Tag: debt

–Debt madness in the media

The debt hawks are to economics as the creationists are to biology.

The media have made America’s voters insane. Any program designed to stimulate the economy is rejected because it would “add to the debt” (which is the only way to stimulate the economy) or would “be paid for by our grandchildren” (a monstrous lie).

Thus we have the ridiculous situation in which banks are criticized for not lending enough (i.e., for giving the private sector too little debt), while the federal government is criticized for having too much debt. Think, people! Do you really believe the solution to our problems is for the private sector to take on more debt, while the federal government reduces its debts?

On the one hand we have the private borrowers, already overburdened with bad debt, and falling into bankruptcy every day. On the other hand we have the federal government, which can support a debt of any size, and which does not even use tax money to support spending, and which as a monetarily sovereign nation, cannot go bankrupt. Which do you think should take on more debt to stimulate our economy?

It is absolute madness to ask for more private deficit spending and less federal deficit spending. Yet, that is what the media, the politicians and the obsolete economists do.

In the post, Is federal money better than other money, I demonstrated that while reductions in federal debt growth immediately precede recessions, increases in private debt growth also lead to recessions. The media and the politicians, who want more private debt growth and less federal debt growth have it exactly backwards.

Rumor says the Obama administration soon will suggest Fannie and Freddie give “upside down” mortgage holders a break, paid for by the federal government. If true, you will hear a great protest that this will increase the falsely termed “unsustainable” federal debt. The protesters prefer that the private sector bear this debt, which for the private sector, truly is unsustainable.

I’m not sure when it became more “prudent” for the private sector to suffer bankruptcies, than for the federal government to create money, but I pray, for the sake of America, that the media, politicians and sleeping economists come to their senses. This backwards thinking has caused terrible misery, as backwards thinking always does.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

–Talking past each other

The debt hawks are to economics as the creationists are to biology.

The proponents and opponents of same-sex marriage cannot and will not ever agree. They are talking past each other. The problem is that the issue is religious/moral for some and legal/moral for others.

Those who oppose same-sex marriage focus on what they believe to be religious/moral factors. They quote the Leviticus passage, “Do not lie with a man as one lies with a woman.” Those who support same-sex marriage focus on what they believe to be legal/moral factors. Many laws grant special privileges to married couples, not offered to unmarrieds. This is felt to be a violation of the 14th Amendment’s, “equal protection clause.”

Although the above is something of an oversimplification, it is impossible for people to agree, when they’re arguing about two different things. More examples:

Israelis and Palestinians may disagree on some facts (“Who was here first? Who fired first?), but fundamentally, the Jews really are talking about the Holocaust and Jewish survival (“Never again”) and the Palestinians really are talking about choice and Palestinian survival (“We have nowhere else to go.”) They are talking past each other.

The pro-lifers are talking about morals (“Do not murder.”) and the pro-choicers are talking about science (“An embryo is not yet a sentient human”). They are talking past each other.

Democrats feel caring for people is good for the economy. Republicans feel caring for the economy is good for people. They are talking past each other, and when people talk past each other, they don’t hear each other.

Listen to any argument, and eventually you’ll hear the words, “Yes, but.” That’s shorthand for, “I don’t want to listen to, or even think about, what you said” (That’s the “Yes” part). “I only want you to think about what I’m about to say.” (That’s the “but” part.)

There lies deep within us, the fear that if we listen too closely, our own arguments will be demolished. So we resist listening, lest we are forced to admit we are wrong, and our world will come crashing down.

Being consciously aware of this, I make a special effort to try to listen to debt hawks’ facts. Unfortunately, their favorite word seems to be “idiot, ” often followed by “stupid,” and they never get around to offering facts I can evaluate. They focus on popular wisdom and I focus on data, so we simply talk past each other, something like the creationists and the scientists.

What’s the solution? Courage. Have the courage to see your treasured beliefs proved wrong. Have the courage to evaluate the other guy’s side. Have the courage to listen, and perhaps to come to an accommodation. Any fool can close his mind and shout louder. It takes real courage and intelligence to listen, truly listen, to the other guy’s side.

Of course, that depends on the other guy presenting a side, rather than limiting himself to telling you you’re an idiot.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

–There is no wasteful federal spending

The debt hawks are to economics as the creationists are to biology.

As usual, some stimulus spending has been criticized because it is “wasteful” and doesn’t create jobs. Here are a couple examples published recently:

“ $1.9 million spent to photograph ants has created two jobs.. Other ant research stimulus projects: $451,000 has created one job, $276,000 created six one-hundredths of a job, and $800,000 created no jobs. The $144,000 spent to study the behavior of monkeys on cocaine created four-tenths of a job. To study why monkeys respond to unfairness cost $677,000 – and has created no jobs yet.”

I am reminded of former Wisconsin Democratic Sen. William Proxmire, who published his monthly “Golden Fleece” awards for what he considered wasteful spending. He often was criticized for opposing basic research he did not understand, for instance NASA, SETI and the Aspen Movie Map. Many worthwhile, federal research projects have been killed because some politician thought they were frivolous. This is especially true of basic research, where the ultimate benefits are yet to be determined.

The notorious Mansfield Amendment prohibited the Defense Department from carrying out “any research project or study unless such project or study has a direct and apparent relationship to a specific military function.” Such Congressional meddling in research virtually eliminates discoveries based on serendipity.

Whether or not you consider ant research to be wasteful, it is highly unlikely that $1.9 million created only two jobs. Let’s speculate on where that $1.9 million might have gone. Photographers, photographic equipment, rent, researchers, travel, computers, chemistry equipment – all of which helped various businesses and people. Then those businesses and people spent the money they received on things like food, clothing, shelter and transportation, all of which helped more people and businesses. And on and on and on. In a similar vein, the monkey research expenses were paid to people and businesses.

In short, when the government spends money, that money costs you nothing. (Taxes do not pay for the spending of a monetarily sovereign nation.) In fact, that spending adds money to the economy, and that money circulates throughout the economy, stimulating as it goes. Every time the federal government spends, people and businesses benefit, and in turn these people and businesses spend, which benefits more people and businesses. Ultimately, all federal spending creates jobs.

There always will be a politician who tries to look heroic and prudent, by pointing out what he considers to be wasteful spending. While state and local governments, which do not have the unlimited ability to create money, can spend wastefully, it almost is impossible for any federal spending to be wasteful, even in cases where the original expenditure seemed frivolous in some eyes. Even spending for the notorious Alaskan “Bridge to Nowhere” would have benefitted the economy by pumping money into the hands of people and businesses.

Good rule of thumb: The more federal spending, the healthier the economy. Reduced growth in federal spending has resulted in nearly every recession and depression, and increased federal spending dragged this economy out of the recession.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

–Debt is bad; debt is good. Take your pick.

The debt hawks are to economics as the creationists are to biology.

There is no functional difference between a federal tax cut and a federal spending increase. Some might argue that federal spending is superior or inferior to private spending, though evidence for either is slim, and either has the same result. They both increase the amount of federal money in the economy. (Mistakenly called the federal “debt.”)

Further, increasing the federal money supply stimulates the economy, and decreasing the money supply depresses the economy. So it is both laughable and sad to see how debt hawks squirm between wanting a lower debt, higher taxes and lower taxes, along with less federal spending, more spending and improved GDP. As the song says, “Something’s gotta give.”

Here are quotes from the always confused editors of the Chicago Tribune, in the editorial dated 8/1/10, titled “Out of debt.”

“. . . Democrats and Republicans are very good at doing one thing: running up the debt. That’s the reason for the National Commission on Fiscal Responsibility . . . to find ways to stem the red ink.” O.K., so federal deficits are bad.

“. . . at this stage (a tax increase) would be a terrible mistake, not only for the health of the economy, but for the nation’s long-term fiscal health.” O.K., so federal deficits are good, in both the short term and in the long term.

“More likely, Congress and the president would spend every nickel (from a tax increase) – and then spend some more.” Oh, oh. Now federal deficits are bad, again.

“Nor does it make sense to place a new (tax) weight on the economy when it is already struggling to grow.” Woops, deficits are good, again.

“Congress can’t afford to indulge the notion that endless borrowing is a sustainable strategy.” So deficits are bad.

“The wisest option is to extend tax cuts for a year . . . “ Deficits are good

“. . . then see what the deficit commissions proposes to curtail our addiction to debt.” Deficits are bad.

“ . . . Erskine Bowles suggests a healthy ratio of $3 dollars in spending cuts for every $1 in tax increases . . . it’s essential if we hope to foster lasting prosperity . . . “ Deficits now are awful. Mr. Bowles “scientific” suggestion equals $4 in spending cuts or $4 in tax increases, or anywhere in between. Guarantee: He has zero data to support his 3/1 ratio, but hey, who need facts?

“ . . . while sparing the taxpayers of tomorrow an unsupportable debt burden.” Deficits are bad.

And here is my favorite: “Coupled with spending discipline, revenue measures can be on leg of the journey back to fiscal sanity. But if they are the first and only leg, they will be a fatal detour.” Huh? They are saying spending cuts and tax increases are good, but first we should have spending increases and tax cuts!

All of the above is classic debt hawk double talk. Federal debt is a taxpayer “burden,” but necessary to grow the economy, but “unsupportable,” even though taxpayers don’t pay for federal debt, and the government has the unlimited ability to service its debt.

That kind of muddy thinking is what needlessly has extended this recession and the unemployment that goes with it. Ignorance may be bliss, but it sure is harmful. As the theme at the top of this post reads, “The debt hawks are to economics as the creationists are to biology.”

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity