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Of course I was glossing over details because I was not attempting to point fingers at any specific administration or make it a partisan debate. Historically,

by lzw 16y ago

Of course I was glossing over details because I was not attempting to point fingers at any specific administration or make it a partisan debate. Historically, deficit spending with the rationalization that it is stimulative has been done by both parties. Debating whether we should have cut taxes to stimulate the economy or paid down the outstanding debt would be worth debating if we were comparing two situations with no ongoing deficit. Everyone in government's job is to operate the government with a balanced budget, every year. IF they do not do this, they have failed. There are plenty of political incentives for irresponsible individuals to endlessly spend to buy political power, influence and to feather their own nests. In an ongoing deficit situation they have already failed in their primary job of delivering a balanced government budget every year (on average). So I see little point in debating whether, having achieved that, tax cuts or paying down debt is more beneficial to the economy. That said, the regulatory and tax burden on our economy is unacceptable. You can't pretend to give a damn about the quality of life of the american people and support high taxes, inflation and deficit spending. This applies to both parties. You argue for rasing taxes, but we are currently running record annual deficits and have only continued to pile on future obligations, bringing the current net present value of all future obligations to over $200 Trillion. (in a recent estimate, though I can't say how accurate it is, whatever the actual figure is, it is well beyond "irresponsible" and into "suicidal" territory.)

anigbrowl 16y ago
I had to trim this because it was too long to post, to say nothing of the time I've wasted to no good purpose. Yes, we are running record annual deficits - because we are in exceptional economic circumstances, and as a result of large one-off spending bills. To recycle the medical analogy, if you go to the hospital with a heart attack your bill may be $10,000 per day, but that's because you're in intensive care. You have not suddenly shifted to a $3.65m annual spending pattern which you intend to maintain indefinitely. Doubtless you'll point to the added structural costs of healthcare legislation; and yet, initiatives to significantly reduce the structural costs of defense spending - and shrink one of the largest bureaucracies in the government, from the top down, saving $100 billion over the next 5 years - have gone largely unremarked. Why is that? It's a pretty large saving, and begins with cutting top-heavy management and scrapping zombie programs. There are howls of fury across the education sector because the administration insists on moving towards performance-based funding, and the axe is falling on poor teachers and diploma mills. The opposition insists that's wasteful, and says it would abolish the department of education and all student loan services altogether, an absurdist position. You say the regulatory and tax burdens on the economy are unacceptable. Which ones? Plainly, different levels of taxation are acceptable in some contexts, the proof being the existence of stable countries with higher taxes than ours. For any given tax rate, some people asked to pay it will insist that it is too high, which is why we currently have an estate tax of 0%. How much should the tax burden be, and what if a majority of the electorate decides they are willing to pay rather more than that in order to pay for some things they want? Kindly note, that I'm not saying 'to make other people pay.' There is always going to be a minority that wants to pay nothing at all and insists it wants nothing of anything the government has to offer, but mystifyingly, shows no serious inclination to go anywhere else. I'm not in love with excess regulation either, but what are the thresholds at which it becomes burdensome? You're opposed to fractional-reserve banking for example, so does that mean you'd like to see laws preventing any banks from lending more than what they have on deposit, in order to keep their leverage ratio lower than 1? If we abolish this or that government agency and stop regulating some sector of the economy, what remedy will be available to those who find themselves the victims of shoddy products, or pollution, or pharmaceuticals? What if they experience property damage? I can't see you being happy if I take up some line of business that involves me dumping toxic waste on your doorstep, but the sad fact is that some people are willing to do such things in pursuit of a fast buck, which is often why those regulatory agencies were set up in the first place. Usually the response to this question is that of course we need sensible regulation, albeit less of it; can we get some specifics? All I've heard from fiscally-minded libertarians, for example, is 'Audit (or abolish) the federal reserve, and return to sound money.' Fine, how will this work in practice? Objections to the status quo posit enormously better outcomes if we would but change this, abolish that, or outlaw the other, but few of these proposals go into any detail about how these outcomes will be achieved. If a proposal is all benefits and no costs, then it's not a policy, it's a fantasy. And you close with the unsourced, scarifying figure of $200 trillion in future obligations, as if this were all payable at once. First, it's from Laurence Koltikoff, a professor of economics at BU and is accessible here: http://www.bloomberg.com/news/2010-08-11/u-s-is-bankrupt-and-we-don-t-even-know-commentary-by-laurence-kotlikoff.html http://www.bloomberg.com/news/2010-08-11/u-s-is-bankrupt-and... ...and he hates supply-side economics, points out that taxes will need to be raised, and observes that the fundamental problem is one of changing demographics as baby boomers retire. He doesn't like demand-siders much either, but his proposed solution is to 'drastically simplify' our various systems. No word on how, and no mention of the fact that this total is the sum of obligations stretching out to 2080, or that the demographic disparity resulting from the baby boom will have run its course by about 2040. By that time the ratio of retirees to workers will have stabilized, because the boomers will almost all be dead and succeeding generations have stayed close to the replacement rate, unlike Japan and China who are facing a long-term demographic collapse far worse than ours, and which goes a lot further towards explaining the moribundity of Japan's economy than even their misapplication of Keynesian policy (such as vast infrastructure projects in remote rural areas). Nor is there any meaningful discussion of what economic growth would take place over the same period, just the unjustified assumption that's it's a one-way street to bankruptcy, unless we institute some new 'simple' rules which everyone will magically agree about and which will fix all our problems...somehow. Such hand-waving proposals ignore the reality of a mixed economy in a high-tech world. Of course things were simpler in the past - in the 19th century we had a resource-based economy with a continent-sized chunk of thinly-populated land which was largely free for the taking. That's no longer the case. After the war we had intact industrial capacity while that of our competitors had been heavily bombed. That's no longer the case either. These appeals to simplicity are actually pandering to the most simplistic readers. Right-wingers say they'll abolish big chunks of government, as if you could perform surgery using a pair of garden shears. Left-wingers say they'll abolish trade and make the rich pay for everything, as if the economy were a battered wife and capitalism a mean husband who will be chased off by some cuddly Uncle Sam. These are not meaningful political positions, they're infantile denials of reality. Reality-based policymaking requires grappling with difficult choices and uncomfortable truths. Professor Koltikoff surely knows full well that the solution to the shortfall of people paying into Social Security etc. is a trade-based reform of the immigration system. We currently spend a ton of money on a vast bureaucracy tasked with administering an absurdly arcane set of laws which keep about 3% of the population in the black market and admit others in a hopelessly inefficient fashion. Although the sunk costs of immigrants (education and pediatric healthcare) were mostly borne by their country of origin, and the treasury as well as business could be collecting a lot more money, we continue to ignore the structural implications for the economy. We need motivated workers, we need them to have slightly more kids than average to finance the retirement of the boomers by both contributions and consumption, and populations have already begun stabilizing in most of the source countries so they're not going to have a surplus of unemployed labor left by 2030, when wage inflation will become the most pressing issue. We have copious economic evidence for implementing such a policy and general agreement among economic thinkers, both left and right, about its immediate necessity and competitive desirability, but the public debate is dominated by xenophobia and economic illiteracy. The fringe right wants to build a giant fence and conduct mass deportations, the fringe left thinks a labor shortage will be a good thing because it will push up wages, we can inflate away our debt and do without international trade altogether. What unifies fringe thinkers, although they all hate being reminded of it, is their insistence that the outside world doesn't matter (and that we can kick its ass if it insists on bothering us), and that a targeted dose of extreme authoritarianism directed against a small minority (immigrants, capitalists, elitists, take your pick) is all that's needed to restore harmony and re-establish the blissful economic landscape we recall from childhood, when society had decent values. This is not a healthy or productive approach. I could give other examples drawn from different parts of the economy or body politic, but demographics are at the core of our long-term economic situation. We are not going to tax our way out of the problem as some liberals imagine, because the rest of the world economy has developed enough to create meaningful alternatives. Nor are we going to cut our way out of it as some conservatives imagine, because abandoning economies of scale would murder our cash flow. These populist viewpoints are regressive and past implementations have proved to be extremely destructive.

by lzw 16y ago

anigbrowl 16y ago

I had to trim this because it was too long to post, to say nothing of the time I've wasted to no good purpose. Yes, we are running record annual deficits - because we are in exceptional economic circumstances, and as a result of large one-off spending bills. To recycle the medical analogy, if you go to the hospital with a heart attack your bill may be $10,000 per day, but that's because you're in intensive care. You have not suddenly shifted to a $3.65m annual spending pattern which you intend to maintain indefinitely. Doubtless you'll point to the added structural costs of healthcare legislation; and yet, initiatives to significantly reduce the structural costs of defense spending - and shrink one of the largest bureaucracies in the government, from the top down, saving $100 billion over the next 5 years - have gone largely unremarked. Why is that? It's a pretty large saving, and begins with cutting top-heavy management and scrapping zombie programs. There are howls of fury across the education sector because the administration insists on moving towards performance-based funding, and the axe is falling on poor teachers and diploma mills. The opposition insists that's wasteful, and says it would abolish the department of education and all student loan services altogether, an absurdist position. You say the regulatory and tax burdens on the economy are unacceptable. Which ones? Plainly, different levels of taxation are acceptable in some contexts, the proof being the existence of stable countries with higher taxes than ours. For any given tax rate, some people asked to pay it will insist that it is too high, which is why we currently have an estate tax of 0%. How much should the tax burden be, and what if a majority of the electorate decides they are willing to pay rather more than that in order to pay for some things they want? Kindly note, that I'm not saying 'to make other people pay.' There is always going to be a minority that wants to pay nothing at all and insists it wants nothing of anything the government has to offer, but mystifyingly, shows no serious inclination to go anywhere else. I'm not in love with excess regulation either, but what are the thresholds at which it becomes burdensome? You're opposed to fractional-reserve banking for example, so does that mean you'd like to see laws preventing any banks from lending more than what they have on deposit, in order to keep their leverage ratio lower than 1? If we abolish this or that government agency and stop regulating some sector of the economy, what remedy will be available to those who find themselves the victims of shoddy products, or pollution, or pharmaceuticals? What if they experience property damage? I can't see you being happy if I take up some line of business that involves me dumping toxic waste on your doorstep, but the sad fact is that some people are willing to do such things in pursuit of a fast buck, which is often why those regulatory agencies were set up in the first place. Usually the response to this question is that of course we need sensible regulation, albeit less of it; can we get some specifics? All I've heard from fiscally-minded libertarians, for example, is 'Audit (or abolish) the federal reserve, and return to sound money.' Fine, how will this work in practice? Objections to the status quo posit enormously better outcomes if we would but change this, abolish that, or outlaw the other, but few of these proposals go into any detail about how these outcomes will be achieved. If a proposal is all benefits and no costs, then it's not a policy, it's a fantasy. And you close with the unsourced, scarifying figure of $200 trillion in future obligations, as if this were all payable at once. First, it's from Laurence Koltikoff, a professor of economics at BU and is accessible here: http://www.bloomberg.com/news/2010-08-11/u-s-is-bankrupt-and-we-don-t-even-know-commentary-by-laurence-kotlikoff.html http://www.bloomberg.com/news/2010-08-11/u-s-is-bankrupt-and... ...and he hates supply-side economics, points out that taxes will need to be raised, and observes that the fundamental problem is one of changing demographics as baby boomers retire. He doesn't like demand-siders much either, but his proposed solution is to 'drastically simplify' our various systems. No word on how, and no mention of the fact that this total is the sum of obligations stretching out to 2080, or that the demographic disparity resulting from the baby boom will have run its course by about 2040. By that time the ratio of retirees to workers will have stabilized, because the boomers will almost all be dead and succeeding generations have stayed close to the replacement rate, unlike Japan and China who are facing a long-term demographic collapse far worse than ours, and which goes a lot further towards explaining the moribundity of Japan's economy than even their misapplication of Keynesian policy (such as vast infrastructure projects in remote rural areas). Nor is there any meaningful discussion of what economic growth would take place over the same period, just the unjustified assumption that's it's a one-way street to bankruptcy, unless we institute some new 'simple' rules which everyone will magically agree about and which will fix all our problems...somehow. Such hand-waving proposals ignore the reality of a mixed economy in a high-tech world. Of course things were simpler in the past - in the 19th century we had a resource-based economy with a continent-sized chunk of thinly-populated land which was largely free for the taking. That's no longer the case. After the war we had intact industrial capacity while that of our competitors had been heavily bombed. That's no longer the case either. These appeals to simplicity are actually pandering to the most simplistic readers. Right-wingers say they'll abolish big chunks of government, as if you could perform surgery using a pair of garden shears. Left-wingers say they'll abolish trade and make the rich pay for everything, as if the economy were a battered wife and capitalism a mean husband who will be chased off by some cuddly Uncle Sam. These are not meaningful political positions, they're infantile denials of reality. Reality-based policymaking requires grappling with difficult choices and uncomfortable truths. Professor Koltikoff surely knows full well that the solution to the shortfall of people paying into Social Security etc. is a trade-based reform of the immigration system. We currently spend a ton of money on a vast bureaucracy tasked with administering an absurdly arcane set of laws which keep about 3% of the population in the black market and admit others in a hopelessly inefficient fashion. Although the sunk costs of immigrants (education and pediatric healthcare) were mostly borne by their country of origin, and the treasury as well as business could be collecting a lot more money, we continue to ignore the structural implications for the economy. We need motivated workers, we need them to have slightly more kids than average to finance the retirement of the boomers by both contributions and consumption, and populations have already begun stabilizing in most of the source countries so they're not going to have a surplus of unemployed labor left by 2030, when wage inflation will become the most pressing issue. We have copious economic evidence for implementing such a policy and general agreement among economic thinkers, both left and right, about its immediate necessity and competitive desirability, but the public debate is dominated by xenophobia and economic illiteracy. The fringe right wants to build a giant fence and conduct mass deportations, the fringe left thinks a labor shortage will be a good thing because it will push up wages, we can inflate away our debt and do without international trade altogether. What unifies fringe thinkers, although they all hate being reminded of it, is their insistence that the outside world doesn't matter (and that we can kick its ass if it insists on bothering us), and that a targeted dose of extreme authoritarianism directed against a small minority (immigrants, capitalists, elitists, take your pick) is all that's needed to restore harmony and re-establish the blissful economic landscape we recall from childhood, when society had decent values. This is not a healthy or productive approach. I could give other examples drawn from different parts of the economy or body politic, but demographics are at the core of our long-term economic situation. We are not going to tax our way out of the problem as some liberals imagine, because the rest of the world economy has developed enough to create meaningful alternatives. Nor are we going to cut our way out of it as some conservatives imagine, because abandoning economies of scale would murder our cash flow. These populist viewpoints are regressive and past implementations have proved to be extremely destructive.