then I think you have no comprehension of what the Ryan plan is or what a moderate is.

    • August 20, 2011 10:33 pm

      Priscilla asked you to read Ryan’s plan, not myriads of third party critiques.

      If you believe the status quo or something similar with minor tweaking is all that is necessary – then we do not have much common ground for discussion. If you accept that in so many ways we are on an unsustainable course, the Ryan plan will look entirely different.

      I am not personally trying to sell the Ryan plan. I suspect it does not do enough – but much depends on growth. A sustained growth rate of 5% would not make the problems we face easy, but it would make more moderate approaches viable – and I consider Ryan’s plan only part way to what is necessary.

      Though Federal spending in general is out of control – It took 8 years for the federal budget to go from 2.1T to 2.8T. It has taken 2 to get to 3.8T. What exactly have we gotten for that additional $1T – that is over and above bailouts, and stimulus spending ? Has the federal government suddenly started providing 25% more services in the past 2 years ?

      The first place one should start with the federal budget is not with what it costs right now, but what the value of the services it provides are. I do not see the federal government as contributing $1 out of every $4 (25% of GDP) to our aggregate quality of life – no matter how you measure it.

      Decide what every service you think the federal government does or should provide is worth in aggregate as a percentage of the total economy. I do not think the entire value of what the federal government provides is worth even 1/3 of what it costs. Not to me, not to the nation as a whole. My question is not “Does the federal government do good things ?” but “What is the value of what the federal government does or should do ?”
      If you believe the Federal government is worth 1/4 of all the wealth we create each year, then you need to defend that.

      Unlike republicans, you will get no argument from me against anything you wish to cut. Chop defense – great. End corporate welfare – i do not actually believe you can succeed – corporatism is an integral part of the progressive state. They are inextricable. But fine – I will end all corporate subsidies. Eliminate actual tax loopholes – things like business or personal deductions for benefits like insurance, deductions for state taxes, deductions for mortgages – done. Though this stupid crap the whitehouse keeps coming up with are nuts. Trying to reclassify the profits from risk as wages, or pretending that messing with the depreciation schedules for corporate assets is serious or solves any problems. Shortening or lengthening depreciation schedules (they should be slightly shorter than the useful life of the asset), has a significant effect on corporate decision making. But it has negligible effects on federal revenue – the entire value of a depreciable asset is a legitimate deduction – all that is being questioned is time. For clarity I am talking about corporate jets and the like.
      Regardles, cut away, I am with you all the way. But once you have done the easy stuff you will still be short.

      Bitching that the Ryan Plan ends social security as we know it, or eliminates most of the federal government by 2050, is irrelevant. Will it get us to 2020 ? Will what you wish to do get us there ?

      I would prefer if you go after Ryan’s plan – you attack his plan – not rant about what third parties have said about what other third parties said. But it is not Ryan’s plan that matters, but whether you grasp the real extent of the problem we are facing.

      We are on a Greek Trajectory – and there are no institutions large enough to bail out the US if we get there. We do actually have time. We have more time the sooner we start, and the problems are easier now rather than later.

    • August 21, 2011 2:03 am

      Lets consider the raising taxes. How much additional revenue are you expecting to get ?
      $1T/year – that is almost an additional 10% of the economy, $500B ? $250B, …
      How much do you really think you can get ?

      Lets assume somehow you manage to get $500B. That is still almost 5% of the economy. Simple logic would dictate that if the government takes in an additional $500B that it will come at the expense the rest of the economy. Even Keynesians would expect that If you take $500B from the economy without increasing government spending by $500B you are going to have a net negative effect. Keynesians do not want to tax the economy to support defict spending, they grasp that puts them in the hole to start. They want to pretend they can borrow (or have saved it during the boom) the money without economic impact. But that is not where we are now. Unless you are actually interested in arguing that we should borrow, and spend more right now. Regardless, if the government takes in an additional $500B in taxes without increasing spending the net effect on the real economy will be to remove $500B – a 5% decline in the current economy would be disasterous. Worse still if Christine Romer – and myriads of others over the past several decades are right, the economic effect would not be -$500B, but -$1.5T. But lets say they are actually off by almost a full order of magnitude. I think this is a ludicrous presumption, but lets say that the government can take in $500B worth of additional revenue while doing only reducing the economy by $150B. During the debt ceiling debate numbers like $49T were being thrown arround. $150B is nothing to the US government. That is 1/4 the cost of the department of defence, that is about the cost of unemployment insurance, veterans benefits, half the interest on the debt, 1/3 the cost of medicaid, A bit less than federal spending on education, ….
      It is also more than 1% of the economy.

      So you want to raise taxes ? Are you prepared to accept that to bring in $500B in revenue you might have to sacrifice somewhere between 1% and 10% of the economy ?
      Even a 1% decline right now would be disastrous.

      Politicians throw around billions and trillions as if they are of little consequence.
      TARP was 5% of GDP, The Fannie/Freddie debacle was 3% of GDP and rising. Defence spending is 5% of GDP, Social Security spending is 5% of GDP, Medicare is 3+% of GDP and rising. The rest of the “safety net” is 3% of GDP.

      These are jobs that are not created, new ideas that do not happen.

      During the Civil War total Federal Debt was about 25% of GDP, and federal spending was less than 10% of GDP. At the end of WWI Federal Debt was less than 10% of GDP, and federal spending was less than 4% of GDP. In 1938 at the height of the depression federal spending was 10% of GDP and total debt was 35% of GDP.

      Finally The Ryan Plan and Simpson-Bowles are in broad agreement – Ryan served on the Fiscal comision and borrowed much of it. There are only a few critical points of divergence.

      Ryan is more specific with respect to Medicare Reforms – though his reforms were an option in the Fiscal Commission report. Ryan’s Medicare reforms were modelled after the bi-partisan Rivlin-Ryan Plan.

      Ryan converts Medicaid to a block grant program while the Fiscal Commission attempt to accomplish cost controls on the same scale with spending caps.

      Ryan repeals ACA while The Fiscal Commission attempts to reform it.

      Ryan caps spending at between 18 and 19% of GDP – the historical norm post WWII
      The Fiscal Commission Caps it at 21% of GDP.

      Ryan reduces tax rates and simplifies the Tax code in a revenue neutral fashion – pretty much what Obama is currently proposing.

      The Fiscal Commission reduces tax rates and simplifies the tax code in a slightly revenue positive fashion. The Fiscal commission assumes that federal revenue at 21% of GDP is achievable and sustainable – even though it has never been done – including when tax rates were much higher.

      These are the only significant differences between these plans.
      If “Ryan’s preposterous radically ultra-conservative plan” then removing one adjective would describe Simpson-Bowles.

      Simpson-Bowles is only slightly less radical than the Ryan plan. The fundamental flaw in Simpson-Bowles is not that it is less radical, but that it will not work. What effort at capping some form of federal spending has ever worked ? Revenues of 21% of GDP has never occured in peace time, there is no reason to believe regardless of the tax rates that it is possible. Actual increases in taxes – even in the most benign scenario will decrease GDP, by atleast 1% making everything worse.

      If your third party sources score Ryan is an end to the federal government they would have to score Simpson Bowles as a return to 19th century levels of federal spending.
      In fact both Ryan and Simpson Bowles allow federal spending to grow in real terms, but not as a percent of GDP. They both presume fiscal disciple will restore rational growth – and growth in federal spending. There is no plan, republican or democratic, that does more than reduce the rate of increase in federal spending to hopefully below the rate of increase in GDP. The Major feature of both Simpson-Bowles and Ryan is bringing Social Security, Medicare, and Medicaid spending under control. Any plan that does not do that fails absolutely. They chose different methods, and I beleive Ryan’s are more plausible, but that does not matter. Both plans MUST achieve cuts of similar magnitude to Social Security, Medicare and Medicaid. Divergence is over means not amounts.
      Both cap federal spending as a percent of GDP and the caps are only 2.5% apart. Ryan and Simpson-Bowles Caps total federal spending as a percent of GDP – Ryan at its historical norm. That will mean more spending each year – so long as the economy grows.

      You can find side by side comparisions all over the web.

      Regardless, do not listen to me, or CBO, or ….
      Remove all the divisive and inflamitory adjectives that interfere with objectivity, and look at things rationally.

      This mess can not be solved without painful spending reductions to Social Security, Medicare and Medicaid. If you do not like Ryan’s particular methods – come up with your own, but Medicare needs to decrease by $200B/year starting now, and Social Security needs reduced by $200B/year in the next couple of years. If you can not do that the country goes bankrupt and the rest is pointless.
      After that the deficit in the primary budget must end now.
      Whatever percentage of GDP you think you can achieve in revenue, you must match in spending. You can increase spending – but only if you increase GDP (and therefore revenue) No matter what percent of GDP above 18 you pick, anyone saying this is shrinking the federal government is lying. It is entirely possible that this may result in draconian cuts in some programs to fund expansions in others. Regardless, the primary deficit must come to an end.

      Any proposal that means my objectives above, is no more or less radical than Simpson Bowles or Ryan. Any that fall short on any of these at best prolong disaster.
      It is that simple.

      The problem with your third party reviews is that they are unwilling to accept that Medicare/Medicaid, Social Security and the primary budget must be brought into balance quickly. We are only a few Trillion dollars of debt short of 150% of GDP. That is not alot of time, and the problem gets harder to address and the pain greater the longer we wait.
      A real default – not this phony default with respect to the debt ceiling, would actually be catastrophically devastating to us and the world.

      We might have a bit more wiggle room as the debt held by the public is lower than total federal debt. But that wiggle room comes at the cost of defaulting on Social Security, Medicare, and the Federal Reserve.

      .

      • Ian Robertson permalink
        August 21, 2011 9:47 am

        I’ll just make one response. I read the Ryan plan website, and parts of the actual resolution. You missed that. Yes, both you and Priscilla don’t like it when I read the Economist or the Congressional Budget Office report or David Stockman’s thoughts. You would like me not to pollute my mind with “third party rants” and just do it all on my own. Would you like me to create life in a testube as well? Sorry, haven’t the time.

        We are at nearly a 100% debt to GDP ratio, you are actually hysterical when you say its about to be 150%.

        If you haven’t noticed, the products of free market absolutism (which includes our disastrous trade policy with China) married to the unfunded wars and defense spending of GOP administrations have led the US and the world to the edge of the next Great Depression and you have no answers as to how to avoid it and expand the economy, but you’d like to repeat many of the mistakes that precipitated it, by shrinking the govt. as rapidly as possible. Your economic ideas are just plain nuts. Its your brand of economics that made a huge contribution to getting us here, now we need to just ramp up the absolutism to get out? No thanks! Tea party debt hawk economists can rationalize anything and concede almost no point, no matter how obvious, you have an explanation. One fascinating thing I have learned in my recent studies is that where economics are concerned there are many people who are both brilliant and crazy, e.g., Summers, Hayek, Friedman, Krugman. How can people who are so smart be such complete (and destructive!) idiots? Because they get carried away with the beauty of simple ideas, like Einstein refusing to admit the God plays craps with the Universe.

        Speaking of universes, you and I live in separate ones where economic issues are concerned. When you say that whether the US govt essentially disappears by 2050 is immaterial or words to that effect its clear that we have no common ground.

        We could get out of our mess by being adults and facing our mistakes that led us here, wind down our wars, raise taxes on the rich and the middle class, cut discretionary spending, but not to the bone, address our trade policies/deficit, do some infrastructure repair and use the federal govt to stimulate job creation, yes, some Keynes). First, we have to get the hands of the economic extremists (that includes you, sorry to say) from around our political throats.

        You are a brilliant guy, good luck to you, its easy to found a website, the New Libertarian may by available. Or you could evolve, many free market absolutists have made steps in that direction recently. I could quote a few influential ones who have said that “Everything I ever believed about economics was wrong.”

  46. August 20, 2011 7:08 pm

    Ian and Priscilla,

    I have been watching the back and forth.

    Your work is more than reasonably convincing proof for the open-minded that us average Americans are being played for fools by both parties. This isn’t the only example. However it shows better than most how hard it is to see clearly what politicians are trying to do and the disconnect between their rhetoric and our reality. We are being lied to and betrayed.

    Ian, how much time and effort did it take for you to get to this point? I would guess, a lot more than most Americans put into any election, ever. And this is just one issue a year and a half from the next election. Only one issue. A year and a half out. How well informed are we? Not informed at all. Whose fault is that? Ours or theirs? Who is skilled in the art of deception? Why is there deception?

    Think about it. What are the Democrats and, in particular, the Republicans doing to us? Why are they doing it? I can only guess its about incumbent reelection, power for the two parties and money for special interests. Unless I am mistaken or missing something big, this two-party politics thing is rotten to the core.

    The real question is how more does it take for average Americans to see them for what they are and walk away? My guess is a lot more. The work you put in was much more than what 99.999% (1 in 100,000) or more are willing to put in. Those folks are unaware of any of this interesting little exchange. This is the kind of discourse the mainstream press should be incessantly focused on. Of course, that’s a fantasy. They worship fluff and irrelevant sound bite drivel to respond to their economic imperatives.

    Wish I knew how make things better.

  47. Ian Robertson permalink
    August 21, 2011 9:08 am

    Well, I’ve put about the same amount of work that I would put in if I were taking a 4 credit course on the politics of macroeconomics, its nothing that heroic, there are still many people in this country who read, when dogmatic ideological ignoramouses are all around, and the accumulated mistakes of such people over the last 30 years seem to be pushing us towards the next great depression, then its time for any person who thinks they can make some understanding of this mess to start doing a little homework.

    What my conversation with Priscilla and Dhlii seems to illustrate is that when you deal with dogmatic economic ultra conservatives you will not reach them what ever you do or say. But one can still educate oneself during the conversation and so talking to them is useful.

    The problem about complain about the two parties is that they are not monoliths, they are composed of multiple elements and some of those elements are rotten, some are not. There are many decent slightly conservative people who are not nuts, in fact they are probably a slight majority of GOP voters. But there are almost no elected GOP members of congress who are moderately conservative, with a few exceptions they seem to range from very conservative to flat out right wing nuts. The Rush-Hannity-Beck-Levin hate speech axis has led something like 25 million conservatives (thats the number who listen to right wing radio and cheer on such cultural events as Rush reacting to the Japanese catastrophe by mocking the victoms of the earthquake and performing a 17 second rant in fake chinese) over to their own separate idiotic reality and more sane GOP officials in the vein of Eisenhower, Bush and even Nixon have been powerless to stop them. So we have one party that as of the moment is not an adult partner for a discussion even. And its been mostly GOP and conservative free market absolutist policies that got us here to the brink of economic catastrophe. Unless we can defeat the ultra conservatives in the tea party and elsewhere we are lost, they will drag the US and the world into a depression.

    Not all is hopeless, right wing radio has begun a recent steep descent in popularity, perhaps not all of those tens of millions of listeners were so lost that they could not finally say “this is beyond the pale.” As well, a recent poll showed that the tea party is less popular with Americans than muslims. Moderate Republicans like the Sloan fellow are defecting, David Brooks patience with the GOP has run out. But we are swinging like a pendulum, moderates need to stabilize that pendulum, not with our own party, we don’t have one, but by voting in primaries and by forming a distinct organized moderate movement that has its own high profile thinkers, journals, and radio shows, etc.

    • August 21, 2011 6:37 pm

      Ian;

      You have a fairly carcitured view of politics – particularly that of the right.

      Do you really belive that Beck, Hanity, Limbaugh, Levin are monolithic ?

      You also do not seem to grasp that the Tea Party essentially represents a civil war in the Republican party. Fiscal conservatives are seeking a divorce from neo-cons and social conservatives – though members of each of these groups share values with other groups, these still represent radically different world views.
      Do you see Ron Paul, Dick Cheney, and Rick Santorum as representing the same world view ?

      In the political spectrum, the Tea Party is generally LESS conservative than social conservatives, and neo-cons.

      The primary opposition to our never ending series of wars, is libertarian. The left seems to think war is fine so long as it is initiated or managed by a democrat.

      I believe Pres. Obama believes much of what he says. Do you think Paul Ryan does ?

      I am bothered that you see those who disagree with you as both evil and part of some evil conspiracy.

      I do not like Limbaugh. I do not listen to him, and I find some things he says offensive.
      But I believe in individual liberty – including free speech, and I will defend the right of Nazi’s to march in Skokie and the KKK to march in Epharta.

      I believe the political right in this country is wrong about many things – but I also believe they are honest. I do not believe the left is even honest with itself.

      Our vice president recently remarked that Tea Party affiliated members of congress were terrorists – that is beyond the pale.

      The Tea Party is broad based and includes alot of people I disagree with. But whether you like it or not, it is an important moderate shift within the GOP. I am very happy with this change within the GOP as the gap between libertarians and fiscal conservatives is relatively small.

      But then you seem ready to label libertarians as ultra-conservatives.

  48. August 21, 2011 5:54 pm

    Ian;

    I am getting disappointed. You have clearly gone to alot of trouble. You have provided me with lots of negative things other people have said about Ryan’s budget.

    I really do not care about Ryan’s plan. Though I am highly disappointed that you have been sucked into the rhetoric.

    Those of us regardless of party who reccognize that there is a problem that needs addressed are “fundimentalist”, “Dogmatic”, “Extreme”, According the the vice president we are “terrorists”, “hostage takers”

    These types of Ad hominem attacks serve no purpose.

    Forget Ryan, Simpson-Bowles, Obama.

    Do you believe we are on a sustainable course ?
    Do you believe we can continue national debt trends ?
    Do you believe that government can continue to grow faster larger and larger in proportion to the rest of the economy ?
    Do you believe it is possible to increase taxes on investment without negative economic consequences ?

    On of my critiques of this blog is that the “so called” moderates, duck the tough issues.
    The recipe seems to be whimpy ccriticism of the left, harsh criticism of the right, and “why can we all compromise” dialogs.

    Put your self out there. Take a stand on something.

    If the Ryan plan is such and abysmal piece of crap – what do you propose ?
    Do you even see a problem ?

  49. August 21, 2011 6:03 pm

    I have read your critiques – well they are not really your critiques they are just appeals to authority. If you want I can find you innumerable other experts who will tell you that Ryan’s plan is too timid.

    I am defending the Ryan Plan below – not because it is the only solution to all our problems, or even what I beleive is necescary, but to address the lunacy that it is something crafted by the econo-terroist conservative lunatic fringe.

    Here are some somewhat moderate views on the Ryan plan. These are highly regarded Harvard and Standford economics professors.
    Democratic and Republican senators, ….
    these are not people typically identified as economic fundamentalists.

    These are not my views. There is not a Koch brother, Cato, Austrian economist, or libertarian below – some are even democrats.

    My point is not that these people are right, but that on any issue you can find many reputable people who will explain that some proposal is the end of the world as we know it and others who will tell you it is our only hope. They can’t both be right, and you are stuck deciding for yourself.

    You seem to like the economist
    http://www.economist.com/blogs/freeexchange/2011/04/americas_budget_deficit?page=2

    While this review of CBO scoring is not entirely favorable it appears to contradict your remarks above
    http://www.economist.com/blogs/freeexchange/2011/04/americas_budget

    And here is John B. Taylor comparing the Obama and Ryan Plans
    http://online.wsj.com/article/SB10001424053111903918104576502112454240744.html?mod=googlenews_wsj

    Or Greg Mankiw
    http://gregmankiw.blogspot.com/2011/04/ryan-plan.html

    Bowles and Simpson’s view of the Ryan plan
    http://gregmankiw.blogspot.com/2011/04/ryan-plan.html

  50. August 21, 2011 8:46 pm

    Ian;

    The US economy is variously reported at about $14T.
    150% of GDP is $21T.
    We have added $4T to the national debt in 2 years.
    The deficit is more than $1T/year – with no end in site.
    There is serious concern that we are teetering on the edge of a second dip.
    If that happens deficts will rise even faster, and any economic recovery – even a weak one will be pushed farther ahead – and we will be a large step closer to the abyss.
    If I recall correctly Greek Debt is only 130% of GDP and look at their problems.

    Nations with debt exceeding 80% of GDP trend toward economic stagnation.

    I would encourage you to read Stockman, CBO, or the economist.
    But how about some diversity. Isn’t diversity supposed to be good ?

    What bothers me is that
    you are unwilling to hold opinions of your own
    you seem to ONLY read views from one side.
    you seem to accept that there is some kind of problem
    you are unwilling to express an opinion as to what that problem might be – beyond that economic fundamentalists are organising an evil cabal to take over the nation and eliminate the federal government.

    I am glad you read the Ryan plan, but your critiques did not talk about the Ryan plan, they talked about what somebody projected it would do. Projections are important – but they are not facts, nor destiny. I am pretty sure that I can take Obama’s budget proposal and separately credibly project we will default in 10 years, and the federal discretionary spending (as a percent of GDP) will decline to incredibly low levels 40 years out.

    Do you understand that total government spending in real dollars can increase at the same time that spending as a percentage of GDP decreases, and that that would be a very very good thing ? Regardless, if Ryan’s plan has an Achilles heal that is not it. The most critical element of Ryan’s and everyone else’s plan is their effect on Growth. With high enough sustained growth we need to do nothing. With little growth we are in serious trouble.

    As I mentioned before – Libertarians – about the most free market absolutists you can get, are nearly universally opposed to all these foreign wars, and military adventures.

    Bush was one of the most progressive Republicans since Hoover. TARP, Medicare Part D and Sarb-Ox are about far from free market absolutism as you can possibly get.
    Though Obama has done as much of exactly the same damage in two years as Bush did in eight.

    You have created a carciture you call free market absolutists, and then lumped two thirds of the political spectrum into it.

    If you want I would be happy to debate trade, but it has no direct bearing on this discussion. Regardless, you are using it as a straw man – I am wrong about everything else, because everyone knows I am wrong about trade. In or out. Either you want to expand this to involve trade or you don’t.

    You have also created a straw man for what a free market absolutists is and labeled me an idiot for believing that.

    I will be happy to join you in cutting military spending – fairly radically.

    I will be happy to join you in opposition to military adventurism.

    We both agree that Bush was mostly a disaster – though you seem deluded into believing that because he was a republican somehow he was a free market absolutist.

    I can find numerous fairly left leaning web sites to inform you that Pres. Obama is the second coming of Geroge Bush on steroids.

    If what Bush was doing was wrong – we have tripled down on pretty much all his bad ideas.

    I would be happy to argue the merits of shrinking government. But the fact is that under everyone’s plan including Ryan’s Federal government spending will increase. At the same time every plan attempts to get federal spending as a percentage of GDP to decrease.
    that is everyone”s objective – even Obama’s.

    I did not say the federal government essentially disappears in 2050.
    I suggested not getting worked into a lather over projections 40 years into the future that everyone else grasps are completely bogus.

    I would be happy to see a far smaller federal government in 2050. But no ones plan actually does, that. But all of them try really hard to make it far smaller as a percentage of GDP.
    Again that is exactly what everyone is trying to accomplish. If we do not somehow manage that we are SOL. Nor is that the secret goal of a libertarian-tea party conspiracy. It is the overt goal of Ryan, Simpson-Bowles, The Gang of Six, and even Obama’s proposals.

    Atleast you have finally been willing to offer some suggestions.

    Despite my ideological opposition, I would be happy to allow you to tax the crap out of the rich if that is what it would take to fix our problem. Democrats had two years to do that if they wished. They did not, and they are not going to – because it is an abysmally bad idea and most of them know it. Christine Romer is not some Austrian Free Market wingnut. She was the Chairman of President Obama’s council of economic advisors, her study is just one of the more recent of myriads that have shown unequivocally that taxes on investment are economically destructive. Personally I think the republicans should have capitulated on the Tax issue – because it was never a real issue. It is political theatre not reality.
    Yes, us econo-terrorists have been saying this half of forever. But we are far from alone.
    But if you do not believe me – go ahead how high to do want to raise taxes ? how much revenue do you think you are going to get ? Atleast you have owned up to wanting to do something.

    I believe winding down the wars is estimated at saving $1T over 10 years.
    Lets assume we are repealing the Bush Tax cuts including those on the middle class which are the greatest put of the reduction in revenue. The most liberal credible figure I could find said they cost $2T over 10 years.
    I do not think you mentioned defence. I am going to assume you want to slash defence by almost 1/3 that yields $2T in ten years.
    I think we have $5T so far. Sounds like alot, except the baseline is now 3.8T/year and it magically increases every year independent of inflation, so that before your changes the 10 year total spending would be $49T. Less $5T is $44T.

    Assuming that you are going to have total tax revenues of 21% of GDP somehow, and that GDP is going to grow at 3.5%/year that is $38T for ten years,
    You are still 6T short – well except that we are counting tax revenue increases twice so you are really $8T sort.
    You have $8T to get from Social Security, Medicare, and other government programs.
    And just to be sure you grasp this, if you get that $8T in spending “cuts” The federal budget will be $3.8T in 2021 – just what it is today. But the economy will be $20T due to growth.

    Now if you only get 18% of GDP in revenue which is far closer to the norms – even when tax rates were far higher, you are short more than $5T more. And if growth is only 1% instead of 3.5% you are short another $5T. Now you have to reduce Federal spending to 2008 levels rather than 2010.

    Now you need to get $18T from Social Security,. Medicare, ….

    The real bottom line is that:
    if we have robust growth for the next 10 years, you must freeze federal spending at Todays level’s even if you succeed at getting higher taxes and not tanking the economy.
    If the economy is crappy we must bring spending back to 2008 levels and freeze it for 10 years.

    The alternative is to run a deficit for the next 10 years. If you only get 1% growth then you can have total deficits of $7T and debt will just barely reach 150% of GDP.
    If you have 3.5% growth you can afford a bit less than additional $16T in deficit by 2021 without exceeding 150%.

    Oh and 150% is only magic in the sense that it is unlikely you can get back from there.
    What is more significant is that starting at 80% the economy gets more and more sluggish as the debt increases.

    Next you want a jobs program. I get really really ticked when politicians of either party claim they created jobs. Government does not create jobs. The only thing government does that produces jobs – besides hire people for government – which you can not afford to do, is to foster economic growth. Jobs are created by the people you decided above to tax the crap out of.

    You also want some Keynesian stimulus – we have just finished about $4T of keynesian stimulus – how well did that work ? Actually please give me an example anywhere ever of keynesian stimulus actually working. But what they hell lets go ahead – how much stimulus do you want ? Keeping in mind that any stimulus is going to just go right onto the debt, and you are already within $7T of debtmagedon, and you are running more than a $1T/year deficit right now.

    The big problems you have are:
    Medicare is already siphoning $200B/year from the budget that it did not before with no end in sight. Social Security will start doing the same shortly.
    Trying to get out of this without robust growth is really really hard.
    Whether you like it or not taxes on investment and deficits negatively impact growth.

    If you chose taxes and you are wrong – things spiral out of control very quickly.

    You can probably put all of this into a spreadsheet yourself.

    Plug in your own assumptions with respect to Revenue, spending,
    Then plug in assumptions with respect to the the economic impact of various changes – such as taxes.

    We are not in a no win scenario, but we can not afford a single serious mistake.

  51. Ian Robertson permalink
    August 21, 2011 8:52 pm

    If you have read half of what I’ve written you know I see two problems, the long term and the short term. We are at the end of every rope, credit, unemployment, debt, housing, job creation, income disparity, political civility. We have to prioritize, which situation is worse, the immediate or the long term. In my view its the immediate situation, which is in danger of going over the edge if we do not respond, and yet we cannot respond. We will see, what happens, I don’t even believe that I can change things, I simply try to understand what is happening and the evidence is very conflicting. I think we have to handle our immediate crisis and stimulate the economy and provide more revenue to the govt. But I don;t think that will happen.

    There are no knockout punches to be thrown in economic arguments, economics is not physics, We can argue forever, and we probably will. My wife wants to know why I spend so much time on the computer, I’d say its time for me to digest what I’ve learned and observe events.

    Not lumping people together, I think that libertarians are even more conservative about economic issues than conservatives. I think you are wrong about who the tea party types are, but agree that republicans have a war in their ranks and its hard to be a more reasonable type.

  52. August 21, 2011 9:58 pm

    I will reserve judgement on Summers and Krugman, but Hayek and Friedman were not crazy, and they were brilliant, what is debatable is whether they were brilliant and right and brilliant and wrong. I will risk an appeal to authority and offer that we are not just talking about Hayek and Friedman, but most 18th and 19th century economists, as well as many 20th century ones, including Smith, Turgott., Bastiat, Mills, Say, Mises. Against this we have Keynes, and a large portion of 20th century economists influenced by him. There is little doubt that Keynes was brilliant, and that many 20th century economists are too.
    But inevitably one group or the other is wrong. Keynesian economics has already failed colossally once – resulting in the stagflation of the 70’s that was not possible in the Keynesian model.

    It is also important to grasp that independent of the validity of their respective ideas, each has particular appeals.

    Keynes appeals to intellectuals – essentially he tells them they are destined to rule their peers. Keynes appeals to politicians – he gives them permission to do exactly what they wanted to do in the first place. He appeals to economists, humans have little place in Keynesian economics, For Keynes humans are irrational actors causing disruption. Absent humans economics is a perfect mathematical science – of course absent humans there is no economics.

    The classical liberal heritage running through to the Austrians, has an appeal to people who value individual liberty. I would strongly recommend reading Hayek’s “The Road to Serfdom”. It is not about economics. It is about people and society, about how we act and think. It is an examination of Nazi’s and Fascists, as well as communism and socialism. But it is not focused on one ism or another, but how political systems such as these can arise, how they will work, and why they inevitably will fail. The central fallacy that Hayek criticises the inability of the best and brightest to know enough to manage everything. Hayek attack’s the fallacy that top down planning can work – regardless of what label you impose on it. Regardless of whether it is malignant or benign. Regardless, of whether it is total or partial.
    As Keynes is nothing if not a prescription for how the best and brightest should manage the economy, Keynes is caught in Hayek’s net. When “The Road to Serfdom” first came out, the primary critique and reason for rejecting it was because we were at the dawn of the computer era, and that would change everything. It was not that Hayek was wrong – but computers would allow humans to do what they could not do otherwise.

    Since Hayek, all communist regimes have failed for the reasons and in the ways that Hayek predicted, and most of the social democracies of the world have failed or are failing, or transforming themselves to less top down structures.

    At the bottom of it all the question is what works for humans. Much of the first several millennia of human existence were dominated by small often warring top down centrally planed structures. Kings, Pharoh’s, and emperors. Human progress during that period was glacially slow. Starting in Europe, at or just after the Renaissance, cracks started emerging in that structure. Increasingly internal rather than external, and lowerer of middle class rather than noble challenges started to arise to the concept of government by our betters. As those challenges gain strength, human progress accelerated. As individuals gained more and more control over their own lives, the human condition improved dramatically.
    I think the correlation between individual liberty and all measures of human progress is beyond dispute.

    So why starting in the late 19th century and progressing in the 20th century have we changed direction ?

    • Ian Robertson permalink
      August 22, 2011 6:45 pm

      hi Dave, No one is a much more freedom loving than I am in my actual life, you’d be likely to find me dancing naked under the moon at a rock concert. But I recognze reality. In an advanced industrial society of unbelievable complexity, the let the fox guard the chicken coops school of economics is simply a naive dream. Its not 1790. America had its chance to become a Jeffersonian small government utiopia, the experiment started from the most promising grounds and the outcome was that as we got larger and much more complex, regulation was unavoidable. Once a society has been built on the plan that we have now, you cannot go back and change it. Once nature invented animals with backbones, they cannot evolve to do without the backbone. We cannot discard what you guys call big government anymore than you can discard your backbone. Its necessary under our plan.

      In some tiny society either liberatarian principles or even communist ones (almost opposite endpoints) might work. But history tells us that the neither the mega government communist nor the micro government libertarian principles have been favored, one existed and was wiped out, the other is a theory that never came to fruition.

      All your stunning command of details are put to use to support a theory that is not tenable and history shows it. I do know marxists who defend their ideals against history’s verdict just as strongly as you defend yours, well, god be with all of you, but you are kidding yourselves.

      It would be a lot easier to hear an economic expert tell us that we need to cut cut cut our government to solve our debt crisis if said expert where not almost wholly opposed to the very idea of most of the functions our government performs.

      Listen, I enjoy a good argument, and have learned a lot from this one, but honestly I am pooped. We are not going to agree on fundamental principles.

      I honestly with you the best of luck. I’d like to ask you in 5 years about whether events have changed your economic ideas.

  53. August 21, 2011 10:12 pm

    Ian;

    I would greatly appreciate it if you are going to stimulate infrastructure, that you do so elsewhere. Where I live several things are happening:
    We are now building apartment complexes rather than homes.
    Banks are sprouting like weeds – it seems like every major intersection has a branch bank on all four corners.
    And all the roads everywhere are being widened, straightened dug up, repaved, …..
    nothing was really wrong with them before.
    I am old enough to remember our infrastructure, 10, 20, 30, 40 years ago.
    Contrary to popular belief the country is not decaying around our ears.

    So please, I would prefer roads with cars on them to roads full of backhoes.

    I don’t know where you live, but I would be happy to send all our infrastructure stimulation your way.

    In fact I will trade you. You can have all the benefits of government, free public education, a cradle to grave social safety net, etc. I will surrender all of these – but I want to keep whatever I create, and to be free to do as I please so long as I do not hurt anyone else.

  54. AMAC permalink
    August 21, 2011 11:48 pm

    The comments have been very educational. There are some people putting in a lot of work to come up with educated opinions. Math is my area, which is far from economics. Based on my business and math background, I see a few immediate changes that most would agree on. About five 7 years after our IPO, the company I worked for faced some challenging times. I know a government is much different that a company, but the company I worked for was is a very succesful, labor friendly, responsible company. We cut wages, which is similar to raising taxes. We also cut the spending that would not effect the effieincy or revenue of our company. I wouldn’t call this wasteful spending, rather non-essential spending. We cut many programs that were responsible and productive, but not financially necessary. We also spent money, that we didn’t have, in high growth opportunity areas. You have to raise revenues, cut costs, and wisely invest or spend in other areas. So much of the discussion, not just here, is cut back or spend more. For me, the moderate position is a combination, not average, of both. I won’t here about cutting medicare and SS completely out, but they obviously need work. Ages for benefits need to be adjusted and probably cut back (hate to admit it). There are unproductive areas of the government that could be cut, but would result in less jobs. Right now, until recovery, we can’t cut government jobs. We need to raise revenue by increasing taxes. We also need to spend to create jobs. Many private sector jobs come from government spending (contractors, etc.). I don’t claim to know what all areas to cut, but we need to make some serious cuts. Raising taxes is never popular. I agree with Rick that all should pay some. I also agree with Warren Buffet that the 1 million plus should pay more taxes. We could at least agree to temporarily raise taxes for a 10 year period, you would think.

    • AMAC permalink
      August 21, 2011 11:51 pm

      I appologize for the grammar and spelling. Not feeling very well. Will do better next time!

    • Ian Robertson permalink
      August 22, 2011 6:25 pm

      Hear, Hear, a kindred spirit! Thanks for that, you are dead on.

    • Priscilla permalink
      August 24, 2011 7:28 am

      Hey AMAC, You put things in a very common-sense, moderate perspective. It makes sense to me when people make comparisons, like you do, between business spending and government spending.

      Here’s my problem with the raising taxes thing – of course taxes must go up if spending goes up. And, when spending goes up, as it has astronomically in recent years, we have to get the money from somewhere. It just seems to me that raising taxes, even temporarily, should only happen after spending has been evaluated and cuts to unnecessary and wasteful spending have been made. Just jacking up taxes, without seriously cutting spending, doesn’t seem to be fair to taxpayers, especially if there are a lot of folks that don’t pay taxes, or don’t pay as much as they should….that just means that those of us who do pay are carrying a greater burden. So, I’d like to see a serious and good faith effort by the government to rein in spending and reform the tax code before I’d want to see taxes raised.

      • AMAC permalink
        August 24, 2011 9:05 am

        Priscilla
        I agree that taxes can’t be raised to maintain a sputtering economy. I want to see the increased revenue tied in a budget that truly invests in the country. I hate to say it, but building monuments, bridges, roads is government money, but money put in American business and American workers pockets. Infrastructure can’t be limited to thinks like streets, bridges, and statues. This isn’t the 1950’s. We need to look at internet capabilities, renewable energy (great job creater in my area), and water reprocessing plants. These are areas that would create jobs and make a more effecient country. We need to step back and say, “what can make us better?”. Putting people to work through granted government money through US based contracts is an immediate way to get business moving and putting people to work. There is a lot of work to do on the tax code. I would like to put that on hold for, say 5 years. Lets put a 5 to 10 year tax increase on the 1 million plus households and put that money directly into contracting private companies (and small companies) to work on things that will make this country succesful. Once that gets done, then lets streamline the tax code.

  55. Priscilla permalink
    August 22, 2011 12:46 pm

    Good heavens, Ian. I come back from the weekend to see that you are now labeling me an “ultra-conservative”. I really do chafe a bit at being labeled, particularly when the label is inaccurate…I am FAR from ultra-conservative, even by fiscal standards.I am not at all averse to responsible spending on government safety net programs and maintaining Social Security in a sustainable way.

    Ah, but there is the rub….”responsible and sustainable” don’t play in the current re-election strategy of the Democrat Party. When a reasonable – not perfect, mind you, but emminently reasonable – proposal like Paul Ryan’s Roadmap Plan ends up as the target of outrageously overheated, hyper-partisan and demagogic attacks, you’ve got to begin feeling pretty pessimistic about the future. And when Ryan himself,an intellectual, wonkish kind of middle class guy, without any apparent megalomaniacal ambitions, is charicatured as an evil, cold-hearted s.o.b – well, all of the pompous blather about “civil discourse” is revealed to be just that.

    What we need is leadership and statesmanship by men and women who know what the stakes are, and are willing to work towards the best solution, regardless of whether it comes from the left, the right or the middle. Sometimes compromise is the best solution, sometimes one side is right and the other side is wrong. I’m sick to death of being lectured about “working together” by a president who demonizes his opposition but proposes nothing but the same old, same old. I don’t give a rat’s behind whether the solutions come from Democrats or Republicans, but I would like to see some freaking serious attempts at getting this economy back on track and off the road to ruin. Simpson-Bowles and Ryan have done that. Obama, not so much.

    Btw Dave, I am immensely impressed with the depth of your knowledge of economics. It’s almost intimidating ;)

    • Priscilla permalink
      August 22, 2011 3:35 pm

      By the way, Ian, I’m sorry if this rant seemed directed at you – it was certainly not. As I’ve said before, I admire your energy in the debate, and there are few commenters on any blog that are willing to dig into a topic the way you do. General frustration at the ruling class is at the source of my anger (and no, it’s not tea party anger…..but there are similarities, lol).

  56. Ian Robertson permalink
    August 22, 2011 6:23 pm

    No Offence taken, Priscilla, I just sort of thought that a budget plan that would end almost all sectors of the the Federal Govt by 2050 if followed to the letter over the entire period was an ideological statement about the proper role of government, and a radically conservative one. The nicest thing I can say about the Ryan plan is that is political posturing, more a campaign platform than a serious budget proposal and one that was met with appropriate criticism.

    Undoubtedly you have some issues on which you are moderate and your tone is very moderate, it seems you have no strong love of either party, but I just can’t really find almost anything in your actual economic values that is not conservative. enough, I’m pooped, lets declare peace and move on, deadlocked as America itself on economic principles.

    Well, we all have our positions and I don’t really see any sign that any of us are about to give.

    I am a moderate and I cannot stomach the present GOP or its economic principles, so you can be a moderate who cannot stomach the Dems, fair enough.

    • August 24, 2011 11:42 pm

      Ian;

      This blog leaves me with no understanding what a moderate is. I am libertarian – fairly well scorned by conservatives and liberals alike. I have strong views and principles – things you call extreme – in some instances they align with the right – or better put on occasion the right deigns to clock themselves in some of my values – for so long as it is convenient, the left is more consistent – they are more consistently wrong and more certain that since we both agree that certain ends are desirable, that I will be willing to go along with execrable means.
      Regardless, I would think being despised by both sides might qualify me as being in the middle. Yet here I find it very hard to tell those who label themselves moderate from those who label themselves liberal. The moderates of this blog certainly do not match the values of the middle of the political spectrum – if we can trust polls. My values do not match those of the middle of the political spectrum either – but I think I can make a compelling case that I am closer to that median.

      I do not hate democrats, nor do I hate republicans. But I do disagree with polices advocated by both parties. I am more likely to find the republicans less dangerous – to be conservative is to preserve the status quo. While that may not be the best choice, it is often a better choice than making things worse. But despite words, political conservatives come in many flavors, and some seek their own forms of change – often not for the good.

      but you keep insisting that anyone who wants to see limited government is both evil and in league with the GOP. Was Nixon a proponent of limited government ? Was Bush ? Even Reagan vastly expanded the military – though he barely used it. I oppose all those expansive things those republicans did – just as I oppose the expansive things this democrat has done.

      I am also offended by the moral overtones. Nixon and LBJ were both evil – because certain of their actions were evil. Both believed in what they were doing – just as this president believes in what he is doing. Faith in the righteousness of your cause does not grant absolution for the evil that you do. Wearing your heart on your sleeve does not make the destruction you wreak upon the unfortunate forgivable. Never forget that places like Cabrini Green were the best efforts of enlightened progressives to improve conditions for the poor – “Urban renewal means negro removal.”

      I do not believe that expecting government to live within its means is an extreme view. In fact I believe it is extremist to believe differently.
      I do not believe that allowing people to keep what is theirs is extremist – whether that is their liberty, what they produce, or what they possess. I believe it is radical to believe differently.
      I do not beleive that expecting that government will at-least produce value for all of us worth what it costs, to be extreme.
      I do not beleive that government should automatically grow just because the economy grows.
      And I consider it lying when either (and both) parties call something a cut, when what them means is growing less fast than before.

      If you and I disagree on those issues, then one of us is not a moderate, and I do not think it is me.

  57. Priscilla permalink
    August 22, 2011 10:29 pm

    Fair enough, my friend. But I still challenge you to read the Roadmap plan – not the reviews and attacks by liberals, the actual plan. In particular, read the bullet point “setting the record straight.” And then tell me that it “ends the federal government by 2050.”

    Ok, I’ll stop now :)
    http://www.roadmap.republicans.budget.house.gov/

    • Ian Robertson permalink
      August 23, 2011 12:50 pm

      Priscilla, I READ THE ROADMAP PLAN AND THE BULLETS! I SAID SO SEVERAL TIMES ABOVE! My favorite bullet point was the one where the PP requires a super-majority of 60 to pass any tax increase in the future in the Senate! In practical terms, no future tax increases, ever. As that famous liberal thinker, David Stockman, said “the PP isn’t a budget, its a religion” (or words to that effect.)

      What a wet dream for any political party, to make 60 votes necessary to enact anything they are opposed to in the Senate. In other words the opposition would have to win not 51 senate seats but 60 seat in every election, or they lose. Very &^%$@? moderate, don’t you think?

      As well, the PP drastically cuts taxes by restructuring the tax rates and cutting them drastically. Its another “bullet.” So, here is the Conservative wet dream, we will pass a huge tax cut and along with it a mechanism that makes it impossible to ever raise taxes again, the supermajority rule. No, no megalomania here, just a bunch of nice sincere young people trying to do our patriotic duty.

      If you just read the GOP roadmap website and avoid any analysis of it you are very, very naive, the perfect customer for the GOP advertising. They want to sell you their new improved Ajax, with blue flavor crystals, and you want to buy it, its a marriage made in heaven.

      You and David have an inexhaustible appetite for labor, MY labor. Why don’t you do what I did and dig up the link to the OMB report on the Ryan plan (they are NOT $#@^%& “liberals”) and see the non partisan analysis I quoted. Ryan ASKED for that analysis, why don’t you read that instead of the sales pitch by the GOP? Look up who the OMB are before you start calling them liberals. Oh well, at least you stopped short of calling them commies so, you must be a moderate Republican.

      I have 4 cords of wood to cut with my trusty chainsaw, and then split with my trusty splitting maul, an incredible harvest of tomatoes to pick this year, not to mention a big load of my paying work to do and a beautiful and affectionate wife who would like to see me emerge from the virtual world of political yacking. You’re going to have to excuse me from reading any more GOP Ryan propaganda. Not one more word from me on the subject.

      • AMAC permalink
        August 23, 2011 1:37 pm

        Easy on the pound signs!!!

      • August 24, 2011 11:09 pm

        Why is a super majority requirment to pass a tax increase inherently evil ?
        I would have no problem with supermajority requirements to pass anything. But I would always want a greater supermajority for tax increases. Our founders did not incorporate a supermajority for tax increase because they did nto allow income taxes AT ALL. They felt each of us should share the burden of government equally – exactly equally, not proportionate to our earnings. So were Washington, Jefferson, Franklin, Madison some kind of religious zealots ?
        I really get ticked at this inflamitory language. You allow no legitimate disagreements. Those who differ do not sincerely believe in what they are doing – or if they do they are zealots, or terrorists, or hostage takers or …. pursuing a religion. If some political philosophy has religious connotations, it is liberalism. There is faith without evidence that government will do good.
        Because I think Ryan’s budget sucks less than the Debt Ceiling Deal or …. I am some GOP propagandist. I do not carry water for the GOP – or anyone else. There is plenty of what Candidate Obama promised – things republicans fought – much of which would cost little or no money, that I would happily support. Few of those have been done. I think far too many within the GOP have only recently found fiscal sanity, and gotten off their spending bender – and I do not trust them at all. But on spending I trust the current crop of democrats less.

        Regardless, absent a constitutional amendment super-majority requirements are speed bumps. Anything one congress can pass another can repeal. This is also why all that savings in the 10 year budget deal is meaningless. Almost none of it happens before the next election.

        CBO just scored the budget deal. the 2013 deficit was only 900B, 2014 was 500B, and 2015 was a mere 280B – of course this presumed that every tax cut of the past decade will expire – including those on the middle class, that there will be no medicare doctor’s fixes in the future and medicare doctors fees will be cut 30%, that growth for 2011 and 2012 will be 2.5%/year and will be 3.6%/year after 2013.

        Does this clarify for you some of what I have been saying about CBO scoring ? CBO did not make these assumptions on their own. They are required to. I have not slandered OMB,. or CBO, or GAO for that matter, they are decent people trying to do there job. But there job is rarely to accurately predict the future – something government is abysmal at, but to make congress or the administration happy. They do so within rules – setup by congress or the administration, they follow those rules rigidly – even when that does not serve their political masters, frequently they present alternate scenarios – something closer to what they believe will happen rather than what they are required to assume.
        But even after all of this – Medicare, Social Security, Medicare D, Iraq, …. everything government has ever done has cost more than predicted usually much more, typically three times more occasionally ten or more times more.
        No I do not believe these are liberal commie whack jobs. Future predictions are incredibly hard. They are made far worse when you must make assumptions that most every breathing creature knows are false. But I try to look at there track record and use that to evaluate their predictions. And by the way there are some things they actually get right.

        Nor have I maligned the private groups you have cited. Though again I do grasp that “The Tax Policy Center” and the “Tax Foundation” as an example have different world views and produce different results – ones matching their ideological bias, and I weigh what I read based on who says it and what their past track record is. Even if an organisation is unbiased that does not necessarily mean it is good.

        In the end I read alot. I get atleast 1/3 of my information from fairly left leaning source. I don’t take what anyone says as gospel. I expect it too make sense and to hold up under scrutiny – and it is those principles that lead me where I am today. Government ALWAYS underestimates the cost, and over estimates the benefits of anything it is contemplating. I can not think of an exception. Someone recently pointed out that Republicans have spent more than democrats – while that does not perfectly coincide with my recollection of my life – does it matter ? Government spends far far too much for far far too little (if any) value. I will absolutely grant you that Bush was a profligate spender – but Obama has trippled down on that. How did the budget (not the stimulus, not tarp, not bailouts, but the baseline budget) go from 2.8 to 3.8T in one year ? Yes I know Obama eliminated some accounting gimick Bush was using to hide the cost of Iraq. But the entire cost of the wars todate is only about 1.2T.

        You are completely bent out of shape over any impediment to raising taxes. Do you accept any limit to taxation at all ? Is there any point at which taxes are too high ? Don’t you grasp that everything government takes comes from the rest of us ? Even if you tax the crap out of the rich – who do you really believe is going to pay ? Corporate profits average a bit over 8%. Regardless of what you set corporate taxes to profits will still eventually stabilise near the average. If they do not we will have lower economic growth – though even if we do we still may if taxes are too high. IF taxes go up and profits don’t go down, who paid the taxes ? I will give you a big clue – you did. The majority of so call income tax payers are small business people. Their income is essentially the profit of their business. Increase their taxes and one of two things will happen – they will be lease productive – oh the horror, they work for profit, what evil greedy bastards, or they will increase the cost of what they produce or any of a myriad of other choices – all of which mean – you lose!
        So fine raise taxes on the rich as high as you want, you will screw yourself and you will screw the rest of us.
        But lets assume somehow this does not happen, corporations go along happily hiring workers producing goods, lowering prices, growing the economy while losing money – all of which is impossible, but were in fairy tale land anyway.

        Isn’t there some point at which you accept that taxes are too high ? What if taxes were 100% – that actually has a name – it is called communism – no one owns anything the state runs everything, and nothing works. Where below that is your limit ?

        You think I am some radical econo-fundimentalist, and you think you are a moderate ?

        And BTW 50% of your wood, and tomatoes, and the pay from the rest of your work – its not yours. It belongs to the government in one form or another. They are giving you nothing of consequence for it.

        The least rights and privileges the worst of have, those are the most that any of us have. It does not matter whether those you despise are the rich or the poor, whether you are taking their freedom or their property. When you empower government to take from someone else, you empower them to take from you.

  58. Priscilla permalink
    August 23, 2011 3:50 pm

    Jeez, Ian. Ok.

    • AMAC permalink
      August 24, 2011 11:32 pm

      Dhlii
      I can tell you that I am against the super majority rule on any issue. As a moderate that is tired of the lack of bipartisan cooperation, I think the super majority rule would just further polarize congress (and the country). This would create a system were bipartisanship would not only be uneccesary, but discourage. Coming from a career in business and now education, I have experienced that diversity in ideas can be a good trait but teamwork is a necessity. In parenting terms, bipartisanship is just playing nice with others. Good for kids and politicians (most time one in the same!!!).

      • Priscilla permalink
        August 25, 2011 12:12 am

        I am in favor of a super majority regarding taxes. I’m less concerned with bipartisanship than I am with my wallet.

      • August 25, 2011 1:39 am

        The entire design of our government is a deliberate effort to require substantial super majorities in everything. Why two chambers to the legislature – do you grasp that the odds of a simple majority far less than simple majority in both, add to that the veto power of the president, and the ability of the courts to nullify legislation. Then consider the complexity with which members of each chamber were initially selected.
        The articles of confederation failed. The federal government was too weak. We needed something stronger, but the very people granting more power to the federal government were seeking to make it very very hard to wield that power. They were not seeking a federal government capable of easily exercising broad power for the latest good purpose. The wanted a federal government that could only use that broad power under the rarest of circumstances.
        You are free to disagree with that reasoning, but it is the deliberate design of this government.
        Over the past two centuries we have occasionally had to exercise great federal power – that was foreseen. What was not was that with each exercise the fetters were released, that became the new norm. For more than a century progressives have been endeavouring to transform this country from a republic to a democracy. I am fine with their efforts to do so, but no the deceit that has accompanied it. They pretend it is no change, that we are a democracy – despite the fact that our founders loathed democracy. We have this great social safety network today that we can not live without. Yet we did live without it once. And though today we can are trapped by it. We are lead to beleive that its creation was a great thing, that before people were barbarians. For several centuries we have followed a smooth curve with each year improving our lives and circumstances. If there are hips in that curve they correspond with the advances we brought ourselves, not the largess of government. The old, the poor the least of society live better today than ever before, because we are all wealthier – not because of anything government has done.

        Getting along with people is NOT bipartisanship. Compromise is occasionally necessary. It is not always necessary, it is usually the lesser of evils, not the greater good. Must we solve all our problems by designing horses by committee. The creation of this country is one of few great endeavors by a committee – and any good liberal can tell you all the sins involved. We did nto cooperate to discover electricity, the light bulb, Penicillin, …. often great things were accomplished by difficult people telling the rest of us to F’off.
        Diversity and compromise are not the same thing. We need differences. Homogenity is boring and unproductive.

        Sometimes – often, one side is right – or righter, and one is wrong. Sometimes it is necessary to tell the emperor he has no cloths.

        In the recent debacle – our debt is too high. It is a burden on the economy, it is unsustainable, if we continue there catastrophe coming.
        At the same time we are not at the end of the world right now. In fact we are probably several years from the brink. But the longer we wait the more painful what we will have to do to extricate ourselves will be. Ian has ranted about the evil Ryan plan. I think at best it is a start. The global consequences of an actual US default – not this fake debt ceiling, but the real consequences of being unable to repay trillions of dollars in debt.
        We just witnessed the results of the destruction of wealth caused by the housing bubble collapse. A real US default would destroy far more wealth.
        And again wealth is not money – it is our standard of living, and in this case a part of the standard of living of the entire planet as things cascade.
        No we are not there now. Nor are we even close, but we are headed there, and we are doing little to stop. Further it will get harder and harder, it will require exponentially deeper cuts the closer we get.
        We are trapped in a long term stagnant economy. IT is hard to get out – but far easier now than it will be if we do not fix this now.

        You can beleive in the presidents plan or the reid plan or the gang of six plan or simpson-bowles or ….. but everyone accepts something must be done – though at the begining of this year the President submitted a budget that assumed nothing needed done. I honestly beleive all the parties involve are seeking what’s best for the nation. Yes there was politics involved.
        Medicare and Social Security must be reigned in. It is politically expedient for republicans to get democrats to sign on now, and expedient for democrats to wait until after the election. I personally beleive all the threats to raise taxes are just theater. Obama did not raise taxes during his first two years when he could have done so easily. He did not do so, because regardless of what he believes I think myriads of economists are telling him and the remainder of democrats that raising taxes will tank the economy. They do not grasp that threatening to do so is not a much better idea – threats have economic costs too. I could go on. Each side had its game. Both were honestly looking to do what was best. Yet the best choice may still have been more cuts and more immediately than either party was proposing. The point is bipartisanship is not some laudable goal.
        Those pundits who deplore the acrimony of modern politics should read more about our founders. The political acrimony between Burr and Hamilton resulted in the vice president of the united states killing the former secretary of the treasury.
        Polarisation is not the problem. Facing the truth is.
        The nation was heavily divided about slavery, about entering World War I, and entering World War II. In each instance we chose – often motivated by circumstances that one side was right and the other wrong.
        Should we have compromised further on slavery ?
        Gone half way into WWI and WWII ?
        Open Public debate of issues is a good thing. It is the name calling that is unproductive – and to me that has been pretty lopsided. I do not recall a Republican claiming the president was a terrorist, hostage taker, …

  59. AMAC permalink
    August 25, 2011 8:51 am

    Dhlli
    I once again disagree with your premise. I think you are confusing the checks and balances with super majority, not the same thing. Executive and Judicial branch powers (such as veto mentioned) are not for a super majority but more like insurance against unwise or illegal legislation. The government was not set up for a two party system and the system has continued through history to be changed an manipulated to help the two party system suceed by the two parties. This is another tool that will ensure the two party system. How can independents get elected or a new party form if they cannot get legeslation through? Super majority will simply marginalize the minority party (which ever party it is). As moderates are on both sides of the isle, I am against any legislation that further polarize the parties (further reducing open minded moderate influence). These parties thrive because we have no options. They have a monopoly ideology in this country. I know I sound like a conspiracy nut right now, but 9 times out of 10 these guys are puppets. That’s what voting based on party rather than individual experience and beliefs gives us.

    • AMAC permalink
      August 25, 2011 8:52 am

      P.S.
      Dhlii, I am very suprised to hear you admit we need a strong central government!!!! I will be reporting you to libertarian.org!

  60. Ian Robertson permalink
    August 25, 2011 8:51 am

    Look guys, can’t you see its unfair? This is the New Moderate, and you are not here to promote that at all, you are here to promote extremely conservative ideas. You two conservatives ( yeah, with caveats) have taken over the conversation, the argument has been yanked completely off the topic of anything that has anything to do with moderation, you have inserted your own conservative agenda, the Tea Party and the Ryan plan. I wish you two would take that appeal to a more appropriate place. The Ryan plan is inherently not moderate, Tea Party likewise, and I know that both of you are more than intelligent enough to understand that full well.

    Personally I’m just going to ignore any future posts of yours because I come here to try to promote and discuss moderate politics and you two have an entirely different agenda. Dhlii is at least transparent about it, but you, Priscilla, are being quite cute about pretending to be anything other than a conservative and I am calling you on it. If GOP headquarters has staffers whose job it is to try to win moderates over to their conservative causes, they would sound just like you. I don’t need to be your “friend” I need to have a moderate space in the middle of all the partisanship. You are making that very hard here.

    • Priscilla permalink
      August 25, 2011 10:58 am

      Well, I’m sorry that you feel that way, Ian, and you are welcome to ignore me. My political views are very independent, albeit right of center, with some libertarian leanings. I was once, like you, fearful of and angered by conservative views, because I believed, as you may, that conservatives were stupid and bad people. I grew out of that phase, and now I believe that conservative thinkers tend to be more realistic and fact oriented than liberals….less emotional perhaps, in their approach to economics in particular. So, I now am open to intelligent arguments from both sides of the political spectrum.

      I think that the US has been moving pretty steadily to the left since the 60’s…..JFK would probably be considered a fiscal conservative by today’s standards. So, I understand why you perceive me as a conservative and yourself as a moderate. I’m not quite sure why you think that all ideas and opinions would not be welcome in the discussions here. I’m certainly not a flamethrower – I try to discuss and debate in a respectful manner – it is pretty easy to do that here, because the other commenters are respectful as well, even when they don’t agree, and because Rick is particularly tolerant and genial (even when he’s ranting,lol) towards his loyal commentariat. I think it has a lot to do with having a moderate temperament and outlook.

      So, I think I will stay, and I welcome you to change your mind and disagree with everything I say. If not, we shall be as blog commenters passing in the night, I suppose :)

  61. August 26, 2011 1:02 am

    Great blog and great (albeit long) discussion to follow it! It has certainly been a long road from ancient Greece to the Jersey Shore. I try to comfort myself with the thought that I will be able to enjoy the decadence of a collapsing empire ;)

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