Wednesday, October 27, 2010

Deleterious Doodling About The Deficit: What Else Is New? Department

In today's Washington Post business section, Lori Montgomery has a big article on "A renewed focus on spending," starting with how the GOP is making noises about cutting spending to cut the deficit without raising taxes, while not mentioning anything too serious, although Boehner supposedly might be open to cutting some loopholes in the tax code, thereby de facto raising taxes, if Grover Norquist will let him (assuming as most think that the GOP will take control of the House after next week's election), and if anybody thinks elimination of the tax deduction for mortgage interest is remotely on the table in a period with a terrible housing market, there is a bridge in Brooklyn for sale to them. Then most of the article lugubriously goes on about all the efforts at supposed bipartisanship on the Deficit Commission.

Yet again, we read about all this agreement to "stabilize social security finances" by raising future retirement ages, because "The current Social Security program will not survive based on upon current rules." Well, beating a drum beaten often here, this latter is so much baloney. However, the rest of it is even worse. We get scare stories about the deficit of the last two years, when about half of this is due to the recession and the rapidly disappearing stimulus package, while the other half is due to the Bush tax cuts and increased defense spending due to wars in Iraq and Afghanistan, which will hopefully wind down in the not too distant future.

Raising future retirement ages does a great big doodley-squat nothing about any near term deficit, although Lori Montgomery and other reporters somehow fail to point this out in their so-called reporting. So, we suffer from an ongoing deterioration of discourse on this subject as the same old groups and politicians push the same old nonsense formuli for solving a problem that will hopefully mostly take care of itself, with almost no offsetting commentary, although undoing the tax cut part of the deficit is not going to happen if the GOP takes over the House.


Shag from Brookline said...

Good post but I was intrigued by "doodley-squat" as I was nurtured on "diddley-squat." Is the plu-perfect involved?

Dan Crawford said...

Well shag, diddling the budget just doesn't sound as serious, but may be more perfectly accurate.

Although from the latin derivatives doodling does come from the verb doo-doo. A quandry?

I did borrow the post Prof. Rosser.

TheTrucker said...

There has never been a time in the history of the United States when increasing the tax rates on extreme ordinary incomes has harmed the US economy. The increase in 1936 was not the cause of the 37-38 recession. That was caused by FED tightening and spending cuts. The recovery happened when the FED loosened and the government resumed stimulative spending. The tax rates stayed where they were as the recovery took place.

The latest counter example is the 1993 tax increase on high ordinary incomes which produced a very solid economy which did not overheat until the 1997 tax cuts for the rich (capital gains rates decreased).

greg said...

I think "an ongoing deterioration of discourse on this subject" is one of the points. With one side determinedly, and loudly, spouting nonsense, it is hard to maintain reasoned dialogue. And I think the destruction of dialogue , and its replacement with slogans is one of their purposes.

True Justice requires reasoning, while unfettered plunder merely requires the slogan: "Freedom." Freedom for the people demands their access to justice and economic resources. It is something that requires reason to understand, and reasoned discourse to promote.

Sandwichman said...

"So, we suffer from an ongoing deterioration of discourse on this subject as the same old groups and politicians push the same old nonsense formuli..."

Hey, it works! As Greg pointed out, the purpose of the mindless sloganeering is to forestall reasoned dialogue. And it works.

Here's a wrinkle you may find of interest, Barkley. The right-wing noise machine uses the EXACT same slogans to promote Social Security "reform" as it does to squelch discussion of work time reduction. Who would have thunk?

Francois Melese at Mises Daily: "the fact that [French] students are in the streets demonstrating against this particular pension reform suggests professors and politicians deserve an F -- they have failed to explain what economists call the lump-of-labor fallacy..."

Jason Kuznicki at Cato@Liberty: "It’s our old friend, the lump of labor fallacy: Force the oldsters into retirement, and it’s like a jobs program for everyone else."

Andrew G. Biggs at the American Enterprise Institute (reprinted from National Review): "Some argue that no jobs exist for older workers. But this claim commits what economists call the 'lump-of-labor fallacy,' which holds that there are a limited number of jobs for which workers must compete. Economists almost universally reject this view..."

And there you have it -- "the case for raising social security's retirement age." Nonsense on stilts but...

"they came first for the shorter workweek advocates, and I didn't speak up because I wasn't a big fan of that particular policy..."

TheTrucker said...

It is actually "the lump of labor fallacy fallacy". While there is no static amount of labor required, there is a set amount of labor required at any particular level of wants and real capital development. Real capital reduces the requisite labor required at any particular level of wants. The distribution of the gains from such development are too highly skewed toward owners and away from producers and that is what causes slack demand.

A shorting of the "straight time" work week and the nationalization of what are considered to be "benefits" will have addressed most of this problem. The increase in the retirement age in the face of higher and higher unemployment and more and more capital development is asinine.

I never can understand which side of the disagreement the Sandwich Man wants to take. But I always thought that he wanted to dispel this idiocy about work being limitless. It is only limitless when the work is done by someone else.

The old Egyptian economy was great. The slaves built the pyramids and the more they worked the more they ate and the bigger the pyramids got to be. The GDP was way up there. But I don't reckon the slaves were very enamored of it.

Sandwichman said...

"I never can understand which side of the disagreement the Sandwich Man wants to take."

Wow. "nonsense on stilts" is ambiguous?

Don Levit said...

What does the trust fund balance indicate? The amount of money that SS can withdraw from the Treasury without an appropriation.
What's the difference between a trust fund and the general fund?
Nothing, both are separate accounts in the Treasury.
Expenses paid out of the general fund need to be appropriated by Congress.
Does the trust fund make it any easier to pay beneficiaries? No, it is not a store of wealth, only a bookkeeping device, which indicates the "draw" on the Treasury.
Once money is drawn from the Treasury to pay SS, it is done the exact same way as the Treasury pays for battleships - out of general revenues and/or debt.
Don Levit