Tag: popular faith

–Why the slow recovery?

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

Recessions and recoveries ultimately are associated with money, and more specifically with money growth. In general, less money growth = less economic growth. (That actually is something of a tautology, since economic growth is measured in money.)

There are several definitions of money, most differing on the basis of liquidity, the ease of converting to currency. The most liquid form is called M1, which consists of currency and checking account deposits.

The government no longer measures the less liquid forms, M3, L and the most inclusive form: Debt of Domestic Non-Financial Sectors. And for many reasons, the supplies of the various money forms do not move together. For instance, there are periods when M1 goes up or down more than M2, even though M1 is part of M2.

I found an interesting pattern relative to recessions. In the following graph, you see a strong tendency for one form of money, Federal Debt Held by the Public, to grow more slowly before recessions, then grow quickly during recessions, then resume growing more slowly after recessions.

M1 exhibits a similar, though less consistent pattern, and M2 is less consistent yet. One consistency is: Following every recession, at least one of the money forms grows at an increasing rate — every recession except the most recent one:

Here, despite (or because of) worries about deficits, every measured form of money has shown a sharp decline in growth rate. Perhaps this overall decline in money growth is responsible for the slowness of the recovery — yet another bit of evidence that debt fear has hurt our economy, and increased federal spending is desperately needed.

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

No nation can tax itself into prosperity

–How President Obama’s National bipartisan Commission on Fiscal Responsibility and Reform could destroy America

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

Parade Magazine, in its 7/4/10 “Intelligence Report”, printed an interview by Steven Beschloss and Janet Kinosian titled, “Can These Men Fix the Deficit?” The men are Erskine Bowles, a former White House chief of staff, and Alan Simpson, a former Republican Senate whip. Today, Messrs. Bowles and Simpson are co-chairs of President Obama’s National bipartisan Commission on Fiscal Responsibility and Reform.

Here, with my comments, are what they said:

BOWLES: “If we don’t solve the (federal) debt problem, we will be paying $1 trillion in interest in 2020. That’s money we can’t spend on Social Security, Medicare, education, infrastructure or innovation to make sure America is competitive in a global economy.”

RMM: “Of course, he’s dead wrong. America is a monetarily sovereign nation. Future spending is restricted neither by past spending, by debt, by deficits nor by tax collections. That $1 trillion in interest will function as an economic stimulus. This is classic cognitive inconsistency. Mr. Bowles believes the government cannot do what he sees with his own eyes, the government actually doing, i.e spending trillions on stimulus plans, despite debt that has grown more than 1,500% in only 30 years. In addition to cognitive inconsistency, he suffers from anthropomorphic economic disease – the mistaken belief that the government’s finances are like yours and mine.

BOWLES: “We’re looking at how we can reduce discretionary spending – things like education, transportation, the military, homeland security – and mandatory spending which includes Social Security, Medicare and Medicaid. We also need to raise revenue.”

RMM: He believes that cutting back on education, transportation, the military, homeland security, Social Security, Medicare and Medicaid, while raising taxes, will “make sure America is competitive in a global economy.” The notion would be laughable if it weren’t so dangerous.

SIMPSON: “We’re not going to cut Social Security – we’re going to stabilize it. None of the ideas that have been presented will affect anyone over the age of 58.”

RMM: “Stabilize” is political double talk for, “We are going to cut Social Security for everyone 58 and younger.”

SIMPSON: “As it is, it (Social Security) can’t sustain itself.”

RMM: Ah, the old (and false) “unsustainable” claim.

BOWLES: “We’re going to work our hearts out succeed.”

RMM: In their world, “Fiscal Responsibility and Reform” are code words for austerity, which always causes recessions and depressions. Heaven help us from those who have power, yet cannot learn.

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

No nation can tax itself into prosperity

–Less debt . . . oh, wait. More debt.

An alternative to popular faith

The 6/30/10 editorial in the Chicago Tribune, titled, “Enough debt, already,” had me confused. At first I thought they meant private debt. After all, consumers now deal with mortgages they can’t handle and credit cards charging 20% or more interest. And business profits, or lack thereof, won’t support much more debt without increased consumer buying. Consumers and businesses are going bankrupt in droves, so at this stage of the recession, “Enough debt, already” seems like good advice for the private sector.

But no, that is not what the Tribune meant. They wanted less federal debt and more private debt. The federal government has the unlimited ability to pay any debt of any size. It is a government that neither needs nor uses tax money to pay its debts. Yet the editors say, “. . . the U.S. has gone way, way down the path toward unsustainable debt . . .”

Will the government be unable to service its debts? No, that cannot happen. So, what makes federal debt “unsustainable”? The Tribune editors never say. However they call for more lending to business, despite the fact that growing business debt can be unsustainable. To make matters worse, the Tribune cheers the restriction on unemployment checks to those people who would have used those checks to buy things from businesses, thereby stimulating business. (“Unemployment checks extending up to 99 weeks instead of the usual 26 add more indebtedness.”)

The editors correctly say, “The U.S. economy is hungry for credit,” not realizing this means the U.S. economy is hungry for money, and federal deficit spending is the government’s method for adding money to the economy. The editors lament, “Washington already has bequeathed to our descendants a nation debt of $13 trillion,” – an untrue statement – and simultaneously wants to bequeath to our descendants added business debt. (Who do they think pays for business debt?)

To summarize: The Tribune editors oppose debt creation by the one entity that can afford unlimited debt service, but advocate more debt for the over-extended private sector. They support looser lending standards, so that less qualified businesses can go deeper into debt. They oppose increasing regulations on lenders, the same lenders whose unsupervised, profligate lending triggered the recession. They favor the end to federal stimulus plans, which would add the money they say the economy needs. And they hope the economy will recover — somehow.

Clearly, economics is not the Tribune editors’ forte.

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

No nation can tax itself into prosperity

–What’s so fearsome about a filibuster?

An alternative to popular faith

The Republican minority repeatedly has used the threat of filibuster to obtain concessions or even to block majority decisions. I wonder why this threat is so powerful. Isn’t there a danger that voters will become sick and tired of a stalemated Congress, and blame the Republicans for repeatedly being “the party of ‘no'”?

Now we come to the Elena Kagan circus, excuse me, hearing, and once again the threat of filibuster sits like an elephant in the room. Yes, ask her questions to see if she is qualified (though it’s doubtful T.V sound bites will prove anything.) And yes, if you really believe someone’s attitudes about guns and abortion should be the sole considerations for Supreme Court Justice, vote accordingly. But, must every vote on everything be accompanied by the same “I’ll take my ball and go home” threat?

If the child learns it can get its way by stamping, screaming and holding its breath, who’s to blame — the weakling parent or the kid? Why not just let the brat stamp, scream and hold its breath until it gets tired? As I said, what’s so fearsome about a filibuster?

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

No nation can tax itself into prosperity