If you want to know what a man is really like, take notice how he acts when he loses money.
New England Proverb
Uncivil Democrat Quote of the Day
"You know, where is the leadership on the Republican side? You want to talk about sitting on the sidelines? They're the ones that have just been crossing their arms and hoping for failure. I mean ... it's so irresponsible for them to allow the economy to just remain stagnant, you know, so that they can get a political victory in the election next year." - Wasserman Schultz on CNN's "State of the Union"The best hope for the future of our economy and nation is to fire President Obama and all incumbent Congressional Democrats standing for reelection next year and give President-elect Mitt Romney a decisive mandate. Props to Speaker Boehner, Majority Leader Eric Cantor, and Budget Chair Paul Ryan whom have the patience to count to 10 every time Wasserman Schultz speaks her uninformed, pathetic, trite, pedestrian, strident, judgmental, paranoid point of view.
Sunday Talk Soup and Progressive Ideology
I was listening to the ABC This Week podcast when the economic roundtable started up and various progressives started arguing that conservatives would be morally responsible for a second recession if the President's stimulus bill isn't passed. I would argue that existing federal spending is both ineffective and inefficient. Any first-semester student in economics is aware of the broken window fallacy. The basic idea is that there is a multiplier effect (> 1.0) by a vandal breaking a shop window: the money to the window replacement business gets multiplied out to other businesses, etc., and lo and behold, we should erect a statue to the vandal whom unwittingly has boosted the entire village economy by his divinely inspired crime! If the shopkeeper really did come out ahead, he should have given the brick to the same vandal and pointed out his remaining windows!
But of course, those $16 muffins and $8 cups of coffee enjoyed by Justice Department employees or contractors are not "free". They were paid by businesses and individuals (or future taxpayers) These dollars have to be repaid sooner or later. (Of course, I and others are deeply concerned that progressives will try to inflate their way out of debt by essentially devaluing currently held debt. Inflation is a very nasty indirect form or result of misguided public policy. For example, lower middle income people may not understand that the reason they are paying more for corn and related food products is because of progressive policy government regulations, subsidies and protectionist tariffs (e.g., against Brazilian-produced ethanol) for use of corn-based ethanol in vehicle fuel mixes.)
Before going on, let us point out much of this hocus-pocus Keynesian (pro-stimulus) progressive Democratic policy nonsense is based or supported on the work of a Goldman Sachs economist Alec Phillips and the "Amazing" Mark Zandi, Moody Analytics. (Yes, the same credit rating company which was so prescient in judging the housing bubble and underlying mortgage backed securities.) Their models are essentially self-fulfilling prophecies (i.e., they beg the question). (Progressives typically attempt to preempt conservative critics by pointing out Zandi supported McCain in 2008. That and $5 will get you a cup of coffee at Starbucks. In fact, Tanner notes that Zandi is a Democrat and did not serve in a role as one of McCain's principal economic advisors.)
Tanner adds:
Zandi ignores the way in which government spending, taxes, and borrowing squeeze out private consumption and investment — what we might have done with the money had it not been taken by the government to build bridges to nowhere. And he ignores the need for economies to create new wealth rather than to simply redistribute existing wealth.Bob Murphy makes a related point in his discussion of what he perceives as methodological flaws in Krugman's (Keynesian/pro-stimulus) similar views (in fact, Krugman has cited Zandi), which put the cart ahead of the horse (i.e., focus on aggregate demand instead of supply) and include government spending as part of GDP.
The first flaw is [Krugman's] belief that output generates employment (rather than vice versa), and the second is his belief that government spending is a measure of real output [i.e.,] he reverses cause and effect in his analysis, and he also fails to note the difference between private and government expenditures.Consider the following relevant excerpts from Veronique de Rugy's "Ugly Modeling":
GDP does not capture [significant] changes in personal investment portfolios or changes in private research and development spending, pension benefits and the U.S. Flow of Funds Accounts balance-sheet information from the Federal Reserve Board...
The Zandi and Phillips models are based on the Keynesian view that government spending produces recovery...The Harvard economists Robert Barro and Charles Redlick estimate that the multiplier for stimulus spending is between 0.4 and 0.7. In another study, the Stanford economists John Taylor and John Cogan concluded that the stimulus package couldn’t have had a multiplier much greater than zero.
[The tacit assumption is] that government spending is the source of all recovery. The logic, as with Bernanke’s and Zandi’s analyses, is that government spending cuts reduce overall demand in the economy, which affects growth and then employment. This argument ignores the fact that the government has to take its money out of the economy by raising taxes, borrowing from investors, or printing dollars. Each of these options can shrink the economy. All these analysts also systematically ignore the fact that GDP numbers include government spending...If Washington spends $1 a year on a bureaucrat’s salary, GDP numbers will register growth of exactly $1...if a firm pays an engineer $1, that $1 only shows up in the GDP if the engineer produces $1 worth of stuff to sell.In any event, the real question is what happens when you have to take away the "free" punch bowl. A 2-point payroll tax reduction suddenly becomes a 50% payroll tax increase. That takes away discretionary income, bearish for consumer spending, a major component in the economy. Moreover, there is no "free lunch"--that 2% tax holiday? It just made unfunded entitlement liabilities worse.
I cited a post several days back which pointed out that consumer spending wasn't the problem in our sluggish economy but poor business spending. ObamaCare, environmental regulations, and the new financial "reform" obfuscate business decision making. What we need is not so much pushing-on-a-string temporary government gimmick, but focusing on the supply side of the economy: lower trade barriers, simplify and lower globally uncompetitive business income taxes, strip away unnecessary (e.g., 'like to have' vs. 'need to have') and freeze any new regulations, fix the government financial statements (including Enron-like unfunded entitlement liabilities), and balance the budget so you don't starve the private sector.
ObamaCare Long-Term Disability CLASS Program Disabled:
Thumbs UP!
You know when a Democrat, retiring ND Senator Kent Conrad characterized the CLASS legislation as a "Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of", we were in trouble. In essence, the only way this would have worked out would have been to mandate the program to force healthy people to subsidize it and/or for the federal government to underwriting steep benefits. So HHS Secretary Sebelius, after being unable to devise a viable plan, formally suspended the program; expect the GOP-controlled House to repeal this. Why was CLASS part of ObamaCare to begin with? It was part of ObamaCare smoke and mirrors accounting, structured in such a way to take advantage of standard CBO scoring where front-loaded CLASS costs constituted nearly half of purported deficit "savings" of ObamaCare. The problem is that the program was never sustainable once you properly matched up premiums with ongoing expenses: any reserves would be rapidly depleted.
Musical Interlude: My Favorite Groups
Moody Blues, "I Know You're Out There Somewhere". How do you follow "Your Wildest Dreams", a modern rock classic? With a follow-up rock classic. Brilliant songwriting and performance, outstanding video. "And to those who lack the courage, And say it's dangerous to try, Well they just don't know, That love eternal will not be denied." Sigh! When I grow up, I want to write and sing songs like Justin Hayward. I love that layered harmony down the bridge verses...
This concludes my Moody Blues series. Next up: an ex-college roommate's favorite band, CCR.
