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Weekend reflections

August 2nd, 2008

It’s time once again for weekend reflections, the longer version of Monday Message Board. Civilised discussion and no coarse language please.

Categories: Economics - General Tags:
  1. stockingrate
    August 2nd, 2008 at 18:15 | #1

    Went to the Gallery of Modern Art exhibition of QLD architects and heard a number talk about their work, they threw off interesting snippets such as how 1 page was sufficient for a Georgian house design because there was an established tradition and a limited number of materials. My favourite: the “Dunbar” house looking south down the N Stradbroke main beach. It frames a view devoid of architecture. (Thankfully for the users of the beach it is also unobtrusive.)

  2. Ian Gould
    August 2nd, 2008 at 19:39 | #2

    I’m tring not to engage in shadenfreude here but I would like to hear from the libertarians and supply-siders here regarding the US budget deficit blowing out to around $500 billion (or $600 billion + if you include the “emergency spending” on the Iraq war and other accounting fudges.)

    Aren’t tax cuts supposed to more than pay for themselves?

    I fully expect the answer to be some variation of “the theory is correct – reality is at fault”.

    So let me then aks a further question – how woudl peopel suggest the US respond?

    How much further should taxes be cut now?

    Because obviously, if you cut enough the budget will magically rectify itslef, right?

    I also look forward to heroic proposals for several trillion dollars per year in unspecified budget cuts.

  3. Bingo Bango Boingo
    August 2nd, 2008 at 20:46 | #3

    Ian, the supposed supply-sider notion that all tax cuts pay for themselves is a leftist canard. The Laffer Curve, etc. does not rest on that premise, although many of Reagan’s unfortunate political promises did. The essence of supply-side economics is that a reduction in marginal tax rates stimulates investment, and therefore productivity, and therefore real wages growth. Libertarians and supply-siders generally view the Bush administration as eight years of not very much progress on the economic policy front. You don’t actually read much libertarian commentary, do you?

    BBB

  4. Ian Gould
    August 2nd, 2008 at 21:06 | #4

    So we have our first “reality is at fault” response.

    BBB – any suggestions going forward?

  5. Bingo Bango Boingo
    August 2nd, 2008 at 21:20 | #5

    Ian, are you insane? My response doesn’t come within cooee of “reality is at fault”. I’m just pointing out that you don’t have a clue what you’re talking about when you construe the views of supply-siders and libertarians. I can’t argue with you about whether the theory is correct, because you don’t actually know the theory. You must have taken Reagan and his offsiders’ word for it. A big mistake, I’d suggest. What other Republican pap have you swallowed?

    As for budget cuts, you don’t have to be heroic to come up with several hundred billion dollars of fat. Start with the latest Farm Bill, assorted military misadventures, and go from there.

    BBB

  6. Ian Gould
    August 2nd, 2008 at 22:04 | #6

    Oh and while I tend to avoid libertarian commetnary wherever possible, I have been exposes to enoguh of it to recognise the latter day arse-covering of the Cato Institute et al on this issue for what it is.

    Go back to 2001 an you’ll find precious little citicism of the unfunded nature of the Bush tax cuts and plenty of anodyne predictions of the tsunami of funds about to hit the US Treasury.

    Go back a little further and you’ll find gems liek this.

    http://www.cato.org/pub_display.php?pub_id=6136

    “Unless tax rate changes powerfully affect economic behavior–as supply siders maintain–then all of these data are puzzling in the extreme. Mr. Summers is right that tax rate hikes have generated healthy revenue growth in recent years But so did tax rate cuts. While tax rates were tumbling by two-thirds in the 1980s, income tax receipts grew at almost precisely the same pace as when income tax rates were rising by 50%. This would be a virtual mathematical impossibility–unless there were at least some behavioral or macroeconomic responses to the tax policy changes that took place in 1981, 1990 and 1993.

    But the most confounding question of all for critics of the supply-side view is this: If tax rate changes don’t influence economic behavior, then how did overall tax receipts grow faster in the Reagan years than in the Bush and Clinton years?”

    Of course as of January 2008, the Cato Institute was still pushing this leftist “canard” (with minor caveats) in this youtube video.

    Next on the libertarian dance card – the Cato Institute “isn’t really libertarian”.

  7. Ian Gould
    August 2nd, 2008 at 22:12 | #7

    Here’s Cato’s “Tax Director” in 2006, praising Bush’s tax policy with only minro and passing criticism of Republican spending.

    “The Years Ahead. While President Bush has been a supporter of pro-growth tax reforms, there are shortcomings in recent tax policies. For one thing, the tax code continues to get more complicated by leaps and bounds. Also, policymakers have not repealed the alternative minimum tax, a parallel income tax system that threatens to hit 30 million households by the end of the decade.

    Another shortcoming has been the failure to make tax cuts permanent. Nearly all of the Bush cuts—individual rates, capital gains, dividends, estate tax—are set to expire after 2010. Sixty votes are needed in the 100-member Senate to pass permanent tax cuts. There are just 55 GOP senators, and they have faced a politically far-left Democratic opposition.

    Republicans also have their own policies of big spending to blame. Tax cutting has been made more difficult because Bush has been the most profligate president in decades. In his first five years, 2001 to 2006, federal spending increased 45 percent and deficits have soared. It’s tougher to convince the few centrist Democrats in the Senate to go along with making tax cuts permanent when federal red ink is gushing non-stop.”

    Back in 2003, Cato was even less restrained.

    “President Bush’s tax cut has the potential to substantially increase economic growth, boost the stock market, and increase business investment. The jewel of the President’s tax plan is the elimination of the dividend tax on individuals. Another key economic growth provision of the tax plan is the acceleration of income tax rate reductions. My estimates are that the tax plan, if fully implemented, would increase stock values immediately by 5% to 15% and would reduce the cost of capital for businesses by 10% – 30%, depending on the industry.

    Contrary to concerns that the Bush tax cut is “too big and too bold,” I believe that the President’s plan would be even more stimulative for economic growth if it were expanded to include several provisions. First, Congress should cut and consolidate income tax rates more than in the President’s plan. The income tax rate should be consolidated down to 3 tax rates: 10%, 20%, and 30%. Second, tax free IRA savings accounts should be vastly expanded, in much the same manner as the White House has suggested. Super saver IRA accounts should be established with a cap of $20,000 per year per individual. The money in these funds should not be taxed until it is withdrawn for consumption purposes. Third, the capital gains tax should be lowered to 10% on all new investment.”

    “[Myth] 2. The Bush tax cut will blow a hole in the deficit.

    The Bush tax cut provides $670 billion in tax relief for Americans over the next 10 years. This will hardly bankrupt the federal treasury. Over the next ten years the IRS will collect some $25 trillion in taxes from Americans. So the tax cut comes to less than 3 cents on the dollar, hardly a massive giveaway.

    Nor is it accurate to say that the national debt will rise by the amount of the tax cut, unless one believes that tax cuts result in absolutely zero change in economic behavior. The truth is that for every action in the economy, as in physics, there is a reaction. If we cut income tax rates and eliminate the double tax on dividends, surely workers, and businesses, and investors will behave differently. If the tax on work and hiring goes down, surely we will get more of both. If the tax on investment goes down and the after-tax rate of return goes up, surely we will get more of that too. If the tax on dividends is eliminated and the capital gains tax falls as well, surely we will get more business investment and higher stock values.

    Opponents of the tax cut continue to tout the results of economic models that have a perfect batting record of being wrong in predicting the future. For example, in 1997, when the capital gains tax rate was cut from 28% to 20%, the crystal ball gazers inside and outside government predicted a multi-billion dollar “cost” to the Treasury. In fact, the capital gains receipts doubled in 4 years. These are precisely the same defective models that are now telling us the Bush tax cut will lead the nation into bankruptcy.”

    That’s Senior Fellow Stephen Moore testifying before Congress.

    http://www.cato.org/testimony/ct-sm03182003.html

  8. Ian Gould
    August 2nd, 2008 at 22:33 | #8

    I would appreciate it BBB or anyone else can poitn me to a single libertarian publication before, say, 2006 predicting that the combination of tax and spending policies under Bush would result in a deficit blow-out.

  9. Ian Gould
    August 2nd, 2008 at 22:36 | #9

    Here’s the also-not-libertarian club for Growth attacking John McCain’s economic record.

    “The reduction of tax rates on income and investment is a cornerstone of limited-government philosophy and economic growth. When the most important pro-growth tax cuts in a generation were proposed by President Bush in 2001 and 2003, Senator McCain vigorously opposed them. The depth of this opposition goes a long way towards tarnishing the Senator’s fiscal credentials.”

    That’s from January this year so I guess they didn’t get the memo about the new party line.

    http://www.clubforgrowth.org/2007/03/arizona_senator_john_mccains_t.php

  10. August 3rd, 2008 at 06:57 | #10

    Ian I interpret the underlying principles of Libertarianism to be that individual entities (people or organisations) are better able to decide how to spend money to increase wealth than is “an authority” who does it by “command and control”. The authoritarian side argue that there is more to life than wealth as measured by monetary value.

    Such simplistic views on both sides of the argument are clearly wrong and a solution lies in the middle.

    The libertarians are correct when they argue that “a free market” will allocate money in the most efficient manner to maximise the monetary measure of the funds.

    The authority argument is right when they argue that maximising the monetary measure is not the only thing that an economy is about.

    A major problem on the libertarian side is that monetary value is used as the measure of benefit. Thus spending money on a pack of cigarettes would appear to have the same value as spending the same amount of money researching a cure for cancer.

    A major problem on the authoritarian side is that it is patently obvious that a government cannot decide on how best to allocate resources to produce food for the population.

    A possible solution is that we leave governments to decide the starting point for allocation of resources and to set other non monetary objectives for society (reduction in child deaths, reduction in house robberies, reduction in green house gases, increase in the flows of the Murray) on which there is broad consensus or where there is disagreement to ask the people through a market in objectives (called an election). We can have multiple sub elections for particular issues instead of trying to decide many things with one election.

    We then set up multiple sub markets through which we allocate funds to achieve the non monetary measures for the least monetary cost.

    This can be done.

  11. August 3rd, 2008 at 07:37 | #11

    Ian

    To show how it can be done consider the following.

    An objective may be to reduce congestion on the road and to make public transport more attractive for the least cost.

    Let us make a guess on how much money as a community we want to spend on public transport. We currently know how much we are spending so let us start with that number.

    Let us distribute the money for public transport to drivers and passengers who “car pool” and distribute some to everyone who does not own a car. That is we pay people to be in a car pool vehicle and we pay people not to own a car. The twist is that the money we pay can only be spent on public transport. Let us extend the idea of public transport to be any entity that can prove they provide transport for others – like mini buses roaming the streets, like City Rail, like a high speed train between Sydney and Melbourne. Let us make the transport money saleable. That is you can transfer your transport money to someone else and get paid in real dollars for it. Let us use an electronic ticketing system like ETag as a way of handling transport dollars.

    Let us now sit back and see what happens. The value of the “transport dollars” will give a measure of how economically efficient the system has become. As we get more experience we can bring cars and road construction pedestrians bicycles etc into the transport dollar economy.

    What has happened is that we have a mixture of authoritarianism (a decision on how much to spend) but the money is spent through a market.

    This approach can be used with all government (community) spending even defence although the details obviously vary.

  12. Ian Gould
    August 3rd, 2008 at 08:37 | #12

    Kevin, now let’s here how you think the US government should balance its budget.

    I suppose libertarians could follow the advice of Rothbard and simply repudiate the US national debt.

    http://mises.org/article.aspx?Id=1423

    Here’s a gem of a quote from Rothbard:

    “bankruptcy laws are an unjust invasion of the property rights of creditors.”

    That’s almost up there with Hayek’s “liberal dictatorship”.

  13. observa
    August 3rd, 2008 at 09:39 | #13

    What Kevin is telling you Ian, is that Govt can be smart and set the overriding constitution of the marketplace and sit back and let the visible invisble hand do its job. One of the glaring problems at present is the overarching problem of monetary inflation which suits govt, largely via indexation of taxes and excise, not least progressive income taxes, the latter the largest culprit in taxation by stealth. Hence some Bush tax cuts may look generous at first glance, but the deficit tells the true story here. As an example I just received my Council rates and the council politely tells me we’re all paying on average another 6.5% this year for their serices, when officially I’m told inflation is currently 4%. Whilst the council may have got that badly wrong over the next 12 months, they would be well ahead of the game over the last decade. I have no say in the matter because unfortunately I can’t take my custom elsewhere. Inflationary monetary policy (our Reserve targets 2-3% annually you’ll recall in an economy that presumably has productivity gains)is the greatest redistributive mechanism devised, as many are finding to their dismay now. The discussion must always be in real terms rather than nominal sleights of hand.

  14. Ian Gould
    August 3rd, 2008 at 10:08 | #14

    “What Kevin is telling you Ian, is that Govt can be smart and set the overriding constitution of the marketplace and sit back and let the visible invisble hand do its job.”

    Which is a blindingly obvious platitude which underlies all modern economics and gets us no closer to closing that US budget deficit.

  15. Ian Gould
    August 3rd, 2008 at 10:13 | #15

    So far, the one solid suggestion we have is to scrap the US Agriculture bill.

    Of course, doing that involves, inter alia, scrapping food stamps meaning almost 30 million of the poorest Americans will be $100 a month worse off.

    But hey it’s for their own good and I’m sure the survivors will thank us for it.

  16. observa
    August 3rd, 2008 at 10:20 | #16

    Speaking of altering that CM at present we have the mere prospect of doing so with a mooted cap and trade scheme on CO2 emissions. Basically well intentioned quantitative controls, with all the plethora of administrative and policing costs that will entail for all taxpayers. We have seen how subsidies to US corn growers for ethanol production has added to food costs via reduced supply and now we’ll tack similar outcomes onto our current CM thus-
    http://news.theage.com.au/business/csr-to-ramp-up-ethanol-production-20080801-3o8l.html
    http://www.news.com.au/travel/story/0,26058,24119602-5014090,00.html
    That way those of us who can still afford to, can drive and fly in the warm inner glow of saving the planet from a fate worse than starvation.

    My conclusion, given the obvious flaws in the existing CM? Scrap the current one and rewrite it from the perspective of where we all are at present and those faulty outcomes.

  17. Ian Gould
    August 3rd, 2008 at 11:04 | #17

    On the historic record, there are really only three ways, the US is goign ot get its deficit and public debt under control.

    1. De facto debt repudiation by printing money to pay the national debt down, The problem with this is it involves the effective confiscation of the savings of American investors and screwing over foreign investors who will probably be less willing to fiannce the US in future.

    2. An IMF-style austerity program including radical cuts to Medicare, Medicaid and Social Security payments.

    3. A combination of moderate tax increases and restraining the growth of government spending to less than the growth rate of the real economy. This was the strategy successfully pursued by Bush the Elder and Clinton.

  18. observa
    August 3rd, 2008 at 11:19 | #18

    “So far, the one solid suggestion we have is to scrap the US Agriculture bill.”
    What an invitation?

    Come imagineering with me for a moment and then perhaps you can do some imagineering on your own along such lines. Suppose as a result of the last recession we had to have we’d decided enough was enough and it was time to seriously address the flaws in our current CM and rewrote it along the following lines-
    - All forms of taxation had been phased out except for a tax on resources including carbon taxing
    - That resource taxing included a land use resource tax on a scale from zero for natural environment to a maximum rate for man made cover (buildings, bitumen, concrete and perhaps man made flooding eg the Snowy dams cf Cubby stations)
    - An Annual Nett Wealth Tax for high wealth individuals, tailored for lifecycle
    - Exemption from ANWT liability for any wealth held as natural environment and further franking credits for expenditure on its creation and protection
    No other subsidies, handouts or special interest feeding ie for hybrid cars, solar feed-in, ethanol or biodiesel subsidy, etc, etc.

    After a decade or so what outcomes would our new CM likely produce? Well perhaps petrol is now $3/L and our public transport ifrastructure and private transport reflects that impost, albeit we have our gross wages in our hands every week to accommodate that. There are no taxes on labour or any disincentives for capital and labour to exchange freely in a fleet of foot economy responding to market forces. No high marginal tax rates or EMTRs, no stamp duties or capital gains taxes gluing capital to past ownership and the like. Entirely netral as to what resources are used for be it private, business, charitable or religious pursuits. The truly secular marketplace. The imperative, inexorable market signal to all is that the use of new resources is costly in relation to existing ones, aiding the wise use and recycling. No more picking winners and losers like Gladwrap and Garbags over disposable plastic shopping bags. It’s likely that all would suffer a withering away under such a tax regime.

    Notice we no longer have to concern ourselves with who owns the resources when all pay the same resource taxes. BHP Billiton/Rio/Woodside shareholders or Chinese SWFs, the resource taxing is the same. A water resource tax of only 4 or 5c/kilolitre would wipe out much counterproductive and profligate use use of water today, especially in the MDB. Notice there is no bias toward capital gain in housing and the effects of negative gearing are gone forever. Pay as you consume rather than as you earn, thereby encouraging real savings and investment, particularly as there is no incentive for borrowing and tax deductibility.

    Now to the greatest benefit of all. Giving natural environment that countervailing market power against knocking it over for Tuscan McMansions or other economic uses. That power lies in the incentive for high value wealth holders to seek relief from ANWT in investing in the natural environment. The lifeblood of the plethora of John Wlamesleys and their Earth Sanctuaries Ltd, not to mention those first tenders of the land. For aboriginals and their ‘worthless’ lands in todays CM, the opportunity to be serious market players in the new marketplace.

    That’s my ideal constitutional marketplace and it’s not anything radically new or difficult. Just the careful thought about the serious deficiencies of our current inherited one and how to unleash market forces to make it a whole lot better. It’s an exemplary approach for the ROW to follow, rather than signing up to some flawed and failed add-on like international ETS. After all, if they didn’t take the hint, I could imagine where a lot of the world’s multinationals would want to headquarter with no income or comapany taxes. Just pay your resource footprint and welcome aboard folks.

  19. Ian Gould
    August 3rd, 2008 at 11:26 | #19

    “imagineering on your own along such lines. Suppose as a result of the last recession we had to have we’d decided enough was enough and it was time to seriously address the flaws in our current CM and rewrote it along the following lines-
    - All forms of taxation had been phased out except for a tax on resources including carbon taxing
    - That resource taxing included a land use resource tax on a scale from zero for natural environment to a maximum rate for man made cover (buildings, bitumen, concrete and perhaps man made flooding eg the Snowy dams cf Cubby stations)
    - An Annual Nett Wealth Tax for high wealth individuals, tailored for lifecycle
    - Exemption from ANWT liability for any wealth held as natural environment and further franking credits for expenditure on its creation and protection
    No other subsidies, handouts or special interest feeding ie for hybrid cars, solar feed-in, ethanol or biodiesel subsidy, etc, etc.”

    And the US is going to implement that in the next year or so?

    Try answering the question asked for a change.

  20. observa
    August 3rd, 2008 at 11:50 | #20

    “And the US is going to implement that in the next year or so?”
    Whether the US does or doesn’t move in such directions shouldn’t deter us from an exemplary approach re the ROW. After all that’s what we’re being exhorted to do now with an international ETS. Set an example for LDCs, albeit I contend it’s a fatally flawed one. I’d suggest the ETS fans should prove their magic pudding with a jurisdictionally simpler C&T scheme in our own backyard with the MDB and water. If they can’t do that with wall to wall Labor now, what chance ‘metoo’ international ETS with CO2 we should all ask ourselves? Nevertheless I think the size and nature of the impending world recession will cause much introspection and circumspection about real future directions. It’s up to us to seek the answers instead of looking for them around the globe like sycophantic children.

    I’ve laid out a simple blueprint for sensible change given the current state of play. It is just a blueprint and clearly there would be much to suck on and see WRT the nature and balance of respective levels of taxation ie degrees of reliance on resource, carbon, ANWT taxation and the like. Still, I’d rather be using the manpower and intelligence in that pursuit, rather than arguing over more tinkering around the edges of the current failing CM. As well I’d like to see the depredations of well meaning central bankers ended once and for all, but if we are to have the continual curse of their monetary speculative bubbles descend upon us, then perhaps some speculation and capital gain in natural environment might be less onerous than the kids prospective housing.

  21. Ian Gould
    August 3rd, 2008 at 11:58 | #21

    “Whether the US does or doesn’t move in such directions shouldn’t deter us from an exemplary approach re the ROW. ”

    So you actually haven’t the faintest idea what the US should do.

    That’s the issue you’re being invited to comment on.

  22. Bingo Bango Boingo
    August 3rd, 2008 at 14:12 | #22

    Ian, your childish remarks about food stamps and their place in the Farm Bill, as if the most offensive parts of the Bill can’t be repealed, or as if food stamps are the only way to ensure equity of access to nutrition, shows you aren’t capable of proper debate, so why would observa waste his breath? I won’t be from now on. You fooled me once, but not again.

    Cheers
    BBB

  23. Ian Gould
    August 3rd, 2008 at 14:41 | #23

    BBB, seeing as food stamps make up about half of the total cost of the bill, I’d say it’s rather a substantial point.

    As for “proper debate”, does this sound familiar “Ian, are you insane?”/

    This is the sort of fatuous hypocrisy that leads me to hold most libertarians in contempt.

  24. August 3rd, 2008 at 17:29 | #24

    There is a way of tackling the current economic crisis and preventing future ones that requires little change to the way we do things and works on market principles.

    Problem number one is how to get rid of all the money that was created as a result of the housing bubble in the USA and to a lesser extent in Australia and other countries.
    Problem number two is how to “recycle” the massive amounts of money that is being created from the profits of oil, coal, and gas. It is not costing anymore to produce these products and yet massive amounts of money is being created to pay for them and the money has to go somewhere.

    Let us take the first one and let us figure out a way of isolating housing prices from the rest of the economy until the housing prices get back to “real value” without impacting the housing construction industry.

    Imagine that when a housing loan is issued the money can only be used to buy a house or build a new house. That is, if someone gets a loan to purchase a house then the person receiving the loan money for the house purchase now has to use the money to either purchase a house or build a house. They cannot use the money to buy a yacht. They can however sell the money to someone who wants to build a house but they will have to sell the money at a discount to its face value because it is restricted in its use. This difference between the face value of money to what it can get in the open market will reflect the asset bubble price of houses – but it will isolate house prices from the rest of the economy and restrict the inflationary effect of all this money created as loans for over valued houses and it will have little influence on other areas of the economy. House construction will still go on because there are a lot of people with money to build or buy houses where the money only gets “full” value if it is used for this purpose. This will “fix” the sub prime crisis and make Australian housing affordable again.

    Now what should we do with the extra money generated from the asset inflation of commodities. Again let us isolate this money and require it to be spent on renewable energy projects or sold to the highest bidder. This would create an instant market in renewable infrastructure which will soon generate energy cheaper than fossil fuels and will turn Australia literally into the Renewable Energy Powerhouse for the next century with all the economic benefits that will bring.

    It is a fact that today the running cost of renewable energy (without capital costs) is half the cost of fossil burning energy and by the time we have built 30% of the energy needs for Australia with renewable energy infrastructure the capital costs of renewable energy will be the same as the best fossil fuel plants. By the time we get to 100% of Australias energy needs the capital cost will be half the cost of a fossil fuel burning plant if anyone was ever crazy enough to build one.

    Again the solution is to put restrictions on the extra money that is created from an asset bubble no matter what caused the asset bubble. Simple to do and easy to implement.

  25. gerard
    August 3rd, 2008 at 18:25 | #25

    A modest proposal Ian; I would think that the obvious ‘libertarian’ solution is to do what Russia did to ‘solve’ its economic problems in 1991 and simply privatize the government completely. In accordance with the best that economic theory has to offer, this solution could have no possible outcome rather than resounding success. It kills two birds with one stone: on the one hand, privatization would raise a large amount of money for the government to pay down its debts, and as an added bonus, the government debts would no longer exist, as the government would cease to exist! The new private owners of all State assets and departments could then run them for the maximization of their own profits, and do away with any superfluous resource wastage.

    But I don’t think you can’t see the forest for the trees. Tpday’s budgetary crisis in the United States is not a problem that needs to be solved – as Cheney said, deficits don’t matter. It is deliberate ‘libertarian’ policy. By ‘libertarian’ I’m talking about super-rich class warriors who like to slap a thin coat of ‘political philosophy’ on top of naked, antihuman greed. Of course they are not real libertarians at all, in any true sense related to the meaning of the word ‘liberty’, but New Right libertarianism has never been more than a crypto-Leninist political program for a small movement of reactionary anti-social welfare pro-corporate National Socialists. Unable to convince the population that strangling social democracy is in their best interests (largely because it’s not), they have instead realized that their most likely shot at implement their program is by bankrupting the State.

    One way or another, the deficit is an enormous boost to their wealth of their own class – and that is what they are loyal to, not this mere geographical expression of the ‘United States’. So why would they think the budgetary crisis is a problem at all? In makes themselves rich, and in their own eyes it makes their case for strangling the welfare state in the bathtub all the more compelling. You think Greenspan didn’t see this coming a mile away? Of course he did, but he thinks its great because if the books were balanced nobody would listen to him talk about privatizing Social Security and abolishing Medicare and Medicaid. And Bush would look even worse vetoing a proposal to extend health coverage to poor children if the government was in the black.

    The only problem is that they’ve taken their program to such radical extremes that even much of the elite is wary of continuing down that path and ending up like Yeltsin’s Russia, which is why Obama has such deep support on Wall Street.

  26. Ikonoclast
    August 3rd, 2008 at 19:03 | #26

    That’s a pretty scarey rave, Gerard, but actually I think you are mostly correct.

  27. Ian Gould
    August 3rd, 2008 at 20:01 | #27

    Gerard, fristly let me say that the majority of self-described libertarians, fiarly obviously, don’t fit that description.

    I actually feel rather aorry the average libertarians who seems to me, despite the movement’s rhetoric, to mostly be examples of what is referred to as the right wing authoritarian personality type.

    http://en.wikipedia.org/wiki/Right-wing_authoritarianism

    It must be terrible to go thorugh life constabtrly convinced you’re being oppressed and terrorised. )One striking difference between libertarians and anarchists is I don;t think I’ve ever heard an anarchist cite their own material wellbeing as a reason for their political views. Unlike libertarians who constantly talk about how much better off they’d be in the damn gub’mint would just stop taxing them.)

    Secondly, what describe is soemwhat similar to the strategy of “starving the beast” enunciated by some prominent libertarians which basically proposes bankrupting the US government so it has to spend most of its money on debt service and is unable pursue an activist policies.

    But while Cheney may be on-board with such a policy I don;t think McCain or most of the Republican Party. The thing about conservative oligarchs (unless there spectacularly stupid and afflicted by religious mania like Bush) is they realise they got to the top under the current system and are reluctant to make radial changes which could undermine their privilged position.

    I also doubt the Republcians will be in much of a position to do anything after November. Even if McCain wins by some miracle, he’ll probably be facing a veto-proof Democrat majority in both houses.

    (Not that the Democrats are anything special – Gore, Kerry and Kennedy are prime examples of the conservative oligarchs I was talking about earlier. They are however preferable to their Republican opposite numbers since they’re bright enough to realise some mininal changes need to be made to keep the gravy train on the tracks.)

    So I expect to see some grudging mix of spending cuts and tax increases. (If Prez McCain faisl to get the votes to extend the Bush tax cuts I’m sure he’ll cry all the way to the bank.)

    Then when the economy recovers in 2010 or 2011, libertaraisn will credit it to the Bush tax cuts and the next downturn whenever it comes will be blamed on the tax increase of 2009.

    (In closing, I’m goign ot say once again that there are soem libertarians here – like Terje and Andrew Reynolds – who I quite like despite our political differences. In both cases (and I’m sure there are others I’ll smack myself in the head for not thinking of as soon as I’ve posted this), their political views strike me as mistaken but I never doubt their good intentions.)

  28. gerard
    August 3rd, 2008 at 20:34 | #28

    more from the benighted states of america,

    Church beatings supported by the first amendment:A woman who claims she was injured during an exorcism performed by a Texas church group is reportedly planning to take her case to the US Supreme Court after state judges ruled the actions of the church were protected by the First Amendment

  29. August 4th, 2008 at 06:59 | #29

    What I find interesting about these discussions is that people talk about what is wrong with other people’s views but rarely talk about ways of getting differing points of view to be reconciled.

    The view that people are selfish and are continually trying to do everything for themselves and to hell with everyone else appears to be misplaced. The book Moral Markets reports some interesting experiments. The one that I found most fascinating is that at the personal level of individual transactions we find that the pleasure centres of the brain light up much more when we give than when we receive. However the flip side is that we really get upset when we give and think we have been cheated. We have evolved to be sharing animals and yet the underpinnings of our current economic system is exactly the opposite and the way we collect taxes is done in such a way that people think they are not getting a fair return on their gifts and so resent it.

    Why not start to discuss how we can better cooperate and share and pay taxes so that we feel good about paying them because we see they are fair. Most of the things I am suggesting in previous comments have come from thinking about how we make our community transactions fair so that we get pleasure from sharing.

    For example in order to reform taxes I would suggest that we do a lot more hypothecation of taxes and go even further and let the person paying the tax have a say in how it is spent. Simply paying a tax gives me little pleasure because I do not trust the people receiving it to spend it wisely. Paying a tax or levy where I have a say in how the money I pay is spent and also get a direct benefit from it while sharing in the benefit with others makes a lot more sense from our evolutionary history.

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