Wednesday, August 24, 2011

Keynesian Stimulus: Divine Miracle or Bloodletting?

Economist Robert Barro writing in today's WSJ (emphasis added): 

"Keynesian economics—the go-to theory for those who like government at the controls of the economy—is in the forefront of the ongoing debate on fiscal-stimulus packages. For example, in true Keynesian spirit, Agriculture Secretary Tom Vilsack said recently that food stamps were an "economic stimulus" and that "every dollar of benefits generates $1.84 in the economy in terms of economic activity." Many observers may see how this idea—that one can magically get back more than one puts in—conflicts with what I will call "regular economics." What few know is that there is no meaningful theoretical or empirical support for the Keynesian position. 

If valid, this result would be truly miraculous. The recipients of food stamps get, say, $1 billion but they are not the only ones who benefit. Another $1 billion appears that can make the rest of society better off. Unlike the trade-off in regular economics, that extra $1 billion is the ultimate free lunch.  

There are two ways to view Keynesian stimulus through transfer programs. It's either a divine miracle—where one gets back more than one puts in—or else it's the macroeconomic equivalent of bloodletting. Obviously, I lean toward the latter position, but I am still hoping for more empirical evidence."

193 Comments:

At 8/24/2011 10:39 AM, Blogger Methinks said...

When are we going to stop legitimizing Keynesianism by describing it as "economics"?

 
At 8/24/2011 11:19 AM, Blogger morganovich said...

methinks-

right around the time we get back to small government?

so long as politicians get to buy votes by passing out goodies, this bizarre cult is going to remain seductive to them.

to bastardize tigger, "promising somehting for nothing is what politicians are bestest at."

 
At 8/24/2011 11:23 AM, Blogger Mr. Econotarian said...

Here is what we know:

1) Taxes likely have deadweight losses
2) Subsidies likely have deadweight losses
3) Taxes and Subsidies may distort the market in a way that moves investment and economic activity into less efficient modes.

 
At 8/24/2011 11:43 AM, Blogger juandos said...

Well its not like this expensivly useless shuck & jive hasn't happened before...

Apparently we as a nation can't learn from history...

 
At 8/24/2011 11:46 AM, Blogger Buddy R Pacifico said...

On food stamps as an economic stimulus:

The mysterious recent surge of a 19% increase in food stamp (SNAP, 2009->2010)payments in North Dakota must account for the lowest unemployment rate in the U.S. -- and not the booming oil and gas industry.

 
At 8/24/2011 11:47 AM, Blogger Larry G said...

what's the difference between food stamps and paying a soldier or a DOD contractor to build a drone?

does a soldier or a drone contribute to productivity?

does it have a "multiplier" effect?

how does a soldier or a drone contribute any more (or any less) than someone spending food stamps?

 
At 8/24/2011 11:51 AM, Blogger Stone Glasgow said...

Unfortunately, there is no proof that Keynes was wrong, either. There are no tests, only theory.

People motivated by forming communities and working towards a "greater good" generally feel one way, and those who know the best way to help others is to help yourself (without hurting others), generally lean the other way.

I can't wait for virtual worlds to simulate a real economy, and allow us to test each theory.

 
At 8/24/2011 12:11 PM, Blogger juandos said...

"Unfortunately, there is no proof that Keynes was wrong, either. There are no tests, only theory"...

Nice try Steve but I think Thomas Sowell debunks your comment fairly well...

 
At 8/24/2011 12:18 PM, Blogger Hydra said...

Of course, there is no cost to an economic system that allows would be food stamp recipients to go hungry.

 
At 8/24/2011 12:22 PM, Blogger Hydra said...

So long as politians get to buy votes by passing out goodies it costs a lot less to buy votes from food stamp recipients than it does from corporate tycoons.

What you are complaining about is a free market in which the competition can afford to sell votes cheaper than you can.

 
At 8/24/2011 12:26 PM, Blogger Hydra said...

Taxes and subsidies may move the market into a mode that is less efficient.

"May" being the operative word.
Besides, this idea depends on whether you believe the market is an accurate metaphor for the total system of well being.

 
At 8/24/2011 12:32 PM, Blogger Mike said...

The very second you pay one dollar in tax, that dollar is no longer a dollar. Since a fraction of that dollar goes to each department that collects it, directs its destination, distributes it and enforces all of the above, I don't see how a dollar in any department could ever be worth so much as a dollar.

Unless, as Larry seems to suggest, it goes to making a piece of gear that we end up selling to Israel for a profit.

 
At 8/24/2011 12:34 PM, Blogger juandos said...

"So long as politians get to buy votes by passing out goodies it costs a lot less to buy votes from food stamp recipients than it does from corporate tycoons"...

Apparently you forget that said politicos are using extorted tax dollars to buy those votes, not their own money...

The problem you lefties want to forget is that the Constitutionally questionable socialist programs we're forced to pay for are approximately 3 times the cost of what is spent on defense...

 
At 8/24/2011 12:40 PM, Blogger Hydra said...

...... those who know the best way to help others is to help yourself (without hurting others), generally lean the other way.
====================
What about those that know the best way is to help yourself and don't give a crap about hurting others?

If you realize that the part about not hurting others is the part that frequently gets left out, then what is wrong with forming a community that supports a greater good ONLY to the extent that it prevents a greater bad? A strict regimen of economically justifiable regulation, such that the regulated are not economically damaged more than the economy gains by preventing hurt to others?

Why does one have to cast in an either or dichotomy?

 
At 8/24/2011 12:41 PM, Blogger arbitrage789 said...

It's a divine miracle.

If one looks through the political lens, that is.

I do think it's possible to create the illusion of prosperity for a time period sufficient to influence an election outcome.

 
At 8/24/2011 12:47 PM, Blogger Hydra said...

I'm no lefty. I just don't buy the argument. If forty percent of the population, the lower paid portion, are busy voting themselves more goodies, how come they have only 4 to 6 % of the wealth? Suppose we cut that by half by shifting more of the extortion to them. Is that going to suddenly solve our economic problems? Redistributed among the richer 60% would they even notice this pocket change?

 
At 8/24/2011 12:50 PM, Blogger Hydra said...

What does the ratio of excess social spending compared to excess defense spending have to do with anything?

 
At 8/24/2011 12:56 PM, Blogger juandos said...

You're no lefty hydra?!?!

"Suppose we cut that by half by shifting more of the extortion to them. Is that going to suddenly solve our economic problems?"...

Oh yeah! When people actually get the bill for the services they're getting from the federal government then they might think twice about the value of said services...

"Redistributed among the richer 60% would they even notice this pocket change?"...

Pocket change?!?! Why should the richer pay a penny more for said government services than the so called poor?

Is there something in the Constitution that says those more successful in life should carry the less successful on their backs?

Any you say you're not a lefty hydra!

 
At 8/24/2011 12:57 PM, Blogger PeakTrader said...

This past recession was caused by a lack of demand, or excess supply.

An increase in demand was needed to stop falling prices, output, and employment.

A tax cut is most effective, because:

1. It goes to workers, who are most responsible (unemployment benefits and food stamps go to less responsible people).

2. Cash is more flexible (e.g. than food stamps).

3. The money from a $5,000 tax cut for 100 million (existing) workers will be used more effectively and better allocated than $50,000 government jobs for 10 million people, for example.

 
At 8/24/2011 12:58 PM, Blogger arbitrage789 said...

Hydra @ 12:47

We've got to cut spending up and down the line. Defense, entitlements, discretionary. Everything.


Pain now, or a lot more pain later. Those are the choices.

But pro-growth policies are important also.

 
At 8/24/2011 12:59 PM, Blogger Mike said...

Hydra,

"If forty percent of the population, the lower paid portion, are busy voting themselves more goodies, how come they have only 4 to 6 % of the wealth?"

We've covered this. They aren't the same people. I'll say it again, social and income brackets are transient....in 10 years, the folks voting for freebies start to be the ones who vote against them.

 
At 8/24/2011 1:00 PM, Blogger juandos said...

"What does the ratio of excess social spending compared to excess defense spending have to do with anything?"...

Its called debt hydra and in this particular case 'massive debt'...

 
At 8/24/2011 1:08 PM, Blogger morganovich said...

"What you are complaining about is a free market in which the competition can afford to sell votes cheaper than you can."

that's ridiculous.

what's free market about me getting someone else to force you to give me money?

free markets involve voluntary transactions.

there is nothing voluntary about tyranny of the majority.

nice try, but your framing does not hold up to even cursory scrutiny.

 
At 8/24/2011 1:10 PM, Blogger morganovich said...

hydra-

i think you are in some denial about your position on the political spectrum.

we've all listened to you for months, and i feel i speak for most of us when i say: if you are not a lefty, then neither was karl marx.

 
At 8/24/2011 1:21 PM, Blogger Larry G said...

does the 900 billion we spend on the military go into an economic black hole?

that 900 billion ultimately gets spent on bread, milk, health care, cars, homes, etc... just as surely as it would be spent on the same thing if the taxes were rebated and they were then spent on big screen TVs.

right?

Look at Northern Va - one of the richest jurisdictions in the country - ...and the home of the Pentagon and the thousands of beltway bandits (contractors).. all "supporting our troops" and using their govt paychecks to supercharge NoVa's regional economy...

Every military base in the US and overseas is a tremendous economic "stimulus"....

So when you write that check to the IRS instead of for that big screen TV - the govt has essentially decided that the country needs a military more than you need a big screen TV

but from that point on - the money gets spent the same way... by whatever DOD employee that the govt hires to support the military.

but it's no different in terms of economic purpose than if that soldier was discharged and the govt decided to pay him to build bridges instead.

 
At 8/24/2011 1:27 PM, Blogger Paul said...

"If forty percent of the population, the lower paid portion, are busy voting themselves more goodies, how come they have only 4 to 6 % of the wealth?"

The question and the answer are both contained in your statement.

 
At 8/24/2011 1:31 PM, Blogger Paul said...

If this Keynesian crap worked, if it were just that easy, then there wouldn't be any poverty left anywhere on the planet. Any nitwit can go borrow a fortune and then hurl it at anything that moves. In the end you have a debacle like the 2009 stimulus.

 
At 8/24/2011 1:32 PM, Blogger Paul said...

I love how Larry is the world's biggest supply-side economics debunker, but he eagerly buys into Obamanomics.

 
At 8/24/2011 1:33 PM, Blogger PeakTrader said...

Larry says: "It's no different in terms of economic purpose than if that soldier was discharged and the govt decided to pay him to build bridges instead."

The U.S. military has a bigger purpose: To defend the empire and our allies in exchange for free goods.

 
At 8/24/2011 1:35 PM, Blogger Paul said...

"Look at Northern Va - one of the richest jurisdictions in the country - ...and the home of the Pentagon and the thousands of beltway bandits (contractors).. all "supporting our troops" and using their govt paychecks to supercharge NoVa's regional economy..."

Look at Bernie Madoff's house.

 
At 8/24/2011 1:39 PM, Blogger Larry G said...

hey.. I'm ASKING...

I think SOME supply-side "works"... sometimes depending on the economy... but I don't buy that supply-side can buy down a 1.5 trillion deficit until I see something more than the blather-butts fervent fair-tale beliefs.

I ALSO THINK that you cannot have a viable economy that is powered by govt jobs...

I ALSO do believe that the Food Stamps program is a scam...with way too many people getting food stamps...for way too long.

the original program was meant to be an emergency..temporary safety net not a way of life...

we have way too many people having kids they cannot support and they count on the govt to provide the and their their kids with food and shelter...

If you look at where many of the tax-funded entitlements go - they go to people with kids... who simply are incapable of financially caring for them.

It's bad enough that taxpayers pay 10K per kid to educate them.. but then they also have to fund subsidized lunches, food stamps and housing vouchers for their single moms who did not graduate from high school and cannot even afford day care so they can get a job...

these folks are breeding the country into financial oblivion.

 
At 8/24/2011 1:39 PM, Blogger PeakTrader said...

"If forty percent of the population, the lower paid portion, are busy voting themselves more goodies, how come they have only 4 to 6 % of the wealth?"

Because the Democrats are great politicians.

 
At 8/24/2011 1:41 PM, Blogger Larry G said...

" The U.S. military has a bigger purpose: To defend the empire and our allies in exchange for free goods."

that's not only not an economic argument - it's a totally subject one that others will say we should be using that money for bridges and solar panels - that they are a much higher and bigger purpose than squandering young people's body parts on forsaken regions of the planet that have little to do without anything more than our paranoid views about the rest of the world.

 
At 8/24/2011 1:41 PM, Blogger Buddy R Pacifico said...

Peak Trader states:

"The U.S. military has a bigger purpose: To defend the empire and our allies in exchange for free goods."

No, make that for the free exchange of goods. I pay for my imports with U.S. dollars; not by magical thinking.

 
At 8/24/2011 1:42 PM, Blogger Larry G said...

" To defend the empire and our allies in exchange for free goods."

How come China, Japan, Brazil and Ireland don't have that problem?

 
At 8/24/2011 1:43 PM, Blogger Stone Glasgow said...

They think they are voting for more wealth moving from the rich to the poor, but are accidentally moving money from everyone to the politically connected.

 
At 8/24/2011 1:51 PM, Blogger PeakTrader said...

Buddy, you pay too little for imports.

The "magic" is consuming more than producing, year after year.

 
At 8/24/2011 1:53 PM, Blogger PeakTrader said...

Larry says: "How come China, Japan, Brazil and Ireland don't have that problem?"

They're not superpowers.

 
At 8/24/2011 2:10 PM, Blogger Larry G said...

They're not superpowers.

ha ha ha

Britain, France, CHINA,JAPAN, etc.. ????

WTF?

we spend more on DOD on the NEXT 10 Countries COMBINED to defend WHAT?

I say we are defending paranoia...more than anything else.

other countries have no trouble "trading"..

China and Japan certainly do not...

Brazil and Ireland seem to be doing well with their trading...

so is Columbia who has signed FTAs with the European Union, eh?

so how many bases around the world does Columbia or Brazil or India have to "protect" their trade?

and who is it that funds our military? China...right?

so China sells us crap that provides jobs for their people and they loan us our own money back so we can deploy troops?

ha ha ha

makes perfect sense..eh?

 
At 8/24/2011 2:14 PM, Blogger Buddy R Pacifico said...

Peak Trader states:

"The 'magic' is consuming more than producing year after year"

The "magic" must be the black magic (voodoo) that drives chronic trade deficit ridden economy of Haiti.

 
At 8/24/2011 2:19 PM, Blogger juandos said...

"we spend more on DOD on the NEXT 10 Countries COMBINED to defend WHAT?"...

O.K. Larry G what do we spend on pandering to the parasites in this country compared to the next 10 countries you like to use in your example?

 
At 8/24/2011 2:34 PM, Blogger Larry G said...

are you saying it's a contest between the domestic parasites and the neocons parasites?

 
At 8/24/2011 2:44 PM, OpenID Sprewell said...

I've got an even better analogy: the Roman emperors used to slaughter cows to appease the gods when the harvest was bad, then leave the carcasses rotting in the streets so the gods could get to them. That is exactly what is going on today, the ignorant masses are being assured that "everything's under control" by throwing money down the drain. Just as the religious morons back then were too dumb to know that was just a big waste of valuable cows, the leftie morons today are too dumb to know that Keynesian "fiscal stimulus" is just a big waste of tax money.

As for Larry's notion of defense money coming back to us, the difference is that we now have a bunch of hugely expensive tanks and bombers that we'll never use, instead of home computers and clothes and other things people actually want and use. This is similar to how the housing bubble led to a bunch more houses being built than we needed, which is why home prices keep dropping for the last half-decade. Although I'm not sure how much Larry really supports such defense spending since he seems to contradict himself: my notion is that he likes it but thinks it could be spent more efficiently, though still on defense.

 
At 8/24/2011 2:50 PM, Blogger Sean said...

Another no-op.

From Junado's Sowell link:
"To the extent that FDR followed the ideas of any economist, it was an obscure economist at the University of Wisconsin who was disdained by other economists and who was regarded with contempt by John Maynard Keynes."

And from Barro:
"Obviously, I lean toward the latter position, but I am still hoping for more empirical evidence."

Not really, everyone has already made up their minds. Keynesianism is not belief in a perpetual motion machine: it is the belief that in times of trouble, it is easier to employ economic slack essentially by taxing "investors" who aren't investing to pay for spending than to wait for them to invest. The theory is clear, WWII is the Keynesian example even Milton Friedman accepted. Counter-examples prove it doesn't always work, but the strongest conservative argument has been that it is immoral and chancy, not that it's imaginary. I view arguments that it's imaginary as essentially anti-intellectual.

 
At 8/24/2011 2:56 PM, Blogger Hydra said...

i think you are in some denial about your position on the political spectrum.

we've all listened to you for months, and i feel i speak for most of us when i say: if you are not a lefty, then neither was karl marx.

===============================

Obviously you havenot listened then, but rather told yourself what you wish to hear.

I simply believe there is a cost and a benefit curve for every policy, just as there is a supply and demand curve for every product.

Regardless of my political proclivities, I am pragmatic enough to want to be at the minimum point where those lines cross. Too far Right or too far Left guarantess that my total costs will rise.

The problem with supply and demand curves is that not everything we use has ownership or costs associated with it, accordingly the market is hoplelesly distorted, right out of the gate.

On that basis alone, I cannot agree that a free, unfettered, darwinian market, devoid of government intrusion will somehow magically divine the best of all posible worlds. And history bears me out on that: we invented governments for a reason.

Certainly they can be improved and one way to do that is to eliminate socilaist policies where the costs exceed the benefits. But I do not see that only starving the beast til it expires is a workable plan to improve either government or my chances for a better life - all things considered.


Therein lies the problem: either you are not willing to consider all things, but only your narrow theory of how you want things to be, or else we have wildly different ideas as to the value of some things.

So, I have my idea of where the cost line and the benefits line cross. I will GLADLY move that position to the Right, when I see an argument that convinces me there is a better solution, all things considered.

Calling me a lefty or any other name isn't going to change my buying position.

So here is a little problem: if you tell me that taxes are extrortion and then complain that 51% pay no taxes, that we need fewer people riding in the wagon and more people pullig the wagon, what am I supposed to conclude?

I conclude that you are in favor of raising taxes and "extorting" more from the 51% that pay none now. That makes no sense to me so you have not sold me on a new position that I think improves my quality of life.

I am perfectly wiling to buy the idea that you grow the economy and hence governemtn revenue by decreasing taxes. But since the last thing you want is the government to have more revenue, assuming this idea ever succeeds, the next thing to happen is to cut taxes again.

I see a death spiral here with no way out, and I don't hear anyone saying that x% is the lowest (total, all things considered) tax we are willing to accept.

I figure that either there is some level of tax extortion you think is acceptable, or else you favor zero taxes, which you can argue till you are blue in the face, but I still don't see a path there that leads to an improvement in my life.

And I don't like the leftist ideas that promise me everything at someone elses expense any more than I like the Rightist ideas that that promise me more eventually by eliminating all expenditures today.

Sorry, no sale, either way. But I'm listening. I just echo back what I hear from you, and you don't like it. Your only response is to call me names.

I would suggest that if you don't like the echo, holler less and think more.

 
At 8/24/2011 3:01 PM, Blogger Hydra said...

I'll say it again, social and income brackets are transient....in 10 years, the folks voting for freebies start to be the ones who vote against them.

==============================

So you are suggesting that bootstrapping people till they have a chance to succeed works. Only then they develop amnesia.

If what is happening is really what you describe, I don't see the problem.

Only, if all those people are mobile and moving out of theos classes, where do all the replacements come from?

 
At 8/24/2011 3:06 PM, Blogger Hydra said...

The very second you pay one dollar in tax, that dollar is no longer a dollar. Since a fraction of that dollar goes to each department that collects it, directs its destination, distributes it and enforces all of the above, I don't see how a dollar in any department could ever be worth so much as a dollar.

==================================

How is that any different from a dollar you give a corporation? You give a dollar to a corporation and they give you 50 cents worth of product and keep the rest. If you buy software or music they give you 20 cents worth of product and keep the rest.

We agree that corporations provide benefits through central planning and economy of scale, and with a certain amount of waste in the process.

But if you have a governemtne corporatio it is suddenly ALL waste? Or substantially all waste?

 
At 8/24/2011 3:06 PM, Blogger morganovich said...

""If forty percent of the population, the lower paid portion, are busy voting themselves more goodies, how come they have only 4 to 6 % of the wealth?""

because if you know you get free goodies for life, why save/invest?

 
At 8/24/2011 3:07 PM, Blogger Larry G said...

" As for Larry's notion of defense money coming back to us, the difference is that we now have a bunch of hugely expensive tanks and bombers that we'll never use"

true.

and many of your colleagues here support that expenditure of money - at the same time they call very similar expenditures of money - dumb and wasteful.

I ask - what's the difference between a Tank and a Coast Guard Cutter or a intercity rail if the govt is paying for all of them?

what do any of them do for the economy if they are funded from tax dollars?

the pro-DOD folks say that - that money is for a "higher" purpose so they totally bail out of the economic argument and justify the wasteful DOD spending as "ok".

so once they make that argument, others will say that other things like roads and bridges are also a "higher purpose" , eh?

Food stamps are a "higher purpose" also..

eh?

 
At 8/24/2011 3:08 PM, Blogger Hydra said...

Apparently you forget that said politicos are using extorted tax dollars to buy those votes, not their own money...

===============================

And I think they use a lot of donated dollars to get in that position, also by buying votes.

Either way, we get the best politicians money can buy.

 
At 8/24/2011 3:13 PM, Blogger Hydra said...

Oh yeah! When people actually get the bill for the services they're getting from the federal government then they might think twice about the value of said services...

=============================

What is the point of sending a bill if they have no money to pay it?

That is WHY they are gettng tose services, remember?

 
At 8/24/2011 3:21 PM, Blogger morganovich said...

"How is that any different from a dollar you give a corporation? You give a dollar to a corporation and they give you 50 cents worth of product and keep the rest"

wow do you have a skewed view of the world.

why would you pay a company a dollar for somehting worth 50 cents? unless you valued it at more than a dollar, you wouldn't.

that's the nature of voluntary exchange.

you only trade your dollars for things you value more.

the wheat, processing, packaging etc that goes into a dollar of pasta may cost less than a dollar, but the finished product winds up worth more than the inputs.

that is called "adding value".

if you don't think they added enough value to be worth a dollar, you can buy the inputs yourself and make your own spaghetti or your own shirt or whatever else you want.

government does not work like that.

if you don't think they are adding enough value (or any at all) you cannot stop buying it. they throw you in jail if you do.

if a pasta company could charge $30/pound for low quality product and force you at gunpoint to buy it, then you'd have an equivalent transaction to government.

they do not have the value added check that private industry does. don't like the GM car value proposition, don't buy one. that forces GM to keep their value proposition acceptable to consumers.

government has no such check on their actions. they can take you money, burn half, give the other half to the non taxpaying public, and get reelected for destroying value.

that's like GM being allowed to charge half the population to give the other half cars.

imagine what the value proposition would look like in such a scenario.

 
At 8/24/2011 3:22 PM, Blogger Hydra said...

there is nothing voluntary about tyranny of the majority.

=================================

Where is the tyranny when this supposed majority controls 4-6% of the wealth and power?

BTW I agree that government has an OBLIGATION to protect its minorities. But protect them from what?

When you have a minority that controls 80% of the wealth and power, how much more protection do they need, and at what cost?

Show me the cost benefit plan here.

 
At 8/24/2011 3:34 PM, Blogger morganovich said...

the tyranny is that 1.5 trillion dollars a year is being reallocated. the folks paying have no say. the folks getting it outnumber them and vote it for themselves.

this 4-6% number you keep trotting out is meaningless.

it's the size of the transfer that matters.

by your logic, a mugger isn't stealing from you so long as he spends it all and doesn't accumulate savings. how can it be theft if he's not getting rich?

it's a bogus metric.

 
At 8/24/2011 3:36 PM, Blogger morganovich said...

"What is the point of sending a bill if they have no money to pay it?

That is WHY they are gettng tose services, remember"

51% of americans don;t have money to pay income tax?

BS.

the real number is maybe 10%.

that other 40% are getting an undeserved free ride.

10 years ago, 25% paid no income tax. that number has doubled in a decade.

that's absurd.

 
At 8/24/2011 3:41 PM, Blogger Hydra said...

why would you pay a company a dollar for somehting worth 50 cents? unless you valued it at more than a dollar, you wouldn't.

==================================

No, you are wrong.

I don't have to value it at more than a dollar. I may recognize it as a cheap piece of crap. But the fact remains that because of their size and central planning they can provide it cheaper than I can.

The salient point is that I value it more for a dollar than I would a marginally better one of my own manufacture that costs several times more.

But I am not doing that, I am not manufacturing my own sprinklers, so I settle for the lesser product and the loss in overhead to the company that provides them. But choice, no. At the end of the day I must have a sprinkler or some watering device.

You are offerig up a false choice as if we could do without this government watering.



Now, if the free market was actually willing to provide all the things that government does, we would not have to satisfice for that cheap government crap.

Over and over again, corporate enterprise has proven that it is not willing to produce those superior goods (say an above squalid living for those unable to earn one, and frequently even for those that CAN earn one), and so it falls to government.

If we think we as a nation of corporate enterprises think we can provide such a good environment that government is not needed (and do it cheaper), well, we have not shown that, yet.

 
At 8/24/2011 3:51 PM, Blogger Hydra said...

10 years ago, 25% paid no income tax. that number has doubled in a decade.

that's absurd.

================================

Not necessarily absurd. What is their slice of the total pie compared to ten years ago? How many have been laid off since then?

If it is true that they are getting a continually diminishing return on their investment in the national enterprise, why would you expect them to pay the same?

If it is true that the wealthy are getting a continually increasing return on their investment in the national enterprise, why would you not expect them to pay more?

 
At 8/24/2011 3:51 PM, Blogger Free2Choose said...

$1 in stimulus = $1.84 in benefits? HA! With the right multiplier, we could probably invent a perpetual motion machine.

 
At 8/24/2011 4:06 PM, Blogger Hydra said...

Pocket change?!?! Why should the richer pay a penny more for said government services than the so called poor?

Is there something in the Constitution that says those more successful in life should carry the less successful on their backs?

==================================

Are they realy more successful, or just getting a better return on their investment in government?


We both own share in a Vangurad fund. i own investor shares and you own Admiral shares. Why do you pay less per share and get a higher return? Same shares, should be the same cost, no?


We both fly on the seme airplane aisle seats in row nineteen one of us paid more for the ticket.


How are you going to convince me that every seat to every destination on the United States airline ought to have the same price?

 
At 8/24/2011 4:06 PM, Blogger Hydra said...

Pocket change?!?! Why should the richer pay a penny more for said government services than the so called poor?

Is there something in the Constitution that says those more successful in life should carry the less successful on their backs?

==================================

Are they realy more successful, or just getting a better return on their investment in government?


We both own share in a Vangurad fund. i own investor shares and you own Admiral shares. Why do you pay less per share and get a higher return? Same shares, should be the same cost, no?


We both fly on the seme airplane aisle seats in row nineteen one of us paid more for the ticket.


How are you going to convince me that every seat to every destination on the United States airline ought to have the same price?

 
At 8/24/2011 4:11 PM, Blogger Hydra said...

Paul said...
"If forty percent of the population, the lower paid portion, are busy voting themselves more goodies, how come they have only 4 to 6 % of the wealth?"

The question and the answer are both contained in your statement.


=============================

Cute. And actually a halfway good answer I might add.


So, if these clods are so inept at getting any goodies, what is the complaint, again? didn't we start by arguing that they outnumber us and keep voting themselves more?

We are still getting richer faster then them, right?

 
At 8/24/2011 4:11 PM, Blogger morganovich said...

"I don't have to value it at more than a dollar. I may recognize it as a cheap piece of crap. But the fact remains that because of their size and central planning they can provide it cheaper than I can."

that's absurd.

you are free not to buy it or buy from someone else. are you in the habit of buying "cheap pieces of crap" that you don't think are worth the price?

no wonder you wind up broke.

"The salient point is that I value it more for a dollar than I would a marginally better one of my own manufacture that costs several times more."

this is not the salient point at all. the salient point is that the purchase decision is yours. you have lots of vendors to choose from. if no one makes a pair of jeans whose value proposition you like, then you can not buy any at all.

you are mistaking "adding value" with forcing you to buy things.

if i can make better and cheaper shoes than you can and offer them to you at a price lower than you could achieve on your own, i am providing you a service, not oppressing you.

you have a really bizarre worldview.

offering you better and cheaper options than you would have otherwise and leaving you free to buy them or not as you choose is not oppressive in any way.

you act like you are getting screwed.

in fact, you are just severely deluded.

the rest of your argument is just incomprehensible entitled drivel.

i know you think you are entitled to the good life without work or skills, but someone has to pay for it. you act like it's private industry's job to give you a nice life.

that's marxist dogma.

we work, you get.

you are trying to describe your failure to develop skills and create value as a free market failure.

it's not, it's your failure.

you want to use the coercive power of government to try to compensate for your failure.

that make you a would be tyrant.

 
At 8/24/2011 4:13 PM, Blogger Hydra said...

because if you know you get free goodies for life, why save/invest?

============================

Umm. So you can be wealthy instead of poor?

 
At 8/24/2011 4:15 PM, Blogger morganovich said...

"Not necessarily absurd. What is their slice of the total pie compared to ten years ago? How many have been laid off since then?"

unemployment went from 5% to 9%.

that's way below 25%, much less 51%.

the wealthy are getting a better return on their investment in government?

are you insane?

the proposition gets worse every year.

0.1% pay 40% of taxes

10% pay 70%.

what are we getting for this that we didn't used to?

nothing.

we get less, not more.

it's a massively diminishing return.

it's getting so bad, many of us (myself included) are looking at leaving.

then you're really going to be screwed.

http://www.heraldsun.com/view/full_story/9639874/article-Dinner-for-ten--A-parable-of-tax-cuts

try reading this and see if you can understand what you would be tyrants are setting yourselves up for.

 
At 8/24/2011 4:16 PM, Blogger morganovich said...

"Umm. So you can be wealthy instead of poor?"

if they wanted to be wealthy, they'd work, not sponge off others.

 
At 8/24/2011 4:17 PM, Blogger Hydra said...

The money from a $5,000 tax cut for 100 million (existing) workers will be used more effectively and better allocated than $50,000 government jobs for 10 million people, for example.

==============================

Not proven. My $5k tgax cut might get blown on a caribbean vacation.

But those government workers can be coordinated in such a way to get something meaningful accomplished.

 
At 8/24/2011 4:22 PM, Blogger Larry G said...

Morg - would you pay a dollar for a nickel worth of product?

I bet you would.

is that 'value'?

When you buy something - the 'value' of it is determined by those who want it and if 99 people out of 100 will pay 99 cents for 2 liters of soft drink - most of them will think that's a real deal compared to the "regular" 1.79 price.

and if you buy that same product - 16oz of it for a buck at McDonalds.. you'll also think it's a "value".

you say the govt can't do what a private company can do when it comes to selling you a product.

how about a bridge?

would you prefer than private companies build bridges and roads and charge you for them?

 
At 8/24/2011 4:27 PM, Blogger Hydra said...

if they wanted to be wealthy, they'd work, not sponge off others.

==================================
So, being wealthy is an insufficient incentive to work. Why do you suppose that is?

Maybe because they get paid so little they have to sponge off others ANYWAY. You want them to work AND sponge?


How many of them got laid off last year?

Some would argue that it is the wealthy sponging off the workers. Having soaked up enough extra from their workers labors, employers can afford to lay them off, buy machines to replace them or hire the work out overseas.

And then complain that the workers are too lazy to work for nothing, or next to it, so that they too can be rich one day.

 
At 8/24/2011 4:28 PM, Blogger morganovich said...

larry-

you are using the wrong metric.

that's not value, that's cost.

value is created by utility, not input costs.

by your logic, and labor has no value.

what's the cost of a massage or of an artistic performance?

is the value of van gough's "starry night" just the price of paint and canvas?

what you call "a nickel worth of product" is a description of cost, not value.

the same soda is worth more at the beach that the grocery store.

you value it more there because you don't have to travel to get it. convenience has value.

cost of inputs is not the same as value.

mario batali can take 10 ingredients and create a valuable meal i'll happily pay for.

i can take the same 10 ingredients and make (for much less money) an inedible mess.

this should show you why input prices are the wrong metric for value.

 
At 8/24/2011 4:32 PM, Blogger morganovich said...

hydra-

you make my case for me.

that last rant was just more entitled whining.

it all boils down to "i lack skills so it's your job to work and support me"

it's the job of the individual to have marketable skills and trade them for what they want, not the job of industry to make sure you get paid what you think you are entitled to.

people who know how to create value have no trouble getting paid.

what you want is the reward without the work.

ironically, it's guys like you that cause marxism to implode.

 
At 8/24/2011 4:34 PM, Blogger Hydra said...

We've got to cut spending up and down the line. Defense, entitlements, discretionary. Everything.

================================

That is one answer. Or we could stand up and actually pay the debts we incurred, by taking more out of our pockets. Since the debt is mainly to ourselves, for things we already got, it does ot really make much difference.


The problem wth your argument is that it translates to YOU have to cut: my speding is for a critcal need.


We could just open the immigration gates, bring in a lot more people to pay taxes and dilute the payment of the debt that way.

 
At 8/24/2011 4:43 PM, Blogger Hydra said...

this is not the salient point at all. the salient point is that the purchase decision is yours. you have lots of vendors to choose from. if no one makes a pair of jeans whose value proposition you like, then you can not buy any at all.

===============================


No, I cannot. I can no more go naked than I can farm without irrigation. You are offering a false choice. At one time we did not have those government services, and the situation was so bad we decided we had to have them, bad as they were.

I could actually make my own sprinkler, but I accept the fact that because of central planning and organization and economy of scale the corporation can make one cheaper than I can EVEN IF IT WASTES MONEY ON PROFIT AND OVERHEAD that provides me no additional value in my sprinkler.

Despite that, and despite being a lesser product than one I might build build for myself, it may still be the lesser of two evils, one of which I must live with.

 
At 8/24/2011 4:45 PM, OpenID Sprewell said...

Sean, some of us have made up our minds based on the evidence. And yes, let's be precise about Keynesianism: it's the notion that in a recession a bunch of smart investors can herd together and become overly risk-averse, so we're better off if the government takes their money and spends it "where it's needed," which it presumably knows better than the smartest investors on the planet. Is that theoretically impossible? Of course not, we could have god as our president and the angels as our congress and they would know exactly where to best spend that money. But it is not in the least bit plausible because we see who's actually in congress and the presidency, the same dimwits who dump our money down the drain every year on bridges to nowhere and tunnels for turtles. The problem is that remedying "economic slack" means the dumbo politicos are much more likely to dump it down the drain on the current buggy whip makers, our car companies, because their unions have paid them off to do so. Because all this govt spending isn't really about economic efficiency, that's a fig leaf for the real issue: power. The cretins in govt want our power and backed by the handful of groups they pay off, they're willing to take it.

And WWII is no Keynesian example, as nobody prescribes killing millions of people and going to wartime rations as the solution. A clear examination of the historical evidence and all the other countervailing factors, like a demolished Europe and technological progress, shows that Keynesianism never works. Also, his prescription is never actually followed, as Keynes also prescribed paying the debt off when times are good, which the supposed Keynesians always forget and never do. Saying that arguments that Keynesian results are imaginary is anti-intellectual is anti-evidence. :)

 
At 8/24/2011 4:47 PM, Blogger Hydra said...

There are after all, dozens of governments. If you do not like this one you are free to "choose" some other one.

But like my sprinkler, or jeans, for practical purposes you do not get to choose to do without.

 
At 8/24/2011 4:56 PM, Blogger Hydra said...

The same dimwits who dump our money down the drain every year on credit default swaps against mortgage backed securities rated AAA, sell us insurance they have no intention of paying off on, and lend out 33 dollars for every dollar they have on the books.

There is plenty of stupidity in the corporate world too. The difference is that corporations are so insignificant that we can afford to let the stupid ones go extinct.

It is only in extreme cases that we let governments go extinct, like when someone like Saddam Hussein or Khadaffi or a close knit group of their families eventually ammases and plunders substantially all of the countries wealth.

 
At 8/24/2011 4:58 PM, Blogger Larry G said...

something caught my attention in the dialog between Hydra and Morg...

so I ask the question -

are good Corporations centrally planned?

and if the answer is yes - does that mean central planning is not the evil that some say it is?

 
At 8/24/2011 5:06 PM, Blogger Hydra said...

it's the job of the individual to have marketable skills and trade them for what they want, not the job of industry to make sure you get paid what you think you are entitled to.

============================

So much for free trade, then. What you advocate is one way trade.

 
At 8/24/2011 5:09 PM, Blogger Hydra said...

What rant?

All I said was I support the least cost solution. It is possible that the least cost solution may involve paying some people to stay out of our way.

If that is the case, I prefer that solution to a mantra that starts off, everyone has to work, no matter how pitiful their work is or the pay we give them.

 
At 8/24/2011 5:13 PM, Blogger Hydra said...

are good Corporations centrally planned?

and if the answer is yes - does that mean central planning is not the evil that some say it is?


==================================LLike any other policy, central planning has costs and benefits.

Too much one way or the other, and you are wasting resources.


If EITHER the Lefties or the Righties are wasting resources, then we had a chance to be better off for the work performed, and we blew it.

 
At 8/24/2011 5:15 PM, Blogger Larry G said...

if corporations that centrally plan are good, how come govts that centrally plan are not?

 
At 8/24/2011 5:15 PM, Blogger Sean said...

Sprewell,

The meaningful bits:
it's the notion that in a recession a bunch of smart investors can herd together and become overly risk-averse, so we're better off if the government takes their money and spends it
Essentially, yes.

"where it's needed,
This is not required, only a bonus. As long as the people who are paid to do the work, whatever it is, in turn spend the money on something useful (through the market), it's perceived as being more useful than "idle" money.

Of course not, we could have god as our president and the angels as our congress and they would know exactly where to best spend that money.
It is not necessary that the money be spent particularly well if and only if the alternative were for it to be hoarded in gold or otherwise sitting idle rather than spent or invested, and if savings are "excessive" for the purpose of hedging against losses.


that's a fig leaf for the real issue: power.
That government or any agency will use the license to act to serve its own purposes is, of course, a real problem.

And WWII is no Keynesian example, as nobody prescribes killing millions of people and going to wartime rations as the solution
This is why the example is useful: no one can claim the money spent was economically fruitful, yet it increased economic output during and even after the war. Private investment actually *was* crowded out during the course of the war, but it didn't prevent an improved economy after it ended.

A clear examination of the historical evidence and all the other countervailing factors, like a demolished Europe and technological progress, shows that Keynesianism never works.
I'm going to call that point moot: there's evidence both ways, and immense bias in the interpretations. It's just too easy to conflate the costs of a welfare state with the costs of high consumption based taxes, government over-regulation, various types of other fiscal and monetary policies, and the idea under consideration: Keynesianism.


Also, his prescription is never actually followed, as Keynes also prescribed paying the debt off when times are good, which the supposed Keynesians always forget and never do.
And yet this is the most important part of the theory! I'm going to grant that Keynesianism has failed the test as a political idea. Yet how can a "prescription never actually followed" be considered dis-proven by evidence as an economic idea?

I call accepting the right solution based on the wrong understanding anti-intellectual. One should not only understand what to do, but properly why.

 
At 8/24/2011 5:18 PM, Blogger Sean said...

Sprewell,

Fix: This is why the example is useful: no one can claim the money spent was economically fruitful,

To : This is why the example is useful: no one can claim that money spent to kill people should count as a directly positive thing economically. The only potential value in war is where it perversely serves the preservation of life,

 
At 8/24/2011 5:19 PM, Blogger Paul said...

"are good Corporations centrally planned?

and if the answer is yes - does that mean central planning is not the evil that some say it is?"


Good corporations are still subject to the whims of the marketplace. They rise or fall according to the value they bring to the consumer.

Obama style governance, not so much. Disaster ensues.

 
At 8/24/2011 5:34 PM, OpenID Sprewell said...

Sean, if it's "not required" to spend the money where needed, it is much more efficient to just cut taxes, as the money then goes back to the same people and you haven't wasted it on bridges to nowhere first. Of course, that'll never happen because the politicos then don't get to decide where to waste it first. If you're worried that they'll in turn "hoard" the money from the tax cut, the same is likely to happen with the money they were paid to build the worthless bridge. There is a reason why people "hoard," they don't see any good way to invest it. Taking it from them and throwing it down the drain doesn't solve that problem, it makes it worse, as we saw when FDR made the depression worse with similar policies. There come times when we're not sure where to invest so we spend time waiting or looking for the next opportunity: govt merely tries to contravene this basic economic fact. It is true that some claim that WWII "increased economic output" but an actual examination of the evidence shows otherwise.

You're right that the economy and so the evidence is very complex, but if you're going to prescribe govt "solutions" that you force on everyone else, you have to study what has been tried before first. And there have been plenty of natural experiments that tease out what our logic tells us first: the govt never knows best. One doesn't have to disprove Keynes's entire policy to show that the part of it that people actually want and implement, increased spending now, has never worked. Not sure what to make of your non sequitur about wrong understandings of the right solution, but we have enough problems getting people to even understand the obviously right solution! And the reason is because people like you are more interested in simplistic "solutions" that make them "feel good," ie tax the rich more to "help the poor," while all the time making things worse according to even their own supposed goals.

 
At 8/24/2011 5:37 PM, Blogger Larry G said...

" Good corporations are still subject to the whims of the marketplace. They rise or fall according to the value they bring to the consumer. "

indeed - but the question is - are the best run and most successful corporations centrally planned?

 
At 8/24/2011 5:49 PM, OpenID Sprewell said...

Hydra, of course there's stupidity in the corporate world but the credit default swaps actually paid off for those buying them (it was those selling the swaps that lost money), AIG essentially went bankrupt when they couldn't pay their insurance anymore, and Bear and Lehman were taken over or went bankrupt when they couldn't pay off their 33:1 leverage. What happened to the dimwits in govt, who can be shown to far, far dumber because of the hundreds of billions more money they waste? They got another couple trillion to play with because of dumb voters who they hoodwinked with boogeymen of Wall Street bankers! We don't "let" corporations go extinct and choose not to do so for govt: Saddam and Ghadaffi's govts forced themselves on their populace regardless of the consequences, until US intervention took both of them out. I actually think it's none of our business to intervene in either, although I did incorrectly think Iraq was justified at the time, but it certainly wasn't their people "deciding" otherwise.

Larry, that question's a layup. It is a perversion of the term "central planning" to say that corporations are centrally planned, because even the largest corporations are not "central," ie planned by a central entity like the govt, and have revenues of only a couple percent compared to the federal govt. And while one can argue whether most corporations are even "centrally planned" by their management, the biggest reasons are choice and the possibility of extinction. I can always choose to use Microsoft over Apple and either can always go out of business, but I can't exempt myself from the federal govt's services and there's certainly no known path to federal bankruptcy.

 
At 8/24/2011 5:53 PM, Blogger Larry G said...

Larry, that question's a layup

then you muffed it... for sure

it was a simple question.

Is Microsoft or Google or GE examples of centrally planned organizations....

I wasn't asking if you could sue them or anything else...

just that simple question...

yes or no...?

 
At 8/24/2011 6:06 PM, OpenID Sprewell said...

Larry, the only thing muffed was your understanding of the answer, as usual. :) I said that if you use the usual understanding of central planning, ie planned by a central, overarching authority, then no corporations are centrally planned. And that's because you can't escape central planning and it never goes away, while you can choose not to buy Apple or Microsoft and they will inevitably go bankrupt if they keep making bad choices. If you're such a fan of your definition of "central planning," ie top-down management with competition, then that means you're a big fan of federalism, where we get rid of the federal government and have all the state and local governments compete with their own top-down managements. Considering state and local govts have grown from 9.5% of GDP in 1950 to 20% today, all while federal spending has still gone up from 15% to 25% of GDP during the same timeframe, that means we could cut the bloated federal govt spending by 86% and still have that wonderful life we had during the '50s, that Sean extols. I agree with you two, let's do it! :)

 
At 8/24/2011 6:16 PM, Blogger Sean said...

Sprewell,

There is a reason why people "hoard," they don't see any good way to invest it.
Yes, but keep in mind, this defines the "demand" problem. People hoarding don't see a good way to invest and have no desire to spend it. The thesis is that there are people without money that would love to spend money. What they spend their money on would create demand, causing investment. That's not far-fetched, but it's likely not to be a good investment for the people actually paying, certainly not directly.

Taking it from them and throwing it down the drain doesn't solve that problem, it makes it worse, as we saw when FDR made the depression worse with similar policies.
As Krugman is wont to point out, the evidence is mixed here: the 1930's included periods of growth, and the policies employed were not coherent. Good argument against government, weak argument against the underlying effect in question.


an actual examination of the evidence shows otherwise.
I'll listen to this tomorrow, but quickly: I admitted government investment crowded out private investment, which rebounded when the war ended. I don't view that as a contradiction.

f you're going to prescribe govt "solutions" that you force on everyone else, you have to study what has been tried before first.
I agree.

And there have been plenty of natural experiments that tease out what our logic tells us first: the govt never knows best
Certainly our government has a poor track record, which is why I don't actually advocate Keynesian policy here.


One doesn't have to disprove Keynes's entire policy to show that the part of it that people actually want and implement, increased spending now, has never worked.
I think the evidence is that is has created both growth and a large hangover. Never actually saving has been a huge problem.

Not sure what to make of your non sequitur about wrong understandings of the right solution, but we have enough problems getting people to even understand the obviously right solution!
Keynesian policy ideas are based on effects that actually exist in reality and are useful in models. That does not make them good policy. Discarding or ignoring the models because you don't like the policy espoused by some of the people who use those models is called "prejudice", which contributes to functional stupidity.

And the reason is because people like you are more interested in simplistic "solutions" that make them "feel good," ie tax the rich more to "help the poor," while all the time making things worse according to even their own supposed goals.
If your reading comprehension were better, you would know this is the exact kind of thinking I despise. If you can strongly infer my opinions from my analysis, then I have erred by steering from analysis into propaganda.
I don't support Keynesian politics: they cannot be characterized as an effective solution to a clearly defined problem. But that's not because Keynes was an idiot who believed in fairies, but because there exists no body with the intellectual and moral authority that I would trust to use Keynesian principles to our benefit.

 
At 8/24/2011 6:23 PM, Blogger Larry G said...

.... " planned by a central, overarching authority, then no corporations are centrally planned"

ya'll really do live in a separate universe don't you?

if what you say is true - then what is a CEO and a Board of Directors?

 
At 8/24/2011 6:43 PM, OpenID Sprewell said...

Sean, the "demand problem" is an artificial framing that's merely an excuse for govt to steal money and throw it down the drain. "Demand" is low so we must get people spending, by hook or by crook, is precisely the type of simplistic notion that I was talking about last. Where does that stimulus money actually go? To bridges to nowhere or to prop up outdated auto union demands by letting them take over the car companies, which is the modern equivalent of bailing out buggy whip manufacturers. If you really believe consumers would make good decisions to buy stuff and that the govt "investment" is "likely not to be" good, then just cut their taxes: I notice that simpler solution is always ignored.

If you're depending on Krugman for evidence, no wonder you're so insistent on bias clouding the issues: the guy just flat out lies to mislead people because of his overwhelming bias. Why weren't the '30s policies coherent? Because democratic govt isn't coherent and can't be expected to help. If your underlying effect depends on govt control, it's a great argument against the effect. I could posit that theoretically Friedman or Higgs should be elected ultimate dictator and decide all economic policy till they die. The fact that such a plan would never actually work out in practice is far more damning than us "theoretically" being able to luck out and find the right person to make such decisions. So your argument is that WWII was so great because it made things so bad during the war years that the rebound after it ended felt so much better? Not much of an argument.

 
At 8/24/2011 6:45 PM, OpenID Sprewell said...

What is your evidence of recent fiscal stimulus causing growth or a large hangover? Isn't saving, ie hoarding, anathema to Keynesians anyway? I call it functional stupidity when some people try to impose dumb prescriptions from their stupidly simplistic economic models on the rest of us. If your reading comprehension were better, you'd know that I wasn't talking about you, only "people like you," ie those who hold up the fig leaf of potentially useful Keynesianism in the face of rampant govt stealing. You may not support Keynesian policy, but then why make their argument that theoretically it might work, if only we had a benevolent, omniscient dictator. Keynes was an idiot who believed in fairies- though to be fair he wasn't as dumb as those who actually implemented their version of his prescriptions- because his entire prescription is moot if there isn't a "body with the intellectual and moral authority that I would trust to use Keynesian principles to our benefit."

Larry, yep, we do live in a different world, one with reason and logic and where the meaning of words actually matters. Can a CEO or board of directors make you buy their product? No, they can't, but the govt can make you pay for all kinds of crap you don't want.

 
At 8/24/2011 7:37 PM, Blogger Hydra said...

Cmon sprewell, Steve jobs essentially was apple.

 
At 8/24/2011 8:18 PM, OpenID Sprewell said...

Hydra,

1. To give Steve credit for most of what Apple has done is to ignore all the great designers and programmers and especially marketers that contributed to their recent overwhelming success. That may fly in simplistic "business" columns written by journalists but not anywhere people actually examine these matters. In fact, I've been calling an impending Apple collapse for some time now, which I attribute largely to Steve's maniacally proprietary approach to intellectual property, so if you give him much of the credit, he'll get a lot of the blame too.

2. Even if you attribute all or a large portion of the credit to Jobs, the exception doesn't prove the rule. Far more boards overpay for "superstar" CEOs and get crappy performance.

 
At 8/24/2011 8:21 PM, Blogger Hydra said...

I still don't see your point. Corporations and even more so small businesses are centrally planned, and they seek advantage and growth same as any organization. They get that advantage through specialization, orgaenization, and economy of scale.

Every decision has costs and benefits. Borrow and expand faster, don't borrow, and someone else grabs your customers. Borrow too much and put the company at risk. Risk reward, cost benefit, supply demand.

No one and no company manages all of those things perfectly. No company ever managed things so perfectly that it obtained the maximum possible capital growth.

Government is fundamentally no different. Only as you point out, it is much harder to manage because there is so much to manage, so much money, as you point out. If it taxes too much and invests the money badly, then its citizens will not have as much opportunity or infrastructure to work with to meet their goals. If it taxes too little it wont have the money to do those things that private business cannot do, or will not do, or will do only if the government pays them to, but which must be done.

You have not convinced me there is any difference between government waste and corporate waste, or that corporations are any better at growing and protecting their business.

Every business has drone bureaucrats that show up, and do as little as possible. Plenty of moderately successful businesses survive for decades, by muddling through and selling an average product at an average price. Some businesses make even more money by selling inferior products at an inflated price, knowing full well this will put them out of business, right after the ownear retires, and reneges on the warranties sold.

Sorry, not convinced that government is a willfully evil slug sucking the juice out of plump perfect corporate tomatoes.

Nor do I buy the argument that this same incompetent government is controlled by a handful of politicos from the other party, who are smart enough to manipulate the entire political system and not smart enough to run it when they win.

 
At 8/24/2011 8:27 PM, Blogger PeakTrader said...

Hydra, a $5,000 tax cut for 100 million workers is more effective, to spur demand, and better allocates resources than a $50,000 job for 10 million people or the unemployed.

Large tax cuts have been more effective in the past to jolt the economy out of recession and into a sustained expansion.

Perhaps, some of the reasons are:

The tax cut would boost the private sector better than the government jobs, which would boost the public sector better.

When the money is used for 10 million government jobs, then it's not used for 100 million workers.

The government jobs are temporary, while the tax cut has a permanent effect (to strengthen household balance sheets, shore up the banking system, and raise private consumption).

The choices of 100 million workers may be much more efficient for the economy than the choices of 10 million people hired by the government.

 
At 8/24/2011 8:30 PM, Blogger Hydra said...

Of course there are many skilled people in the bowels of the company, and also drones, custodians that keep thing neat but produce little. Those people are interchangeable in most any company: human resources we call them to be used, replaced and upgraded only when necessary.

Government is no different.

 
At 8/24/2011 8:40 PM, OpenID Sprewell said...

Central planning has a very specific meaning and connotation, control by the govt. Just because some businesses may use some similar top-down management principles doesn't make them "centrally planned." And however top-down you may think they are, they ultimately have to pay the consequences, as you yourself note. Of course no company is managed "perfectly," so what? Nobody expects "perfection," whatever that means, from any of these entities. Government is fundamentally different because it has almost no competition. I can't just move to Canada and say I want to start buying your federal government's services now, they have all kinds of restrictions on that, not to mention having to uproot your family and entire life. Of course, things sometimes are so much better elsewhere that people do do that: my parents were immigrants to the US. So they are very few consequences to govt stupidity, because it is very hard for their "customers" to leave and the govt can never go out of business, as they can always just tax us more. Which explains why they're now taking 40+% of our economy and shitting much of it away. There is nothing private business cannot or will not do, because govt just is not necessary.

I have not convinced you of the difference between govt and corporate waste, because you are fundamentally innumerate and do not understand how trillions in govt waste that's never punished is much worse than billions in corporate waste that's usually punished. Of course, corporations have bureaucrats or do dumb things, that's why they go out business, if they're doing more dumb things than useful things. If only our federal govt had the same discipline applied. State and local govts do because it is much easier just to leave California. I was born in California but will never live there again. Who said anything about the "other party?" Both parties and most of their candidates are incompetent but one must at least vote for the candidate that's less incompetent. Um, smart enough to manipulate but not smart enough to run the govt: isn't that the perfect description of Obama? It's not about smarts, those are just different skills and knowing how keep a poker face while you lie to the populace is completely different than governing.

 
At 8/24/2011 8:48 PM, Blogger Hydra said...

Much is made of the difference between California and Texas. Customer/citizens are fleeing california for Texas and Arizona.
If Texas were a business it would be angling to acquire California. Except that is not allowed: the sales territories are defined by corporate/federal. As manager of Texas, the best you can hope for is to become CEO someday.

As far as I know there is no reason Texas could not offer to buy a piece of new mexico, being sovereign states. Just as the us bought Louisiana and part of Russia.....

You tell me, where does the analogy go wrong? What would a super corporation do differently from the us government, aside from disenfranchising its citizens/ customers?

 
At 8/24/2011 8:51 PM, Blogger Hydra said...

The other party was a reference to the idea that each think the other is incompetent. In other words the argument I make is not party specific. Sorry you did not get it.

 
At 8/24/2011 8:53 PM, Blogger PeakTrader said...

When there's a fall in private demand, the goal is to raise demand for private goods rather than create new demand for public goods.

 
At 8/24/2011 8:54 PM, Blogger Hydra said...

Corporate waste that is usually punished? You are kidding, right?

 
At 8/24/2011 9:05 PM, Blogger Larry G said...

anyone who walks into a WalMart or a McDonalds or GM or GE and doesn't realize they are centrally operated needs their head examined.

There is a reason why they all look very similar and operate virtually the same way...

 
At 8/24/2011 9:05 PM, Blogger Larry G said...

anyone who walks into a WalMart or a McDonalds or GM or GE and doesn't realize they are centrally operated needs their head examined.

There is a reason why they all look very similar and operate virtually the same way...

 
At 8/24/2011 9:06 PM, OpenID Sprewell said...

Again with the big govt, why does Texas need to take over California? People will just leave California until the remaining retards realize their stupidity and copy Texas policies, or go bankrupt. And you don't need the manager of Texas to take over California: a bunch of corporations headquartered in Texas can be ascendant and pay taxes there, while maintaining branch offices or sales locations in California and putting California corporations out of business. :) This is precisely what is about to happen to California because of increased competition driven by the internet. A "super corporation" only exists as long as people buy their products. Wal-Mart would go out of business tomorrow if even 20% of their customers stopped showing up. It takes a much larger number to vote against the direction our govt is taking, because of all the money that the govt funnels to various interest groups to keep backing the same politicians. They literally steal from Peter to pay Paul to vote for them.

Not sure what point you're trying to make about being party-specific, as you seemingly think that somebody does a good job in govt, but my argument isn't party-specific either: they're all incompetent. :D

 
At 8/24/2011 9:12 PM, Blogger Hydra said...

Sure, Enron is gone, but who got punished? Lays family kept millions in fraud money, untouchable because he died. And you think government is corrupt? Government is as corrupt as the corporations that use it. No more, no less. Where is the government incentive to be corrupt? Is it in the revolving door?

Why is government handing out goodies to the children who control 5% of the economy and not to the adults that control 80%?

Get at least a little bit real.

 
At 8/24/2011 9:16 PM, Blogger Hydra said...

The government funnels money to interest groups? Really? Then why am I on every solicitation list in the nation?

 
At 8/24/2011 9:21 PM, Blogger Hydra said...

You are correct, even if a very large percentage of the population favors a policy, it takes a long time for the policy to occur and be enforced. Not surprisingly, if a large portion of the wealthy population wants something to occur, it happens pretty fast.

Why is that? Because the government bribes the wealthy with money to make it so?

 
At 8/24/2011 9:29 PM, Blogger Hydra said...

Sorry you missed the analogy between the us and its states and a corporation with enforced sales territories.

Go back and try again. CA can lose customers and go broke. Then what?

The corporation would probably merge the failed sales territory into another, to save costs. Eventually you would have one huge territory under the most successful manager, and the customers would have no choice as to where to buy.

Just like government.

 
At 8/24/2011 9:34 PM, Blogger Hydra said...

The military defends That empire in exchange for free goods?

You mind explaining that? What does the military do with free goods and who provides them?

 
At 8/24/2011 9:44 PM, Blogger Hydra said...

The goal is to raise demand for private goods?

No it isn't. That would be a waste. If people don't want the goods, why would industry want to provide them?

I know. Lets get the government to require purchases, like seat belts or catalytic converters, and unleaded gas and gasahol, and health insurance. We can force the public to buy, all the while posturing against big government. The rubes will think we are on THEIR SIDE.

While we laugh our way to the overseas bank.

 
At 8/24/2011 9:47 PM, Blogger Hydra said...

So far I am an innumerate lefty Marxist.

Keep it up. You are convincing me to see things your way.

 
At 8/24/2011 9:50 PM, OpenID Sprewell said...

I could easily skewer the additional dumb arguments put forth by you two chuckleheads but you spend any time arguing with retards and you soon realize you're the only one wasting your time. I've had my fill, time to move on.

 
At 8/25/2011 2:48 AM, Blogger PeakTrader said...

Hydra, people always want goods, and they maximize their utilities given their budget contraints.

The free market responds well to demand. The U.S. is a consumer-driven economy.

The U.S. military is valuable, and countries will pay for it:

The World’s Reserve Currency
October 3, 2007

A country whose currency is the predominant reserve currency benefits tremendously.

In the case of the dollar, the U.S. benefits from the increased demand for the dollar that the reserve currency status creates.

Other countries give the U.S. valuable goods in exchange for dollars issued by the Federal Reserve.

They also lend the dollars they’ve accumulated back to the U.S. at low interest rates.

Most significantly, the U.S. benefits from importing these goods and exporting its inflation to other countries in the form of depreciating dollars.

 
At 8/25/2011 3:24 AM, Blogger PeakTrader said...

When the Roman Empire fell, the world had a thousand years of economic stagnation, called the Dark Ages.

 
At 8/25/2011 5:49 AM, Blogger Larry G said...

" The U.S. military is valuable, and countries will pay for it:"

totally bizarre and totally untrue

if that were true - why are we spending twice as much on the military than a decade ago and as a result spending 1.5T more than we are getting in revenues?

this sounds a lot like the "deficits don't matter" that neocons in the Bush admin loved.

 
At 8/25/2011 8:10 AM, Blogger morganovich said...

"if corporations that centrally plan are good, how come govts that centrally plan are not?"

this is a foolish canard.

first off, it contains several inaccurate assumptions:

corporations are not centrally planned. they are adaptive. they study best practices, listen to customers, and get constant feedback from the market.

this leads to the second big difference: they fail if they do not provide goods and services that people are not willing to pay for. government does not.

any corporation run like our government would have gone BK decades ago.

corporations compete with each other. government establishes monopolies.

corporations mys provide value to get revenue, government do not.

we are free to do business with corporations or not if we choose, not so with government.

it's a bogus comparison from top to bottom.

 
At 8/25/2011 8:14 AM, Blogger Larry G said...

" corporations are not centrally planned. they are adaptive. they study best practices, listen to customers, and get constant feedback from the market. "

then how come they have "headquarters" guy?

and how come McDonalds and Walmart all operate under the same policies and procedures - a classic top-down, command and control environment?

and we all know of examples of corporations that adapt and ones that don't... but virtually all of them are directed from a central authority.

Central Planning and flexibility/adaptability are not mutually exclusive you know...

 
At 8/25/2011 8:17 AM, Blogger Larry G said...

even small businesses are invariably central planned... unless of course they are co-opts or employee-owned .....

the military is centrally planned for sure....

so is the Red Cross and the Catholic Church...

Central Planning is common in most all entities public and private.. profit-seeking and non-profit or institutional....

Apple computer is a tremendous example of central planning....

eh?

 
At 8/25/2011 8:21 AM, Blogger morganovich said...

"Or we could stand up and actually pay the debts we incurred, by taking more out of our pockets. Since the debt is mainly to ourselves, for things we already got, it does ot really make much difference."

wow. what color is the sky on your world?

we have 61tn in unfunded liabilities and 14tn in external debt.

how do you propose paying $250k for every man, woman and child in the US? each family of 4 owes a cool million of after tax money.

sorry, but this money flat out does not exist.

we have made entitlement promises that cannot possible be kept.

even just paying down the external (bond) debt is getting to be implausible.

if we balanced the budget immediately (implausible) and spent 10% of GDP on it (half of ALL collected taxes at the federal level) it would still take us 18 years to pay it down.

that's 18 years of having half the current federal budget levels (of income, not spending)

that's about 1.1tn, a 2/3 cut in all non debt service spending.

we could do it if we eliminated the military, social security, and the whole medi program.

implausible as well.

you are making a claim you cannot possible back up.

show us your math of how this is easy to solve.

 
At 8/25/2011 8:29 AM, Blogger Larry G said...

the interesting thing is that we do pay interest on our debt and people, and countries, and Social Security cash in treasury notes every day... getting back their principle plus interest.

the debt is not a static thing.

it's "rolling"....

Social Security, for instance, buys thousands of treasury notes every week... and..at the same time redeems treasury notes to get back the principle - plus interest.

people say that these treasury notes are worthless IOUs...

au contraire!

check out how much SS got in interest:

Interest earnings 108.2 (billion)

http://www.ssa.gov/oact/TRSUM/index.html

 
At 8/25/2011 8:32 AM, Blogger morganovich said...

larry-

that's ridiculous. you are demonstrating that you know as little about business as you do about value creation.

so anything with a headquarters is "centrally planned"? come on lar, just think for a minute.

mcdonalds is a FRANCHISE model. the stores are not even centrally owned.

apple has CEO, sure, and he's very habds on, but lots of other managers make decisions and they get tremendous feedback from customers. they have independent divisions.

but you are missing the key point:

apple faces tons of competition. if they fail to please customers, they go away. it nearly happened to them once already.

miss a new technology, and android, microsoft, rimm, smamsung, and HTC are all over them.

they must adapt or die.

government is no like that. they can keep destroying value until no one will lend to them anymore, then they can print money until we are zimbabwe.

equating a corporation to a government is absurd. all your transactions with a corporation are voluntary. not so a government.

imagine if GM could arrest you if you didn't buy their cars.

perhaps that will drive home just how different government and business is.

central planning only works to a point.

for a small or highly focused company, it can work. but for a big company, like GE, it doesn't. it's too much for anyone to plan.

the further you are from the place where your policies have effect, the more likely you are to make mistakes and the less likely to realize it.

that's always the trade off in centralization.

if a company like GE is too bog to be planned centrally, then imagine what the US would be like.

amplify that by adding coercive power, and you get a disaster.

 
At 8/25/2011 8:36 AM, Blogger morganovich said...

larry-

SS does not mostly consist of treasuries.

it consists of intergovernmental IOU's, which are not the same thing at all. they are largely not paying interest. that's one of the reasons that my SS contributions get a negative nominal rate of return. we pretend there is a "trust fund", but htere isn't. there is a pile of slips of paper that say "borrowed $100 billion. pay you back one of these days. - the EPA"

regardless, it's a sum that cannot possibly be paid.

tell me how we meet a $75 trillion obligation.

first we have to balance the budget, then we need to find the cash.

so lay it out for us.

how do we do it?

 
At 8/25/2011 8:44 AM, Blogger Larry G said...

" mcdonalds is a FRANCHISE model. the stores are not even centrally owned."

some are and most WalMart are .. but BOTH are operated via strict down-town rules...

you don't follow the top-down rules, you lose your franchise.

 
At 8/25/2011 8:45 AM, Blogger Larry G said...

" amplify that by adding coercive power,"

isn't that what McDonalds does to it's franchises?

 
At 8/25/2011 8:51 AM, Blogger Larry G said...

morg -

here's how the SS trust funds earn interest:

http://www.ssa.gov/cgi-bin/transactions.cgi

tell me how we meet a $75 trillion obligation

http://www.ssa.gov/OACT/solvency/provisions/index.html

but SS is not a major part of the CURRENT Deficit right now anyhow.

so why must we deal with future SS issues rather than the things that are now at the root of the 1.5T deficit?

why do we focus on SS and ignore the current 1.5T deficit?

 
At 8/25/2011 9:10 AM, Blogger Sean said...

Sprewell,


Sean, the "demand problem" is an artificial framing that's merely an excuse for govt to steal money and throw it down the drain
This paragraph is phrased as an opinion based on ignorance rather than an analysis, and rightly so.

If you really believe consumers would make good decisions to buy stuff and that the govt "investment" is "likely not to be" good, then just cut their taxes: I notice that simpler solution is always ignored.
The fact that you think this is novel or ignored shows you are ignorant of liberal discussions of when and why this is a good idea.

If your underlying effect depends on govt control, it's a great argument against the effect
I have admitted this argument as valid, but it's not the whole story.

The fact that such a plan would never actually work out in practice is far more damning than us "theoretically" being able to luck out and find the right person to make such decisions
Unless your goal is to understand economics rather than to propose policy.


So your argument is that WWII was so great because it made things so bad during the war years that the rebound after it ended felt so much better?
No, my argument is that employing people, even inefficiently, had long term economic benefits because it integrated people into the economy that were otherwise unemployed.

What is your evidence of recent fiscal stimulus causing growth or a large hangover?
I think over 30 years of debt spending caused both growth and hangover. The Obama stimulus was barely a blip in the trend.

Isn't saving, ie hoarding, anathema to Keynesians anyway?
No, the key understanding is that saving is inefficient, not bad. Any engineer should understand tradeoffs between efficiency and redundancy. Yet saving during good times is still more efficient than continually paying debt.

. You may not support Keynesian policy, but then why make their argument that theoretically it might work
Because the scientific mind is concerned with understanding reality, whether or not those understandings have direct applications now.

Keynes was an idiot who believed in fairies
How very perceptive! By the way, I'm about halfway through Higg's case, and while he makes some interesting points, they so far haven't done much to justify the overall argument.


If your reading comprehension were better, you'd know that I wasn't talking about you, only "people like you,
How are these people like me? Presumably in the sense that they share the beliefs you suppose I hold.
You are not Hydra. Don't make muddled statements.

 
At 8/25/2011 9:18 AM, Blogger morganovich said...

larry-

i'm talking about wntitlement payments as a whole, clearly the medi program is a much bigger problem than SS, but both are going to be bankrupt.

the 1.5tn deficit you describe is an accounting fiction produced by the absurd not quite cash accounting the government uses.

using GAAP, the deficit is more like $5tn.

that extra 3.5tn comes from unfunded entitlement liabilities.

that's why we need to focus on them.

"balancing" the budget this year when you have run up $3.5tn in future debt is like claiming to balance your own finances by running up credit card debt.

growth in liabilities dwarfs the cash deficit.

even now, SS, medi, and debt service at 77% of federal income.

it's what's sinking us.

there is no plausible way to cover those costs without heavy cuts to entitlements.

note that it gets even worse if you include the states. then the number jumps to $144tn in unfunded future costs.

add in state and federal debt, and and you're at $2.3 million per family of 4.

how do you plan to pay your own personal $570k larry? that's what, $712k pre tax? that's 18k a year over a 40 year work life even if it stopped compounding now. (in reality it would wind up being more like $30k).

you ready to cut your check?

think the average american is?

it's unpayable, pure and simple.

you're talking about 50-60% of household income for 40 years.

 
At 8/25/2011 9:20 AM, Blogger morganovich said...

"isn't that what McDonalds does to it's franchises?"

no.

when was the last time mcdonalds came to your house and said they'd throw you in jail if you didn't by a franchise?

 
At 8/25/2011 9:22 AM, Blogger Larry G said...

"
the 1.5tn deficit you describe is an accounting fiction produced by the absurd not quite cash accounting the government uses.

using GAAP, the deficit is more like $5tn.

that extra 3.5tn comes from unfunded entitlement liabilities.

that's why we need to focus on them"

no you don't.

you PRIORITIZE and deal with the near term threats FIRST as you pursue concurrently the longer term issues.

You don't ignore the short term threats to go after the long term ones...

 
At 8/25/2011 9:26 AM, Blogger Larry G said...

it's unpayable, pure and simple.

you're talking about 50-60% of household income for 40 years.

not according to the supply side idiots...

eh?

the mantra is that we are deep in dept and adding to it at the rate of 1.5T a year.

Anyone with half a brain knows you have to deal with the 1.5T first.

after that... if you have increasing GDP.. and you keep a balanced budget.. you'll gradually reduce the debt...

but right now, we are hemorrhaging at a rate that is exceeds what we take in - in income taxes...

1.5T verses 1.3T

 
At 8/25/2011 9:29 AM, Blogger Larry G said...

"isn't that what McDonalds does to it's franchises?"

no.

when was the last time mcdonalds came to your house and said they'd throw you in jail if you didn't by a franchise?

when is the last time McDonalds Headquarters told a Franchise " do as I tell you or you lose your business"?

would you call that "coercive"...."central planning"?

evil, evil,

 
At 8/25/2011 9:39 AM, Blogger morganovich said...

larry-

the fact that you cannot see the difference between a franchise having rules and government coercion makes me question your intellect and judgement.

if mccorporate says "you need to have mcrib" franchisees are free to say "no".

so not only are you factually incorrect, but you are missing the whole point.

a mcfranchise is a contract, freely entered into by both sides.

you know the rules when you sign up.

you decide they look attractive, and you sign up.

if, at any time, you change you mind, you can sell out or just walk away.

try that if you don't like how your income taxes are being spent or the new OSHA rules.

 
At 8/25/2011 9:42 AM, Blogger morganovich said...

larry-

that's an absurd framing.

dealing with the 1.5tn first can ONLY happen if you stop the 3.5tn a year in new liabilities. where do you think next years 1.7tn cash deficit comes from?

you need to stop incurring liabilities before you can stabilize that cash situation.

if we were cash neutral right now, we'd still be piling on 3.5tn in liabilities, which means MORE cuts next year just to get to flat again.

you are talking about bailing the boat when what we need to do is fix the hole in the bottom.

 
At 8/25/2011 9:45 AM, Blogger Larry G said...

you know the rules when you sign up

sort of...

they can change...

and do....

but I'll admit that "coercive" central planning for corporations and franchises is not the same as coercive taxes...

 
At 8/25/2011 9:48 AM, OpenID Sprewell said...

Sean, if you can't understand how "aggregate demand" is an idiotic way to look at the economy, you can call it only an "opinion" and not "analysis" if you like- what's the difference again?- but that doesn't change the fact that that framing has been shown to be dumb by many economists. Wait, liberals want tax cuts? These are the same people who wanted to raise taxes with the debt ceiling, right? The only story you need is that the dimwits in govt don't know how to spend Keynesian stimulus, period. Nobody's trying to "understand economics" when talking about Keynesian policy prescriptions, as economics isn't about govt interventions. You can make up supposed market failures, all while ignoring myriad govt failures, but none of it has much to do with economics. I suggest you actually read something about how bad life was during WWII, and if you read Higgs, you'll see that it's perfectly clear that what caused the postwar boom had nothing to with wartime policy.

30 years of debt spending averaged 4-5% of GDP every year, that wasn't the problem. It's the mammoth govt spending overall that's the problem, and both have now reached unprecedented levels under Obama. The notion that you can "engineer" an economy to be more "efficient" is what's ignorant. Both savings and investment are natural responses to what people think is happening in the market, which the govt monkeys with at our peril. It's not "science" to make fantastic claims about human nature and the ridiculously tiny possibility of Keynesianism ever working, even if you then admit it won't work in practice. Keynes was at best a useful fool who desperately desired influence, as Hayek noted, and was willing to offer whatever intellectual construct would get him there. That marks him as a particular kind of idiot, considering he himself was then disappointed with the results.

The Keynesians are like you because they keep talking about the theoretical possibility that it might work in the face of rampant evidence that it doesn't work. Even Obama's own economists, like Romer, wrote papers on how the infamous Keynesian multiplier didn't exist, only to throw all that out when power came calling. I don't have to know what your larger beliefs are to tee off on your defense of the "theoretic possibility" of dumb Keynesian precepts working, then point out that the people who do whole-heartedly espouse those precepts are deeply misguided. Perhaps you're one of them, perhaps you're not, and you certainly haven't bothered to pick a position, but I've made very clear what I think of what you've said and that position. ;)

 
At 8/25/2011 9:49 AM, Blogger Larry G said...

" you are talking about bailing the boat when what we need to do is fix the hole in the bottom"

ha ha ha..

you're a RIOT Morg...!!

the HOLE in the boat that is bringing more and more water in every year is the 1.5T deficit...

the water that is already in the boat is the debt.

you have to plug the hole which is what you are bleeding every year.. FIRST....

Every balance budget plan proposed says the same thing including Ryans...

cut the deficit.. not only to balance but more than balance so that you can start to buy down the debt.

what good would it do to buy down the debt if you still are bleeding 1.5T every year?

you got it bass ackwards guy..

no wonder you anti SS guys are so screwed up...

you'd bet paying down your mortgage while your credit card was growing a bigger and bigger balance...

:-)

 
At 8/25/2011 9:58 AM, Blogger morganovich said...

larry-

wake up and smell what you are shoveling.

what do you think 3.5tn a year in new liabilities does?

it creates future cash shortfalls.

thus, the only way to durably stop cash shortfalls it to rein in the new liabilities you are creating.

let's look at a simple flow chart:

create a liability ---->
incur cash loss in the future ----->
add to monetary debt.

you are claiming we need to fix step 2 without fixing step one.

that's impossible in any durable fashion.

by boat metaphor is quite apt.

you think bailing is enough, but don;t want to fix the hole.

what are you going to say when it keeps filling back up with water?

you are focusing on a cash deficit and ignoring where it comes from.

 
At 8/25/2011 10:04 AM, Blogger morganovich said...

think about this this way.

imagine we balance the cash budget.

there is ZERO new debt created in 2011.

but, we run up $3.5 tn in new liabilities for entitlements.

what happens in 2012? some of those new entitlements come due. even if we keep the previous balance, it's not enough. we're in cash deficit again.

so you cut again.

then you run up $4tn in new unfunded liabilities.

in 2013, you're in cash deficit again.

repeat until entitlements alone exceed revenues.

add in debt service, and this is projected to happen in less than 30 years.

your solution is no solution at all.

it's a quick fix that cannot work durably.

 
At 8/25/2011 10:07 AM, Blogger Larry G said...

" what do you think 3.5tn a year in new liabilities does?"

it does NOTHING RIGHT NOW guy...

RIGHT NOW - the immediate damage is the 1.5T that you may have noticed has direct impacts on our debt limits...

the tea pots were demanding IMMEDIATE CUTS.. to NOT ADD to the debt..

in other words deal with the 1.5T FIRST...

you have to deal with the immediate threat first because the immediate threat is what is ADDING to the Longer term liabilities.

Every year you don't deal with the 1.5T - you GROW the longer term liabilities!

this explains why you guys don't want to deal with the current deficit...though..

ya'll are totally bass ackwards...

you'd pay down your mortgage rather than pay off your credit card..

no wonder ya'll are so screwed up.

you have to deal with the immediate deficit first...

no reasonable person who is offering a balanced budget proposal.. the two deficit commissions, Ryan, Obama and Ron Paul... are saying what you are saying..

all of them are dealing with getting rid of the 1.5T FIRST.

 
At 8/25/2011 10:11 AM, Blogger Larry G said...

but, we run up $3.5 tn in new liabilities for entitlements.

Morg - are you forgetting that we are paying INTEREST on the deficit and debt...????

your unfunded liabilities are future debt ...

IF YOU DO NOT DO SOMETHING ..

which is what SS reform is all about...

if you REFORM SS NOW - the unfunded liabilities go away...

but if you don't deal with the current deficit - it ADDS to the DEBT which if you do nothing about it will make the unfunded liabilities look like chump change.

The interest we pay on the debt is going to DOUBLE in about a decade if we don't get rid of the 1.5T and start paying down the debt.

Every budget proposal to date says the same thing... deal with the 1.5T NOW.

 
At 8/25/2011 10:32 AM, Blogger Sean said...

Sprewell,

but that doesn't change the fact that that framing has been shown to be dumb by many economists
I've read some "shootdowns" of the Paradox of thrift, etc, but none of them have been solid so far.

Nobody's trying to "understand economics" when talking about Keynesian policy prescriptions, as economics isn't about govt interventions.
If it isn't, then it's not about reality, because such things occur. The free market is a useful model, but it doesn't exist.


You can make up supposed market failures
For the market to fail, it must have a goal.

all while ignoring myriad govt failures
I do not ignore them. And myriad is a noun.

It's the mammoth govt spending overall that's the problem, and both have now reached unprecedented levels under Obama
Entitlement spending is the problem, and Obama did not invent it. We would have no problem balancing a budget if we didn't have existing commitments to medicare and Social Security. Obamacare adds fuel to the fire, but please don't pretend there's any problem we're facing to day which is "new" other than debt de-leveraging.

Both savings and investment are natural responses to what people think is happening in the market, which the govt monkeys with at our peril.
It is perilous to monkey with the market. Even more perilous than building a combustion engine or sending people to the moon.

then point out that the people who do whole-heartedly espouse those precepts are deeply misguided
People whose perceptions of reality are shaped by their philosophy do tend to be misguided in one area or another. That's why I listen to a variety of sources, to try to filter out the insights from the crap.
Liberals carry a lot of useless baggage, but don't think Conservatives don't.


It's not "science" to make fantastic claims about human nature and the ridiculously tiny possibility of Keynesianism ever working, even if you then admit it won't work in practice.
It is science to posit behaviors and relationships, then test those hypotheses in small pieces, trying to isolate other effects. Behavioral economics is a promising field: we've shown that people are not only often not rational, we're irrational in very predictable ways. Knowing the biases of our nature, we can correct for them.
I don't favor huge experiments with giving away freedom on the basis of half-baked theories, but I am very much against throwing away knowledge and ideas because they didn't work perfectly under complicated circumstances. Half of my chemistry labs didn't work in college because the water was dirty, the concentrations of the ingredients were off, or because I made some small mistake, and yet I have not declared opposition to Chemistry. Imagine if the first experimenters did?

 
At 8/25/2011 11:02 AM, Blogger morganovich said...

larry-

my whole point is that SS and particularly medi need to be reined in sharply.

you are the one who seems to get upset about that idea.

it is IMPOSSIBLE to deal with the current deficit without dealing with them.

it is also impossible for any balance in the current deficit to be durable while running up unfunded liabilities.

solving the 2011 deficit only to have it pop up again in 2012 because you only treated a symptom and not the disease is meaningless.


increases in US debt service are TINY compared to the liabilities we are running up.

if we take a 3% interest rate, we run up $1.3tn X 3% = $39bn in service costs a year.

that's 1.1% of the unfunded liabilities were are running up.

your math looks pretty suspect.

the solution is easy (fiscally), it's just currently politically impossible.

take the SS age to 72 and means test it.

bingo, 2/3 cost savings.

take medi and turn every bit of it into HSA cash grants.

make it work like food stamps, not a government sponsored amex black card you can take to the grocery store.

this will not only rein in overuse, but will also make costs predictable and introduce an incentive to shop based on price and value making overall healthcare cheaper.

medicare part B is a disater.

you cannot sell $1200/mo insurance for $120 and expect to do anything but lose your shirt.

it needs to go to an HSA system.

perhaps we can afford some high deductible insurance ($10kish), perhaps not. that depends on actuarials i'm not familiar enough with.

that would solve the unfunded liabilities issue and thereby the deficit issue as well.

it's a shame that we have nothing like the political will to do it.

once you get voters used to free stuff, it's very difficult to get them to vote to give it up.

i fear we are going to hit this wall having never even tapped the brakes.

the fact that recent reductions in spending increase are being called "cuts" tells you everything you need to know about how disingenuous or politicians are.

only in DC could a 4% increase be called a "cut".

 
At 8/25/2011 11:18 AM, Blogger juandos said...

hydra's marxist attitude comes simmering out: "Some would argue that it is the wealthy sponging off the workers"...

Yeah sure, its always nice to want someone else's money...

In this country if one feels that one's efforts aren't duely appreciated by the right amount of monetary renumeration than that person can pack up and take his/her services somewhere else...

 
At 8/25/2011 11:31 AM, Blogger juandos said...

hydra this is hilarious!

"Are they realy more successful, or just getting a better return on their investment in government?"...

What the hell are you talking about?

So the successful in our country are all gaming the government, eh?

"We both own share in a Vangurad fund. i own investor shares and you own Admiral shares. Why do you pay less per share and get a higher return? Same shares, should be the same cost, no?"...

Absolutely NOT! We both go into the Vangard store and buy a particular type of share... If you bought what seems to you at a later date the wrong kind of share then who's fault is it and why should someone else need to compensate you for your poor decisions?

"How are you going to convince me that every seat to every destination on the United States airline ought to have the same price?"...

Wouldn't even dream making such a silly argument...

The lifespan on a seat on a particular flight to a particular destination is very short... Those who buy in first tend to get the better prices especially when its a popular destination...

 
At 8/25/2011 11:58 AM, Blogger Hydra said...

"Cosmetologists defending their occupational turf doesn’t contribute measurably to the wealth gap but physicians, lawyers, physical therapists, optometrists and other higher-end professions defending their turf does. Just one more example of how the rich and privileged wield the coercive power of government to stay rich and privileged. "

===============================

Yes, The privileged do get more mileage out of their use and control of government, and should pay more for it.

Not to say that ability does not play SOME role, but as pointed aout above, there are plenty of well paid CEO failures.

 
At 8/25/2011 12:01 PM, Blogger Hydra said...

The shares are EXACTLY the same, in that they both represent pieces of exactly the same underlying companies. The difference is only the allocation of the management costs for the allocation of management costs.

The point being simply that it is not unusual to pay different prices for essentially the same thing.

 
At 8/25/2011 12:03 PM, Blogger Hydra said...

Wouldn't even dream making such a silly argument...

==================================

Of course not. It underminds your preferred belief.

 
At 8/25/2011 12:10 PM, Blogger Hydra said...

it is IMPOSSIBLE to deal with the current deficit without dealing with them.

=================================

No it is not impossible. Some adjustments need to be made, but making sharp immediate adjustments to current recipients will violate promises previously made and help make the governemtn exactly the sort of untrustworthy partner you wish people to see it as.

You are selling a self-fulfilling prophecy.

Clearly, the longer life spans imply we should increase the age of retirement, for future retirees, and do more to encourage other supplemental savings.

Means testing social security strikes me as exactly the kind of tax increase onthe wealthy that you think is unfair.


One thing we can do to deal with the deficit is throw open the immigration doors and admit another 20 million people. That would immediately solve the housing glut, and add a lot more taxpayers to pay the debt, and those people would reuire a lot more goods and services, boosting the GDP.

 
At 8/25/2011 12:18 PM, Blogger Hydra said...

"Some would argue that it is the wealthy sponging off the workers"...

Yeah sure, its always nice to want someone else's money...

==============================

Did not say that was my attitude, hence the third person.


If a worker does work for me, I get some of the value and he gets some of the value. It is wrong to assume that it is ALL my money, and he gets paid for labor, or at least that is only one way to look at it.

Where are the rules of thumb that describe the usual and customary ratios of what he should get and what I should get, based on my provision of tools, space, marketing, and planing, and his skill in executing the work?

Or should I just pay him the minimum amount that will keep him on board, regardless of his contribution and mine?

 
At 8/25/2011 12:19 PM, Blogger morganovich said...

hydra-

your assumptions are absurd.

let's say you are a talented chef, and i am a mediocre one.

we open restaurants right next door to each other.

you wind up making $200k a year from you hit new restaurant.

i make $50k from my less successful one.

you pay 5X what i do in taxes.

so what are you getting for it?

what benefits do you get that i do not?

you trot out this "the rich get more" crap over and over, but you can never provide any examples.

i probably pay 50x what you do in taxes.

what do i get?

it's the same federal highways, FAA, FDA, military, FBI etc.

i get negative nominal return on FICA for SS, you get positive returns.

i pay far more for the same medicare, and and never going to use the medicaid or unemployment benefits i am paying for. the FDUC is funded by fees on my deposits, but even then, most of my accounts are not insured.

you get all kinds of things i don't.

what do i get that you don't?

you'd expect a $5 million house to be MUCH better than a $100k house.

that's the difference in my taxes and those of the average American.

so what am i getting that looks even remotely like the difference between a 12,000 square foot palace and a tract home in Boise?

i have no additional say in government. i get no access. no extra vote.

what i do get is told that 50X the average is not paying my fair share and have efforts made to raise my taxes still further and hounded by rabid populists who hate the idea of the success of others and foment class war to get elected.

i've asked you this question about 9 times, and you have never had an answer: what do i get that warrants such a greater price?

you're just a sandbox marxist with severe entitlement issues.

you have no real answer, just dogmatic repetition.

 
At 8/25/2011 12:21 PM, Blogger Hydra said...

In this country if one feels that one's efforts aren't duely appreciated by the right amount of monetary renumeration than that person can pack up and take his/her services somewhere else...

==================================

Only theoretically true. From a practical aspect, prequently a worker cannot just pack up and find a better position.

A common argument, but only a partial reality, spun from what benji calls the dunceworks.

 
At 8/25/2011 12:27 PM, Blogger Hydra said...

take medi and turn every bit of it into HSA cash grants.

==================================

You really are out of your mind.

This is completely unworkable because of the vast differneces between ordinary and catastrophic care.

Talk about politiclly unworkable, this would last a week, before the pathetic stories start to hit, and people would demand change.

This is justa one size fits all death committee: once you spend your money, goodbye.

 
At 8/25/2011 12:47 PM, Blogger Hydra said...

i make $50k from my less successful one.

you pay 5X what i do in taxes.

so what are you getting for it?

what benefits do you get that i do not?

===============================

We have been through this. You can only concieve of one way of taxing ins a way that you consider fair.

I can conceive of many ways, that Might be fair. The isssue is NOT what tax system is fair, but rather how we choose to evaluate fairness. Likewise, how do we evaluate the value of a human life or days of morbidity?

It is important, because once you choose one of those systems and apply it consistently, it affects the price of everything.


If you are going to test a piece of equipment, you first have to know what job it is supposed to do. Then you design pass and fail criteria, for whether it is doing the job. Then you devise a test that can distinguish those pass fail criteria, and THEN you design the equipment.

You have simply chosen your favorite or available equipment, declared that Jonhn Deere is the best, and defined a test you know it will pass.


There is no point in needing a thousand point beaking load and testing it with a 100 pound strain guage.


You can holler all you want about what you think is fair, but it matters not unless it is pretty generally perceived as fair. to understand that we need a fundamental understanding of what trips the switch that says "hey, unfair".

We know that people eperience the pain fo a bad outcome, more than the pleasure of a good outcome, and bad economic decisions are frequently made that way. We have tests that can measure such things.

I don't think your argument passes the test. Do I have one that I think does? Nope. But I can think of many that might ought to be evaluated equally with yours.

 
At 8/25/2011 12:51 PM, Blogger Hydra said...

you have no real answer, just dogmatic repetition.

==============================

My dogmatic repetition is that there is a cheapest and best way to pay for the optimum amount of government.

We need to agree on how to measure, before we start arguing over which party produces the best results.

 
At 8/25/2011 12:56 PM, Blogger morganovich said...

hydra-

you have never told us what you think is fair. so, no, we have not "been over this". you just keep stating your position and never justifying it.

to me, paying the same price for the same goods is fair.

please lay out your argument for how charging you (making 200k) 5 times what i (making 50k) for a cheeseburger.

if we use your system where you owe more because you make more, then your labor ceases to be as valuable than mine, even though you are the better chef. you make 4x as much and pay 5x as much for goods, so you wind up with less real buying power despite your superior skill.

in what possible ethical system is that fair?

in what economic system would that not be disastrous?

if the reward for skill and diligence is less buying power, who would ever learn to do anything or work hard?

you spew this marxist nonsense, and don't even realize you are doing it.

you appear to be as deluded as you are entitled.

 
At 8/25/2011 12:57 PM, Blogger Hydra said...

the fact that you cannot see the difference between a franchise having rules and government coercion makes me question your intellect and judgement.

if mccorporate says "you need to have mcrib" franchisees are free to say "no".

================================

Not if they want to keep their franchise. If McCorporate had their way they would have a monopoly on every food franchise, and your pratical choice would be the same as with the government.

And even with governments, you are free to pick a different one, it is just not very easy.

Same as a guy who does not like what he is gettig paid - theoretically, he can go someplace else.


Now, lets talk about the real worls, and what actually happens, and how we got the regulations and taxes we have.

 
At 8/25/2011 12:59 PM, Blogger Larry G said...

" my whole point is that SS and particularly medi need to be reined in sharply.

you are the one who seems to get upset about that idea.

it is IMPOSSIBLE to deal with the current deficit without dealing with them."

I'm not upset with the idea - I'm questioning the premise behind your advocacy because it not based on facts.

you need to be clear about which entitlements are a problem in the CURRENT deficit because SS is not one of them.

and because SS is funded 98% from FICA - not income taxes, it has virtually nothing to do with the current deficit.

that's a fact. You ignore that and just keep on trucking.

from that point on - you are basing your ideas on ideology and not the simple facts.

" increases in US debt service are TINY compared to the liabilities we are running up."

this is ludicrous guy.

the unfunded liabilities are THEORETICAL and worst case scenarios premised on us doing nothing to reform....

the deficit is REAL. every year we add another 1.5T to the 14+ T debt and increase the interest payments.

that's what is unsustainable guy.

the 75-year horizon unfunded liabilities you speak of are not a business concept - they are specifically a SS concept.

and they've used that actuarial for 65 years to look ahead far enough to see the potential problems and in each case - more than a dozen times before now - they "look ahead" resulted in changes and reforms that kept the program in balance and not in deficit.

That's the reality. SS did not "accidentally" end up generating a 2.1 trillion surplus. It was the result of conservative reforms to keep the program from running a deficit.

that's why it is not in deficit right now except for the 2% FICA reduction.

if we make the changes to SS that the two deficit commissions are recommending... the unfunded liabilities go away.

cutting SS does nothing... because it's not a part of the deficit to start with....

" take the SS age to 72 and means test it"

that's one of about 1/2 dozen options that I sent you the link to but even if you did none of them - it would not affect the current income-tax deficit.

SS has already said that if no changes are made that by 2037 - the program would then only have enough FICA taxes to pay 75% of benefits.

and unless Congress acted to give it income tax revenues, it would not happen.

there is no unfunded liability for SS that affects the income-tax-funded budget.

Medicare Part B? yes...

but look at the numbers guy -

210 billion dollars for the whole program.

Compare that number to the 1.5T current deficit.

You could ZERO Medicare Part B and you'd STILL have a trillion dollar deficit so that's not going to fix the problem.

but I agree with you - %100 a month is ridiculous and has to change - and it will.

but how do you figure unfunded liabilities for a program that is VOLUNTARY anyhow?

Morg - can you cite me a single group that advocates what you are advocating here in terms of forgetting the 1.5T and focusing on the unfunded liabilities?

every single group that I'm aware of - from both left and right leanings is saying the 1.5T is the bear in the woods that we must deal with now...

and Morg - if you continue to insist that SS is a significant part of the 1.5T - then I ask you to show me the number...

how much of the 1.5T deficit is due to SS?

 
At 8/25/2011 1:03 PM, Blogger morganovich said...

"
My dogmatic repetition is that there is a cheapest and best way to pay for the optimum amount of government.

We need to agree on how to measure, before we start arguing over which party produces the best results."

first off, i notice that "fairness" does not appear here anywhere. cheapest and best depend on where you sit.

of course your asking me to pay for you seems cheap and fair to you, you are an entitled marxist seeking to live off my labor.

your whole argument is internally inconsistent.

fairness is simple: you get treated the same way as everyone else. this is in nominal terms, not % terms.

you don't buy a cheeseburger as a % of income. you don't buy anything that way except government. buying everyhting that way would run the economy to zero in short order. why would anyone work?

why is government special?

you repeatedly claim that the rich "get more" yet you cannot provide examples of this claimed largess.

then you try and change your tune when cornered on your illogical and misstatements and talk about "best".

best for whom? perhaps for you. certainly not for me nor the economy as a whole. you decrease overall wealth so you can have more, make the aggregate less well off because you feel entitled to the fruits of the labor of others.

at least marx was up front about it.

you are just an obfuscating free rider.

 
At 8/25/2011 1:12 PM, Blogger morganovich said...

larry-

i have never singled out SS and repeated said that medi was the bigger problem.

you are just making stuff up.

even so, SS is only going to get worse.

it'll run a $45 billion deficit this year (a 6.4% deficit, not the 2% you claim) and this is projected to increase.

from the social security trustees:

"Under current projections, the annual cost of Social Security benefits expressed as a share of workers’ taxable wages will grow rapidly from 11-1/2 percent in 2007, the last pre-recession year, to roughly 17 percent in 2035"

those are big deficits coming.

medicare is MUCH worse.

you focus on what you call "RIGHT NOW" and miss what a fool you are being.

hey, the room is cool "right now" don't worry about the fire in the basement.

you could balance "right now" and it will do no good next year.

those liabilities push you back in the red.

until you rein them in, all you are doing is treating a symptom, not the cause, like taking cold medicine and going to work then wondering why you are sick again tomorrow.

you have swallowed to short term thinking and nonsensical accounting of the federal government hook line and sinker.

you cannot balance the budget in any durable fashion until you deal with the unfunded libilities we keep creating.

you are just putting a band-aid on a squirting artery and calling it a cure.

 
At 8/25/2011 1:16 PM, Blogger morganovich said...

larry-

http://dev.cato-at-liberty.org/the-national-debt-is-huge-but-unfunded-liabilities-are-americas-real-red-ink-challenge/

you wanted someone else with these ideas, this should lay it out for you.

 
At 8/25/2011 1:34 PM, Blogger Larry G said...

i have never singled out SS and repeated said that medi was the bigger problem.

you are just making stuff up.

you're making it a priority at the same time you have zilch to say about the other causes of the 1.5T deficit.


"even so, SS is only going to get worse."

until changes that are recommended are made - as they have almost a dozen times before in it's 65 year history. It's a non-issue...unless you want to believe that they won't make changes like they did before.

"it'll run a $45 billion deficit this year (a 6.4% deficit, not the 2% you claim) and this is projected to increase."

It's running a 45billion deficit - as a RESULT of the TEMPORARY 2% reduction in the FICA tax that Obama did in an effort to get more money in people's pockets.

it's temporary guy...

and tell me how much 45billion is as a percent of 1.5T....


from the social security trustees:

"Under current projections, the annual cost of Social Security benefits expressed as a share of workers’ taxable wages will grow rapidly from 11-1/2 percent in 2007, the last pre-recession year, to roughly 17 percent in 2035"

those are big deficits coming."

they come if changes are not made.

changes are going to be made.

count on it.


"medicare is MUCH worse.

you focus on what you call "RIGHT NOW" and miss what a fool you are being."

you need to differentiate here between Medicare Part A and Medicare Part B.

the first is funded from FICA and the second from income taxes.

right now - part B is 210 billion...and even if you counted the entire 210 as part of the current deficit - it's 1/7 of the problem.

"hey, the room is cool "right now" don't worry about the fire in the basement."

if you want to REALLY worry about health care costs Morg - you should worry about MedicAid which costs twice as much as Part B and TRICARE - the military health care system that is accelerating in costs and those "unfunded liabilities" you spend of just as much and more than Part B and MedicAid.

"you could balance "right now" and it will do no good next year."

it depends on what you do...

those liabilities push you back in the red.

if you reform the system so it's no longer accelerating.. then the budget amount allocated to it - stays the same and does not increase - ergo - the unfunded liabilities go away.

"until you rein them in, all you are doing is treating a symptom, not the cause, like taking cold medicine and going to work then wondering why you are sick again tomorrow."

ALL health care costs have the very same problem Morg....

Medicare, MedicAid, Tricare, the govt employees health care... they're ALL going up as well as private health care costs....

"fixing" Medicare won't fix the health care problem.


"you have swallowed to short term thinking and nonsensical accounting of the federal government hook line and sinker."

ha ha ha..

I've pointed out to you that the Tiger behind the door is more urgent than the bear two doors away.

they both have to be dealt with but ignoring the 1.5T deficit to go after Medicare and SS is downright dumb...

 
At 8/25/2011 1:35 PM, Blogger Larry G said...

"you cannot balance the budget in any durable fashion until you deal with the unfunded libilities we keep creating."

when you speak of unfunded liabilities Morg - you're talking about FUTURE problems if no changes are made.

they have NO EFFECT on the CURRENT BUDGET which already has a 1.5T deficit.


For instance, you could have SS right now that is not in major deficit - and will not be until 2037.. but over a 75 year horizion it will start to show impacts AFTER 2037.. indeed.

but those impacts have nothing to do with the CURRENT 1.5T that is adding 1.5T to the 14T debt - every year.

You could kill SS and Medicare and you'd STILL have a 1.5T .. and over the next 10 years the debt would double ..

there is MORE to the deficit than SS and Medicare - way more...


"you are just putting a band-aid on a squirting artery and calling it a cure."

Nice try but really blowing smoke..

and you know it...

when you can show me how to cut 1.5T.. right now.. we'll know how much SS/Medicare are part of it.

right now.. you focus on those two and ignore the other 80% of the causes of the deficit.

and that's because you are more ideologically opposed to SS/Medicare than you really care about the deficit and debt... or else you'd admit the real problems.. that are IN ADDITION to SS/Medicare...

there's a trillion dollar worth of deficit that has nothing to do with SS/Medicare yet you focus on them...and their "projected" unfunded liabilities.

tell me again how you compute "unfunded liabilities" for a program that is totally voluntary?

and how would you compute the unfunded liabilities for TRICARE and the Fed Govt employees health care?

I'm pretty sure you don't know.. right?

 
At 8/25/2011 1:45 PM, Blogger Larry G said...

http://dev.cato-at-liberty.org/the-national-debt-is-huge-but-unfunded-liabilities-are-americas-real-red-ink-challenge/

you wanted someone else with these ideas, this should lay it out for you.

no.

I wanted you to show me another group that recommended a budget that dealt with the unfunded liabilities instead of the deficit/debt.

it's totally bass ackwards to ignore the current deficit and debt and focus on the unfunded liabilities -as there is nothing you can do right now about it...

unfunded liabilities are future projections that only come true if you do not take action before then.

In SS case, that action has been taken more than a dozen times in it's 60+ year history and in each case the projected unfunded liabilities never happened because action was taken before then...

you totally misunderstand unfunded liabilities.

they are NOT what IS GOING TO HAPPEN.

they are instead - what will happen if you do nothing.

but that never happens guy.

in each case - action is taken early on so that we avoid the unfunded liabilities.

It's a mechanism for looking downstream to see if what you are doing right now is - sustainable.

As far as I know SS is the only entity - govt or private that uses a 75-year look ahead....

private pension plans and private industry also use look-ahead to determine what they should do now to avoid future problems.. but 75 years is a pretty long look ahead for most entities.

For instance, if you had Toyota try to look-ahead 75 years to determine their unfunded liabilities... it would require them to project what Toyota itself might look like in 75 years.. an almost impossible task given the volatile and competitive state of automobile manufacturing itself..

you're totally misunderstand the purpose of it...

 
At 8/25/2011 1:46 PM, Blogger morganovich said...

larry-

deficits are future problems too.

we could survive this one.

it's next year and the year after etc that kill us.

you have astounding chutzpah to accuse me of blowing smoke whole trying to sneak that nonsense by.

a balanced budget this year is meaningless unless it continues.

if we go right back to big deficits (as necessitated by huge unfunded liability creation) it's just a band-aid.

i've already shown you how to cut budget right now.

cut milspend in half.

(350bn saved)

move SS age to 72 and means test.

(470bn saved)

ultimately, privatize the whole thing in sep accounts. offer to buy out people from the system and from fica. i'd happily take 50% of what i have paid in to never pay SS fica again. hell, i'd probably write it all off to not pay further if they let me and would still come out ahead in the long run.

move medi to cash pay HSA grants. means test them if you need to.

(300-400bn saved)

now were at nearly 1.2tn of a 1.3 tn deficit.

eliminate the mortgage interest tax deduction and every farm and corporate subsidy.

bingo. surplus.

start paying down debt.

this system would work because it reduces unfunded liability creation too.

i have no idea what you think would work.

we could cut every single federal expense to ZERO and debt service + unreformed SS and medi would have us in deficit in 25 years.

 
At 8/25/2011 1:53 PM, Blogger morganovich said...

larry-

i'm stunned that you cannot see something this obvious.

i really have no idea how to get this through to you.

you cannot bail a boat with more water pouring in and have any durable effect.

the two issues can easily be solved simultaneously. (and you obviously either did not watch or understand the cato piece)

the same reforms that can balance the budget today also do away with the unfunded liabilities.

doing the former without the latter is a band aid.

your repeated "but that's in the future" claim is just insane.

it's the future we're talking about.

if you had a balloon mortgage on your house that came due in 4 years, would you feel good about being "break even" today even though the payment was getting bigger every year?

how would you plan to pay it?

you can't just sell the US to cover the liabilities.

 
At 8/25/2011 2:08 PM, Blogger Larry G said...

i've already shown you how to cut budget right now.

cut milspend in half.

(350bn saved)

agree....

move SS age to 72 and means test.

(470bn saved)

not in THIS Deficit... bzzzzt


ultimately, privatize the whole thing in sep accounts. offer to buy out people from the system and from fica. i'd happily take 50% of what i have paid in to never pay SS fica again. hell, i'd probably write it all off to not pay further if they let me and would still come out ahead in the long run.

where would you get the money to do this?

move medi to cash pay HSA grants. means test them if you need to.

(300-400bn saved)

210 saved ...


now were at nearly 1.2tn of a 1.3 tn deficit.

no - you dummied up on the SS which is not part of the current deficit...except to the tune of about 40 bil

eliminate the mortgage interest tax deduction and every farm and corporate subsidy.

hand waving here.. use numbers.

bingo. surplus.

major hand waving...

tell me which current budget deficit proposal cuts 1.5T in one year.....

the only one I've seen is Stossel and one other guy - and not one from any left or right leaning institute and none from any elected Republicans or Dems.

the only one that comes close is Ron Pauls and it takes 5 years to hit balance.

Ryans takes 20+ years...

the reason Ryans take 20+ years is he cuts Ss/Medicare like you do but then the reality sets in as to the other causes of the 1.5T deficit and Ryan does not clear it until 20 years later..


start paying down debt.

we agree.. you can't start paying down debt until you balance the budget... good!

this system would work because it reduces unfunded liability creation too.

i have no idea what you think would work.

I SUPPORT ANY plan that deals with real numbers AND acknowledges that way, way more than just SS/Medicare are involved.

since 2001, Medicare Part B has doubled but so has DOD spending.

we are now spending more than twice as much as we are taking in ....
we could cut every single federal expense to ZERO and debt service + unreformed SS and medi would have us in deficit in 25 years.

partially agree.

not SS. SS goes until 2037 before crashes but even then - because FICA continues to generate almost as much as the income tax - it would reduce payments to 75%.

so you're all wet on the unfunded liabilities for SS.

the "change" is that we automatically cut benefits by 25% unless other actions are taken.

SS even in 2037 is not creating a deficit - because guy .. it's FUNDED from FICA and not income taxes.

you don't get that...

on Medicare Part B and MedicAid - I agree with you.

if we make no changes - those two programs will end up occupying more than half the budget.

but we all agree that that is not going to happen.

we ARE going to make changes.. and I'll bet you that we're going to see changes in the next couple of years...

 
At 8/25/2011 2:10 PM, Blogger Larry G said...

" i'm stunned that you cannot see something this obvious."

I work off of FACTS Morg.

show me the facts...

otherwise.. you're blowing smoke guy...

start this way...

real simple...

this year Medicare Part B costs 210 billion.

now. you tell me what the unfunded liability is for Medicare Part B for next year.

what is that number?

 
At 8/25/2011 5:04 PM, Blogger Hydra said...

you repeatedly claim that the rich "get more" yet you cannot provide examples of this claimed largess.

===========================

I think it is obvious that big money controls access to the government. That investment would not be made if those (mostly rich) persons providing the money did not see results.

The rich as a whole are probably more talented, more driven, and smarter than the poor, and certainly more interested in making money. A lot of money.

But that does not mean that they are not serieously aided intheir quest for money and therefore should pay more.

You have not shown me any reason to think a linear arrangement against income alone is the only way to think about this, and still come up with something most people would agree is fair.


Go read Martin Gilens "Who Gets What They Want From Governmnet" and then explain to me why the rich should not pay a premium for deferential service.

But aside from that argument and prior to it, I think it is important to come up with some way to measure what people sense is "fair".

Once we figure that out, we can put your idea, and many others to the test. right now, thee is no way for you to win your argument. it is merely a suggestion dangling in space with neither velocity nor orientation.

 
At 8/25/2011 5:26 PM, Blogger Hydra said...

to me, paying the same price for the same goods is fair.

\=============================

Dogmatic repetition, you have said that before.

I know that not everything gets measured on a linear scale, or paid for on a linear scale. The price you pay for a car is not linear with the horsepower it produces. If you buy one that allows you to accelerate much faster, you will pay much more for it.

Suppose we had a tax system that worked like this: everyone pays a flat ten percent on their income, except that if you increase income government will take 90% of the increase for the first three years. This is to ensure your income is earned, and not a fluke or a scam.

Everybody pays the same tax rates. Does that meet your description of fair?

A tax schedule like this would incentivize the government to adot real growth policies, that would enable moe people to earn more.

 
At 8/25/2011 7:21 PM, OpenID Sprewell said...

Sean, it's not that the Paradox of thrift is necessarily wrong, but that the Keynesian "solution" only makes things worse. This is because the economy is an extraordinarily complex distributed system, so when you start propping up some businesses, whether GM or green tech companies, you as a govt "planner" are much more likely to be making a mistake than "saving" a worthwhile business. This is why Japan has been stuck in purgatory for decades after regularly propping up zombie banks.

Economics isn't about govt intervention because it's about voluntary economic activity, which govt contravenes because it claims it can sometimes do better than the market. You can claim that such intervention is based on economic understanding, but it's not economics, it's an outside intervention, which is properly studied in Public Choice theory. The govt as a beneficient economic maximizer is a fanciful idea, just like socialism, but it doesn't exist. ;) The market may not have a goal writ large, but those claiming that it fails certainly claim that it has one, so that they can then claim that it fails. Myriad is used as an adjective also, it's even used often enough that some think it's only an adjective. If you're going to make such a claim, you might want to spend five seconds looking it up, like I just did.

 
At 8/25/2011 7:24 PM, OpenID Sprewell said...

Entitlements are the medium-term problem but Obama has presided over overall federal spending that has gone up to unprecedented levels during a downturn, precisely when the govt should be cutting back and becoming less of a burden. The federal deficit this year will hit $1.4 trillion and medicare/SS deficits are a small part of that at the moment, so no, it's not pre-existing entitlements that are driving the huge deficit right now, nor could you balance the budget by just balancing those two entitlements out. Obamacare hasn't really even kicked in yet, it's his massive budgets that are the big problem, made especially burdensome during a time of deleveraging in private markets. Not sure what to make of your non sequitur about combustion engines and the moon. As an anarcho-capitalist, I'm well aware of the baggage of the two established parties. ;)

Behavioral economics results are mixed at best, likely overblown. I suggest you look at experimental economics if you want something more scientific. It is extremely presumptuous to think that you can correct our "biases" with institutions that are even worse and riddled with even more biases and failures. "Giving away freedom?" Wow, you've really accepted the default statist position against freedom, haven't you? There is no comparison to Chemistry because their results are perfectly repeatable if done with enough care, ie not the level of a college lab. No social experiment will ever be so clean because we humans are adaptive, not inert chemicals. But given the great volume of evidence against Keynesianism and more broadly against govt interference, only a complete apologist could claim that the evidence is still mixed. The fact that you keep making such a half-hearted defense on grounds of muddiness or complexity is what led me to suggest that you are like the bleeding hearts who assume a conclusion of "helping" others with the govt, then work backwards in a soft-headed manner to make up a theory to justify it.

 
At 8/26/2011 9:23 AM, Blogger Sean said...

Sprewell,

Sean, it's not that the Paradox of thrift is necessarily wrong, but that the Keynesian "solution" only makes things worse
If the Paradox of thrift is not necessarily wrong, why do some many people claim it's bunk?
My concern is that even though I disagree with people like Krugman's policy agenda, their predictive record has been better in the past 10 years than the libertarians and right-wing folks. Policy ought to be kept separate from predictive modeling.

You can claim that such intervention is based on economic understanding, but it's not economics, it's an outside intervention,
I agree. Keep intervention separate from modeling.

The market may not have a goal writ large, but those claiming that it fails certainly claim that it has one, so that they can then claim that it fails.
And if you agreed with those people on goals, you could probably agree on whether the market failed. My guess is that your goals for the market differ.

Myriad is used as an adjective also
Dammit! I used it get chided for using it this way, looked it up, and only found the noun form in the dictionary. That was about 15 years ago: I should have checked more recently! My apologies.

I suggest you look at experimental economics if you want something more scientific. It is extremely presumptuous to think that you can correct our "biases" with institutions
Did I refer to institutions in my statement? Again, I want understanding, not control.

But given the great volume of evidence against Keynesianism and more broadly against govt interference
I think monetary policy has been shown to have a quantifiable effect, ala Milton Friedman. I buy Krugman's argument that there's a relation between that and fiscal policy. The Keynesians seem to have been able to predict a number of things correctly:
"Meanwhile, there’s actually a lot of evidence for a broadly Keynesian view of the world. Not, to be fair, for fiscal policy, mainly because clean fiscal experiments are rare. But there’s huge evidence for sticky prices, lots of evidence that monetary shocks have real effects — and it’s hard to produce a coherent model in which that’s true that doesn’t also leave room for fiscal policy."
I basically think there's something to Keynesian ideas on how the world works, but will never trust governments to apply them.

you are like the bleeding hearts who assume a conclusion of "helping" others with the govt, then work backwards in a soft-headed manner to make up a theory to justify it.
A lot of people do indeed do that. I try not to.
But I also try to avoid the mistakes of the libertarians who bend over backwards to make up all kinds of strange and complex explanations for what are institutional and herd effects so they can map everything through the view of the individual.

 
At 8/26/2011 9:47 AM, Blogger Sean said...

Sprewell,

Obama has presided over overall federal spending that has gone up to unprecedented levels during a downturn, precisely when the govt should be cutting back and becoming less of a burden

That's not the story I get:
http://www.usgovernmentspending.com/federal_budget_cbo_long_term_outlook

There's a blip for the stimulus, but it's not a huge problem relative to the whole.
And where's the money going? Defense, Healthcare, Pensions, Welfare, and Interest in descending order dominate the budget.

It's a long term commitment to a big military, pensions, and entitlements.

 
At 8/26/2011 10:14 AM, Blogger Larry G said...

" It's a long term commitment to a big military, pensions, and entitlements"

DOD, Medicare Part B and MedicAid but not pensions...

unless Congress changes their mind in 2037... the general fund will never fund the pensions - only FICA will.

but I agree with DOD, Medicare Part B and MedicAid...

all 3 have doubled in 10 years...(and as far as I know - Obama had nothing to do with the 3).

 
At 8/26/2011 11:32 AM, Blogger Sean said...

Larry,

unless Congress changes their mind in 2037... the general fund will never fund the pensions - only FICA will.
Sure, but Congress has shown a willingness to raid, by hook or crook, if things get bad. And even if if it's a separate fund, it's still money collected and disbursed by the government.
I think savings and investment programs make sense, and I don't have a big problem with a program like FICA, except I'm starting to lean towards the libertarian argument that it's still better to let people manage such things on their own rather than have it mandated.

 
At 8/27/2011 4:19 AM, OpenID Sprewell said...

Sean, the Paradox of thrift has well-known problems because it fundamentally assumes that all savings are the same, that your hoarding gold bars is the same as my investment in a tech startup, when the latter actually creates jobs and production. Also, as you well know, prices will usually fall to spur people to start buying again. But ultimately, even if people buy useless stuff like gold, as they are doing today, that's because they honestly don't know any better investment. Smart guys like Buffett love times like this, when he can use his smarts to make some cheap purchases. Cheaper home prices mean much more affordable entry into the housing market for young professionals. For the govt to intervene in this market and decide they know better than all of these people where that money should go is the height of hubris and it never works out. Krugman or Roubini's "predictive record" has been "better" only in their fantasies. For every 10 times they predict a recession or liquidity trap, it happens once and they point at that one time over and over again, throwing out all the times they were wrong. They depend on the ignorance of their audience to pull this shit.

Policy and interventions will never be kept separate from predictive modeling, because one determines the other. I prefer we just got rid of policy. ;) I cannot, by definition, agree with the "market failure" dimwits on goals, because like I said, there is no large-scale market "goal," just millions of voluntary transactions. But what I do find is that the results of markets are invariably fantastic for most involved, while the results of the govt failure crowd's "policies" are invariably disastrous. The wonderful thing about dictionaries or encyclopedias today is that they are literally seconds away, meaning I'm much more likely to actually read them. ;) If your intent was that we merely read self-help books that inform us of the findings of behavioral economics, I've got no problem with that. But that's certainly not what most use it for: they have policy prescriptions and now work for Obama.

 
At 8/27/2011 4:27 AM, OpenID Sprewell said...

Monetary "policy" is a weird sidebar, because the Fed is actually a mostly private institution and money has been made to be weirdly centralized. I wouldn't normally call it "policy" for the first reason, though Bernanke's recent QE1-3 moves are really fiscal policy by another name, so the lines start blurring when he starts making such unprecedented moves. I don't know Krugman's argument about the relation to fiscal policy because I don't read that jackass. Your Krugman quote seems to imply that because there are market "imperfections" like "sticky prices," govt intervention can be justified, which is the same argument every tinpot dictator makes before he invariably fucks up the situation worse. As for there being something to Keynesian ideas, there's not much there: they just place greater emphasis on different matters, always with their goal of transferring power to politicians to screw things up worse. I would conversely say that it is the Keynesians and the liberals who "make up all kinds of strange and complex explanations" to fabricate "market failures" that somehow always need "intervention." What they never seem to realize is the dimwits who they want to intervene, whether FDR, LBJ, or Obama, invariably make every situation worse.

So there's some amount of market herding, so what? Politicians are elected by far worse herd effects, where negative feedback is nowhere near as immediate and focused as the market. I can only vote out my local congressman every two years and Senator every six years, but I can vote against Warren Buffett every day, by not buying his products. As for the notion of institutional effects versus the "view of the individual," I don't know who you talk to but the market is replete with institutions, voluntary ones. The market is the most wonderful community and group involvement that most people ever have but since it's decentralized, it attracts a bunch of crackpots and power-hungry dimbulbs, that would be Krugman and the politicians he espouses, intent on controlling and reshaping it towards their ends.

 
At 8/27/2011 4:29 AM, OpenID Sprewell said...

The spending chart you link to is only a prediction, which doesn't jibe with Obama's own desired future budgets. That's no stimulus "blip" so far, that's trillions of dollars in extra spending. As for where it goes, of course he's going to lard up the places it already goes, he's not about to start a new chain of donut shops. ;) But it's not long-term, it's being spent now, hence the massive deficits.

Larry, SS had a deficit last year and will have one from here on out, only getting worse as time goes on. That money now comes from non-payroll tax revenue, since the payroll tax isn't covering it. Income or payroll taxes will have to be raised or benefits will have to be cut, those are the only two options. Considering what a scam SS is, I suspect it will be privatized and benefits will be cut. If you really think people won't save without govt making them, you would force them to put money into a 401k. The fact that you instead force them to put money into a ponzi scheme like SS, where the govt skims the "surplus" money off the top to spend on the latest bridge to nowhere every year, shows that the real goal is theft, power and "redistribution," nothing else.

 
At 8/27/2011 4:32 AM, Blogger Larry G said...

if enough people pull their money out of the stock market and put it in fixed assets.. like gold, land, or even very low interest treasury notes.. though.. the money is basically taken out of the economy.

right?

money can effectively be "parked" and taken out of circulation.. no?

as far as I know though.. liquidity traps have not been predicted very often...

some folks question whether or not it can even happen, right?

 
At 8/27/2011 5:49 AM, Blogger Larry G said...

unless Congress changes their mind in 2037... the general fund will never fund the pensions - only FICA will.

"Sure, but Congress has shown a willingness to raid, by hook or crook, if things get bad. And even if if it's a separate fund, it's still money collected and disbursed by the government.
I think savings and investment programs make sense, and I don't have a big problem with a program like FICA, except I'm starting to lean towards the libertarian argument that it's still better to let people manage such things on their own rather than have it mandated. "

I think one could debate the concept of FICA/SS... but to attack it the way it has been attacked is dishonest and disingenuous.

For instance, all the hoorah over the "trust fund" that is "worthless IOUS".

they're not.. but let's assume they are and gone...

what happens to SS?

well... nothing.. right now...

FICA continues to generate almost a trillion a year and continues to pay out SS ..... and the numbers say... that.. they can do that without any downsides until 2017....

so then what happens?

well.. FICA will STILL generate almost a trillion dollars that will be spent on benefits but it won't be quite enough to pay out at 100% but instead at 99%.

then the next year after that.. perhaps at 98% .. and so on until 2037.. when it would pay out at only 75%.

and not a penny of it would come from general income tax-generated revenues... and not a penny of the deficit and debt would be caused by FICA/SS...

but if you listen to the propaganda being spewed.. you'd believe that the trust fund is gone and that SS is 'bankrupt' and will fail....

"unfunded liabilities" does not mean the same thing as "bankrupt" in the context of FICA-funded SS benefits...

In fact.. if you compare the "unfunded liabilities" of SS - they are LESS than the "unfunded liabilities" of the Prescription Drug Program... but even then you are looking at a 75-year horizon that assumes - no changes... to the program.

there might be a better way to do pensions... and maybe worth debate... but to use lies and disinformation as the starting point.. what is the purpose?

 
At 8/28/2011 4:00 PM, OpenID Sprewell said...

Larry, the only person spewing lies and propaganda about Social Security is you. As my link above notes,

"Starting in 2010, Social Security began to permanently spend more than it takes in. From now on, Social Security will require large and growing amounts of general revenue money in order to pay all of its promised benefits."

This directly contradicts both your claims. Your date of 2017 is wrong because of the recession, SS deficits have already started. Your claim that we can just draw on the "trust fund" and won't have to take it out of general revenue is also wrong. This is because the "trust fund" doesn't have marketable investments like gold or mortgage-backed securities or stock investments, it is merely IOUs from when the govt raided it years ago. If it had actual gold or stock in there, the govt could easily sell those investments and get the money to pay SS, just like a 401k does. But since there are no marketable securities there, we have already had to take it out of general revenue, from either tax revenue or kicking the can down the road by borrowing even more. You must be either deeply stupid or very emotionally attached to SS and hence intensely irrational about it not to see this. I'm guessing the latter, but I can't rule out the former. ;)

 
At 8/28/2011 4:44 PM, Blogger Larry G said...

" "Starting in 2010, Social Security began to permanently spend more than it takes in. From now on, Social Security will require large and growing amounts of general revenue money in order to pay all of its promised benefits."

I don't know where you got that but it's totally false.

You and others here say that SS is broke, bankrupt and is the cause of the deficit and debt and nothing could be further from the truth.

The ONLY thing that can be paid with General Revenues is the trust fund balance ....

if SS outruns FICA - the law says that they must reduce benefits and specifically cannot receive general revenue money.

the program was explicitly designed that way from the get go...

all you have to do is read - to find that out - but you have to read credible info ....and that's the problem with you...you read propaganda.

I'm not going to call you names guy but you're all messed up over understand SS and you got that way by reading propaganda.

SS is a pay-as-you-go system.

the ONLY THING the trust fund is for is to hold the excess when FICA exceeds payouts and over the 65+ years, it has managed to accumulate about 2 trillion..some years there were deficits and money was taken from the trust fund to balance.

if we don't do anything at all with SS - the law says that the benefits must reduce to match FICA.

and that's why on the SS web site, they will tell you that they project that to happen come 2037.

but it might happen earlier... especially if it is decided the trust fund is no longer available ...

but the worst case is that the benefits are reduced to 75%

That's if NOTHING is done.

that's the truth guy..

now.. some say the govt won't let it go to 75%...

that may be but THAT would REQUIRE ACTION by the govt..

no action = cut benefits...

SS is not broke. SS will never be "broke" in terms of money coming in and money paid out.

SS will be "broke" ONLY in the sense that - if not changes are made - it will, by law, reduce benefits.

 
At 8/28/2011 4:52 PM, Blogger Larry G said...

here Spewell... I forgot to give you this:

The Design of the Original Social Security Act

http://www.ssa.gov/history/genrev.html

" President Roosevelt who signaled early on that he did not want the federal government to subsidize the program--that it was to be "self-supporting." He would eventually observe: "If I have anything to say about it, it will always be contributed, both on the part of the employer and the employee, on a sound actuarial basis. It means no money out of the Treasury.""

 
At 8/28/2011 6:44 PM, OpenID Sprewell said...

Larry, I'll try again, because you're using a lot of double talk and simply may not understand how SS works. You don't need to ask me where I got that quote from, I gave you the Heritage link a couple comments ago. You are right that current benefits were technically paid for at one point decades ago when the current retirees were working. However, they then let their politicians take that money out of the retirement fund and spend it general crap, like bridges to nowhere or various other non-SS programs, so that the "trust fund" just has a bunch of worthless IOUs now. So they did put the money in, it's just gone now, because they didn't stop the politicians from spending it. That means their children now have to pay that money back in, by making good on the IOUs on the trust fund.

That's as though your parents had a 401k, took the money out and bought themselves granite countertops and whatever other crap they wanted and put some IOUs in their pension fund, which their kids then have to pay off when they get to be adults. That process is what started last year, as they started drawing on the "trust fund." Well, I'm one of those kids and let me tell you this: I'm not paying for your irresponsibility. You people were irresponsible and blew that money on govt crap, we're not going to make up the difference. There will be several elections coming up that will decide who pays for that giant SS shortfall, and trust me, you will lose.

As for what FDR said at the beginning, who cares. SS has been changed so much since then that it bears little resemblance to the original program. If you want to go back to the much lower benefits back then and raise the retirement age so that it's much higher than the average life expectancy, like it was back then, I'm all for scaling it back like that. Let's do it! :)

 
At 8/28/2011 7:05 PM, Blogger Larry G said...

spewell.. you simply do not know the facts....

FICA generates over 800 billion a year in revenues and those revenues are what pays for SS and Medicare Part A.

It's this money that pays the benefits.

The Trust fund is like a checking account where the FICA revenues are parked once they are collected by the IRS.

these collections are going on all the time.. every week, every month and the IRS puts them in the trust fund and SS takes them out.

In years where FICA generates more than SS spends what's left in the account - increases.

In years when the payouts exceed FICA - because there is a surplus in that account - they just draw down on it.

it's explained here:

http://www.ssa.gov/cgi-bin/transactions.cgi

IRS puts money in.. SS takes it out... and whatever is left is called the surplus.

Contrary to Heritage and others.. there is no static fund just sitting there. It's a very, very active fund...

but forget all of that... and assume there is no trust fund... what would happen if FICA does not generate enough for revenues?

If you go to the SS website - they tell you what happens.

on the date when FICA no longer can generate enough revenues (due to demographics) - benefits to recipient will be reduced.

so if no body does nothing.. there is no money coming from general revenues...

they do not plan to do nothing.

they plan to do one or more of these:

http://www.ssa.gov/oact/solvency/AARP_20080619.html

if you read it.. you'll see there are no options for using general revenues...

changes like these have been made about a dozen time over the life of SS ...

but let's assume there is no trust fund and they WILL use general revenues..

can you tell me how much that would be in the next couple of years?

wouldn't it be about 40 billion or so per year?

that's not chump change but the deficit is 1.5 trillion..

SS just does not affect the budget in a big way right now.....

here's the 2011 report, take a look:

http://www.ssa.gov/oact/TRSUM/index.html

Now if you want to worry about entitlements that ARE funded from the general fund and are already pulling substantial dollars out of it - think about Medicare Part B (C&D also) and MedicAid... the four of them are about 700 billion...and projected to double in a decade.

so then how come folks are saying that SS is a problem right now (when it is not) and at the same time totally ignoring the much, much larger and more immediate entitlements that affect the general revenues right now?

The answer is that they're attacking SS because they disagree with it as a concept.. and they are using false financials to make their case.

I've given you specific links to answer every one of your claims.. credible links .. to your propaganda links...

and I'm not sure you're even reading them...

 
At 8/28/2011 7:54 PM, OpenID Sprewell said...

Larry, that's pretty funny. You just repeat the lie that the SS "trust fund" is a "checking account," then repeat stuff that I already said. I refer you to my comment earlier in this thread, where I said "Entitlements are the medium-term problem... The federal deficit this year will hit $1.4 trillion and medicare/SS deficits are a small part of that at the moment." So who's not reading whom? I already said that the SS deficits are small at the moment but will grow to be much bigger. I don't have to read your links because you do not claim any new information in them. Rather, you simply repeat the lie that the "trust fund" is a checking account, which isn't found in any of your links. A checking account is backed by bank assets, which consists of various marketable securities like real estate and corporate bonds. The SS "trust fund" has nothing of the sort, it's IOUs that make future generations pay for the waste of previous generations, the idiotic pork projects that the older dumbos let the politicians waste it on. That repayment doesn't start in 2037, that started last year. We will change the "benefits" now, hopefully just privatize the whole deal, because we are paying for it from general revenues now.

 
At 8/28/2011 8:12 PM, Blogger Larry G said...

Spewell.. you're being ignorant ...

the trust fund (there are really 3) have more than 800 billion dollars in them during each year.

the money is flowing trough them guy.

the money comes in from FICA taxes, gets put in the trust fund and SS receives redeemable notes.

At the same time they receive redeemable notes, they are cashing in older notes ..they hold.

it works exactly like a checking account where you are writing checks and have direct deposits coming in at the same time.

the gas tax trust fund works the same way guy.

so does the Medicare Part B trust fund...

trust fund receive incoming revenues... at the same time the money is being spent....

...exactly like a checking account.

but none of this matters guy because the SS trust fund only receives FICA taxes - not income taxes...

you keep blathering about marketable securities... WTF?

when you buy savings bonds it's the same deal.

there is no "market" in savings bonds.. guy...

there is no "market" in gas tax securities...

you are totally misunderstanding the concept..

and it does not matter anyhow because what funds SS is the FICA TAX revenues - not the trust fund.

the trust fund is just a conduit (checking book) for the funds received until they are spent.

 
At 8/28/2011 10:08 PM, OpenID Sprewell said...

Larry, I can see that it is you that is deeply ignorant about how the SS scam works, either that or you are intentionally lying because you can't take the fact that it won't be there. There is no "checking account," which doesn't even make sense because the real analogy is to a pension. The way a pension works is that you save your money by buying marketable securities like stocks or gold or mortgage-backed securities, building up a fund of such assets until you retire, when you slowly draw it down. The SS "trust fund" has none of those, it has IOUs, saying that the govt will raise taxes- either the payroll tax has to be raised or the income tax will be raised (which Obama is now trying to do with his tax hikes) or you just borrow a ton more money again and kick the can down the road- to pay off those IOUs later. That finally started to happen last year, when income tax revenue, not FICA/payroll tax funds, paid $40 billion of the SS payments, as you yourself admit. However, you keep repeating some fantasy that because general income tax revenue went through the "trust fund," everything's good, because goshdarn it, we have a "trust fund!" What's going to happen is that we will start cutting SS benefits this decade, because the rest of us aren't going to pay off your debts.

 
At 8/29/2011 5:50 AM, Blogger Larry G said...

Spewell.. socials security was never designed to be a pension guy.

It was always designed to be a pay-as-you-go system.

http://www.ssa.gov/history/ponzi.htm

" it has IOUs, saying that the govt will raise taxes- either the payroll tax has to be raised or the income tax will be raised (which Obama is now trying to do with his tax hikes)"

they might raise the payroll tax or they might do this:

http://www.cbo.gov/ftpdocs/115xx/doc11580/07-01-SSOptions_forWeb.pdf

"social security reform options"

what they might DO is NOT THE SAME as saying if they do nothing SS goes broke - which is totally false and total propaganda that you are clearly spouting..now

Oh.. and guy .. Obama CUT the payroll tax and he wants to EXTEND the cut... and Obama also provided a $400 Tax CUT (but I digress).

" income tax revenue, not FICA/payroll tax funds, paid $40 billion of the SS payments, as you yourself admit"

which was ORIGINALLY put in the trust fund from PAYROLL TAXES guy.

they were getting the payroll taxes they has set aside earlier back.

" you keep repeating some fantasy that because general income tax revenue went through the "trust fund," everything's good, because goshdarn it, we have a "trust fund!" What's going to happen is that we will start cutting SS benefits this decade, because the rest of us aren't going to pay off your debts."

I did the opposite in response to your repeated propaganda/ignorance about the trust fund ...and your ignorant insistence about things that are clearly false.

My point remains that if SS is left alone and nothing is done - it will not go broke and it will continue to pay out at 75% and that's the truth and not your propaganda crap.

you say the ONLY option is to increase taxes to pay for SS.

That's simply not true. there are more than 30 options to made changes to put SS back to balance and many do not involve tax increases.

you focus on SS while ignoring the real entitlements problem and ignoring the real causes of the current 1.5T deficit and 14+T debt.

why?

why do you focus on the one thing that is the least of the problems NOW - AND into the future?

Medicare Part B and MedicAid will be 5 times the problem that SS is or will ever be and yet not a peep out of you about them and your "worries" about tax increases and the general fund.

Medicare Part B has a trust fund also and yet you've never mentioned it or it's IOUs - why?

in a word - you don't know and you don't know because the right wing sites you apparently love to read but refuse to admit it even as you provide Heritage links...themselves don't deal with these simple realities either...

bogus to the bone guy..

yet another disciple from the "don't bother me with facts, my mind is made up" Church.

 
At 8/29/2011 6:37 AM, Blogger Larry G said...

this is how Heritage explains it:

" How the Trust Fund Operates.Workers pay their Social Security taxes through their employers. Each employer periodically sends a lump sum payment to the U.S. Treasury that includes all of the income taxes and Social Security and Medicare payroll taxes paid by both the employer and its employees.
The Treasury both receives the payroll taxes (and income taxes that higher-income retirees pay on their Social Security benefits)"

and then they mess up:

"... and pays monthly benefits on behalf of the Social Security Administration (SSA). The money stays in the Treasury's hands until it is either paid out as Social Security benefits or otherwise spent by the government."

this is not how SS explains it:

http://www.ssa.gov/cgi-bin/transactions.cgi

then they continue to make up stuff - notice they do not provide any links that substantiate their claims...

" In fact, no money ever goes into the trust fund. Instead, the trust fund balance is the result of two accounting entries by the Treasury."

again.. SS explicitly says there are DAILY transactions where they are redeeming treasury notes even as they are receiving new ones as credit for the FICA tax coming into the treasury.

Heritage is calling these treasury notes "IOUs" but EVERY DAY - SS is redeeming ones that were issued a year ago....

then they continue with their blather again giving no cites to what they are claiming.. just making it up as they go along because they are hoping gullible folks won't question it.. (and they are correct).

"First, the Treasury estimates how much of the aggregate tax receipts are Social Security taxes and "credits" the Social Security trust fund with that amount. Then the Treasury "subtracts" the total amount paid in monthly Social Security benefits from the trust fund balance. No money actually changes hands; these are strictly accounting entries."

money DOES change hands - every time SS redeems the treasury notes - which is EVERY DAY and then they cut checks that any bank will cash and provide real money to the folks presenting the checks for payment.

this IS REAL MONEY...

"Any "money" remaining in the trust fund is converted into special-issue Treasury bonds, which are really nothing more than IOUs."

every single dollar of FICA tax IS CONVERTED to one of two kinds of treasury notes - according to SS.

" In addition, the Treasury pays interest on the trust fund's balance by crediting the trust fund with additional IOUs."

No.. they ISSUE treasury notes for the interest - that can be redeemed and is...

"These are also strictly accounting entries, and again no money changes hands. After crediting the trust fund with the proper amount in IOUs, the government spends the extra Social Security tax collections just like any other tax revenue--to finance anything from aircraft carriers to education research."

http://www.heritage.org/research/reports/2004/09/misleading-the-public-how-the-social-security-trust-fund-really-works

this is not the way that SS or even OMB says it works.

Heritage provides no links to back up their assertions... none...

they just make it up as they go along... and the gullible believe it without every verifying it... themselves.

here's what really happens:

http://www.ssa.gov/cgi-bin/transactions.cgi

 
At 8/29/2011 11:57 AM, OpenID Sprewell said...

Larry, the only "disciple from the 'don't bother me with facts, my mind is made up' Church" is you. Of course I want to get rid of Medicare and Medicaid also, those are even bigger time bombs, but we seem to agree about those, so obviously there's not much to talk about there. All the entitlements will be slashed- we should get rid of all of them altogether, along with cutting "defense spending" by at least two-thirds- but you don't seem to understand that SS is as much at risk as all of them, precisely because SS is a ponzi scheme where the politicians steal the "trust fund" surpluses, as you well know but choose to try and lie about.

 
At 8/29/2011 12:06 PM, Blogger Larry G said...

" you well know but choose to try and lie about. "

I provide you with credible links with the facts.. it's not my views...it's the facts directly from the Social Security folks.

SS is a pay-as-you-go program - the same as a majority of private insurance sold in the US.

over 65+ years ..instead of deficits and instead of require money from general revenues - it has generated a SURPLUS.

and if you bothered to check the 30 options available for reform - a majority of them also do not require increased taxes either.

there might well be a legitimate debate about the concept of SS but your attack on it is based on lies, misrepresentation and disinformation that you suck up from the world of right wing idiots.

My view here is that if you can't or won't deal with the simple facts and truth about an issue then what good are you to start with..???

In order to have any reasonable discussion -on the merits - once has to be willing to use facts - and one has to be willing to want to use facts.

the program has gone 65+ years and stayed solvent - and there are 30+ straight-forward adjusts that are available to keep in solvent for another 100 years.

so your advocacy to kill it is NOT based on finances .. but instead on an ideology.

by the way.. I have no dog in the SS hunt guy.. but I do care about the truth in any debate...and have a dim view of those who purposely distort facts.

 

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