I’ve been teaching the socialist calculation debate again this spring. Each time I return to these arguments, I think I see them more clearly. Here is my latest try at summing up the Austrian position and its implications for potential economic systems, capitalist or otherwise. The web is crawling with Austrophiles, so they can tell me whether I am walking in light or darkness.
1. The key concept is discovery: discovering what consumers need and want, and discovering the true costs of providing these things. Since they are subject to tacitly known and otherwise irreducibly qualitative determinants, values and costs cannot be ascertained apart from the actual processes of producing and marketing, so the technical problem of number crunching—devising algorithms to calculate equilibrium prices and quantities out of cost and demand information—is secondary. Any reasonably efficient economic system has to have processes of discovery, some for costs, others for the value of goods and services as determined by consumers. These processes need to be specified concretely.
2. Discovery requires trial and error. In an economy with a vast number of goods, and with complicated production and consumption relationships surrounding each good, it is inconceivable that trial and error can be sequential. Rather, there have to be many trials simultaneously, along with a process for determining which succeed or fail. That is the role of rivalry (competition) in a market economy, with the market test assessing success and failure. “Cost” is discovered by firms that succeed in being low-cost producers; “value” is discovered by those who succeed in marketing. This information is transmitted via prices to other firms, telling them whether they are producing at- or above-cost, and whether they are producing and selling at- or below-value. Any plausible economic system has to have a structure of multiple, simultaneous trials, a “hard” test that tells enterprises whether their trials are succeeding, and a vehicle for transmitting the results of these tests to all participants—in real time. On top of this, of course, there needs to be an incentive structure that causes those who failed the test to abandon the methods that were retrospectively unsuccessful.
Saturday, June 4, 2011
Second Interview on The Invisible Handcuffs
Richard Estes, "Speaking in Tongues." KDVS, Davis, CA invited me on his program to discuss the Invisible Handcuffs.
The url is:
http://michaelperelman.wordpress.com/2011/06/04/second-interview-on-the-invisible-handcuffs/http://www.blogger.com/img/blank.gif
The url is:
http://michaelperelman.wordpress.com/2011/06/04/second-interview-on-the-invisible-handcuffs/http://www.blogger.com/img/blank.gif
Interview about the Invisible Handcuffs
Alan Ruff of WORTfm in Madison, WI gave me a very good interview yestersday. This is the first of 3 interviews. I hope to have the url for the next 2 in a day or two.
Access at:
http://www.archive.org/details/MichaelPerelman--InterviewAboutTheInvisibleHandcuffs
Access at:
http://www.archive.org/details/MichaelPerelman--InterviewAboutTheInvisibleHandcuffs
Friday, June 3, 2011
A Paranoid Thought: Suppose the Republicans Are Smart
If the Republicans are smart, unscrupulous and want to win in 2012 at any cost, here’s a game plan.
Step 1: Fight like a demon against any fiscal stimulus that would help accelerate economic growth and reduce unemployment. Make up any excuse that sells. If one excuse begins to lose its juice, switch to another; consistency is irrelevant.
Step 2: Wait for the economy to stall or even go into reverse by early 2012.
Step 3: Once it’s too late for policy to have any effect before November, switch gears and demand an emergency program to create jobs, coupled with tax cuts for carefully targeted campaign contributors. Blame Obama for the endless slump and paint yourselves as tireless activists for full employment. Obama then faces the ugly choice between remaining consistent and toughing out the feeble economy or flip-flopping and chasing after your policies.
It’s all hypothetical, of course, except that we’ve been living in Step 1 since the moment McCain conceded in 2008.
Step 1: Fight like a demon against any fiscal stimulus that would help accelerate economic growth and reduce unemployment. Make up any excuse that sells. If one excuse begins to lose its juice, switch to another; consistency is irrelevant.
Step 2: Wait for the economy to stall or even go into reverse by early 2012.
Step 3: Once it’s too late for policy to have any effect before November, switch gears and demand an emergency program to create jobs, coupled with tax cuts for carefully targeted campaign contributors. Blame Obama for the endless slump and paint yourselves as tireless activists for full employment. Obama then faces the ugly choice between remaining consistent and toughing out the feeble economy or flip-flopping and chasing after your policies.
It’s all hypothetical, of course, except that we’ve been living in Step 1 since the moment McCain conceded in 2008.
The Optimism of a Double-Dip
A crisis is the method by which a capitalist economy partially purges itself of the effects of past mistakes while imposing misery on the masses.
Economists often characterize the outcomes as by the shape of letters of the alphabet. A "V" indicates a quick collapse and an equally quick recovery. "L" suggests a collapse followed by a very weak recovery. And a "W" indicates a double-dip in which the quick recovery is followed by another collapse. Ironically, our previous president was known as "W" will and our present president could be known as zero, which approximates the first letter of his last name.
A V-shaped recovery suggests that the economy was fundamentally strong, allowing the economy to quickly pick up steam. A W-shaped outcome is a telltale sign of an economy that was leaked to begin with, propped up by external support, which was withdrawn prematurely. For example, Roosevelt succumbed to outside pressure in 1937, leading to an expected setback. Under far less pressure, Obama followed suit.
Both the crisis and the recovery can only be understood in terms of the long-term processes that caused the initial collapse. In "The Confiscation of American Prosperity: From Right-Wing Extremism and Economic Ideology to the Next Great Depression" I tried to tell the story of the gradual weakening of the US economy. The book explained how the unusual postwar prosperity was created by a sequence of the Great Depression and then the war. The postwar period up to the late 1960s is often described as The Golden Age because the economy performed better than ever before.
The business class believed that this exceptional performance was the norm. As the economy began to falter in the late 1960s, capitalists set out to restore their sagging profits. During the Golden Age, prosperity also meant that competitive pressures were not strong. In the absence of competitive pressures, business had little need to improve productivity. Management could coast along assuming that high profits were due to their outstanding managerial skills.
Unprepared and unwilling to adapt to the new economic conditions, capitalists set out to remake the economic structure in a way that would allow profits to recover. However, they did so by subtracting from the rest of society, rather than by contributing anything productive. Anything that stood in the way of profit maximization, whether unions, regulation, or taxes, had to be swept away. Business was surprisingly successful in this endeavor, but it did nothing to make the economy stronger. In fact, this strategy undermined economic strength.
Obscene inequality of wealth and income meant that business would be unlikely to prosper by selling goods to the masses. The rise of international competition made that strategy less likely. Instead, business turned to finance, at the same time as the regulatory forces that might have imposed a modicum of rationality were no longer operative.
I use the term Confiscation of American Prosperity to indicate that in this period from the late 1960s until 2007, when the book was published, to indicate that growing profits were not a sign of strength, but an indication of how much capitalism was subtracting, or as Marx would say, vampire-like parasitically sucking away the strength of the economy.
I will not speculate whether the money thrown at the banks was a continuation of the process of confiscation or whether the people in charge actually believed that this misconceived strategy would be sufficient to create a quick recovery. In any case, it did little to the bleeding -- except for the large mass of the public, which had been being bled her for more than three decades, since the end of the Golden Age.
On top of the withdrawal of the federal life support for the economy, the confiscatory strategy has been escalated. The attack on unions, regulation, and taxes is now on steroids. If the previous attack was crucial in creating the present crisis, this all-out attack seems certain to make things considerably worse. A double-dip may be just an ice cream cone and any expectation of a W-like outcome may be overly optimistic.
Economists often characterize the outcomes as by the shape of letters of the alphabet. A "V" indicates a quick collapse and an equally quick recovery. "L" suggests a collapse followed by a very weak recovery. And a "W" indicates a double-dip in which the quick recovery is followed by another collapse. Ironically, our previous president was known as "W" will and our present president could be known as zero, which approximates the first letter of his last name.
A V-shaped recovery suggests that the economy was fundamentally strong, allowing the economy to quickly pick up steam. A W-shaped outcome is a telltale sign of an economy that was leaked to begin with, propped up by external support, which was withdrawn prematurely. For example, Roosevelt succumbed to outside pressure in 1937, leading to an expected setback. Under far less pressure, Obama followed suit.
Both the crisis and the recovery can only be understood in terms of the long-term processes that caused the initial collapse. In "The Confiscation of American Prosperity: From Right-Wing Extremism and Economic Ideology to the Next Great Depression" I tried to tell the story of the gradual weakening of the US economy. The book explained how the unusual postwar prosperity was created by a sequence of the Great Depression and then the war. The postwar period up to the late 1960s is often described as The Golden Age because the economy performed better than ever before.
The business class believed that this exceptional performance was the norm. As the economy began to falter in the late 1960s, capitalists set out to restore their sagging profits. During the Golden Age, prosperity also meant that competitive pressures were not strong. In the absence of competitive pressures, business had little need to improve productivity. Management could coast along assuming that high profits were due to their outstanding managerial skills.
Unprepared and unwilling to adapt to the new economic conditions, capitalists set out to remake the economic structure in a way that would allow profits to recover. However, they did so by subtracting from the rest of society, rather than by contributing anything productive. Anything that stood in the way of profit maximization, whether unions, regulation, or taxes, had to be swept away. Business was surprisingly successful in this endeavor, but it did nothing to make the economy stronger. In fact, this strategy undermined economic strength.
Obscene inequality of wealth and income meant that business would be unlikely to prosper by selling goods to the masses. The rise of international competition made that strategy less likely. Instead, business turned to finance, at the same time as the regulatory forces that might have imposed a modicum of rationality were no longer operative.
I use the term Confiscation of American Prosperity to indicate that in this period from the late 1960s until 2007, when the book was published, to indicate that growing profits were not a sign of strength, but an indication of how much capitalism was subtracting, or as Marx would say, vampire-like parasitically sucking away the strength of the economy.
I will not speculate whether the money thrown at the banks was a continuation of the process of confiscation or whether the people in charge actually believed that this misconceived strategy would be sufficient to create a quick recovery. In any case, it did little to the bleeding -- except for the large mass of the public, which had been being bled her for more than three decades, since the end of the Golden Age.
On top of the withdrawal of the federal life support for the economy, the confiscatory strategy has been escalated. The attack on unions, regulation, and taxes is now on steroids. If the previous attack was crucial in creating the present crisis, this all-out attack seems certain to make things considerably worse. A double-dip may be just an ice cream cone and any expectation of a W-like outcome may be overly optimistic.
Wednesday, June 1, 2011
The Lucas Explanation of the Persistence of the Great Recession: The Barro Objection
Robert Lucas offers the following as one of his reasons for the persistence of the Great Recession:
Gavyn Davies and Paul Krugman argue that the Lucas attempt to explain the persistence of the Great Recession on purely classical principles lacks credibility with Davies noting:
One could argue, however, that the Barro reformulation of Ricardian Equivalence would argue that it is not current taxation that matters but the expectation of future taxes when government spending outstrips taxes. But if one is basing one’s argument thusly, I don’t see what has fundamentally changed in the past few years. We knew back in the 1980’s that Reagan’s fiscal policy has spending outstripping taxes until we got the return to fiscal sanity during the Clinton years. Of course, that changed when a new Administration took office but that new Administration took office in 2001 – not 2009. Professor Lucas does not explain to us why he believes that the Obama Administration signals an even further long-term commitment to more government spending. In fact, the medical reforms he mentions were designed to reduce long-term spending. So if the rich were forward looking ala Ricardian Equivalence, the likelihood of much higher taxes would have been realized well before the Great Recession.
Likelihood of much higher taxes, focused on the “rich”
Gavyn Davies and Paul Krugman argue that the Lucas attempt to explain the persistence of the Great Recession on purely classical principles lacks credibility with Davies noting:
As yet, there has been no increase in taxation, on the rich or anyone else. Nor have the Obama administration’s medical and financial sector reforms really taken effect. It would take a remarkably far sighted private sector to have already reacted adversely to this set of long term reforms, even if they might do so eventually.
One could argue, however, that the Barro reformulation of Ricardian Equivalence would argue that it is not current taxation that matters but the expectation of future taxes when government spending outstrips taxes. But if one is basing one’s argument thusly, I don’t see what has fundamentally changed in the past few years. We knew back in the 1980’s that Reagan’s fiscal policy has spending outstripping taxes until we got the return to fiscal sanity during the Clinton years. Of course, that changed when a new Administration took office but that new Administration took office in 2001 – not 2009. Professor Lucas does not explain to us why he believes that the Obama Administration signals an even further long-term commitment to more government spending. In fact, the medical reforms he mentions were designed to reduce long-term spending. So if the rich were forward looking ala Ricardian Equivalence, the likelihood of much higher taxes would have been realized well before the Great Recession.
Sunday, May 29, 2011
The Macro Identity Cuts the Cant
I’ve been pretty busy, and in lieu of writing a real post, I’ll mostly quote Yves Smith:
The reason most people don’t like government deficits is that they are assumed to crowd out private sector borrowing, thus discouraging business investment. But companies in the US, even in the last expansion, were net savers. That pattern has taken hold in advanced economies, even in many emerging economies ex China, since the mid 2000s, and some as early as the late 1990s. Andrew Haldane, the director of financial stability for the Bank of England, confirmed that companies and investors are taking an excessively short-term perspective, which is leading to underinvestment.What she is doing here is simply applying the fundamental macro identity, one of whose forms is that the sum of private and public budget positions plus the current account is zero. I’m increasingly convinced that just starting from the relevant version of the identity eliminates the 90% of economic debate that is nonsense. After that we can start discussing the other 10%—like whether the net savings of the business sector are only due to short-termism. (I think not, but that’s another, longer, more time-intensive post.)
In simple terms, the household sector always wants to save. If the business sector also perversely wants to save, then government needs to take up the slack and deficit spend, otherwise wages and GDP will contract (if you run a big trade surplus, you can escape that conundrum, but that isn’t germane for the US). If GDP contracts, debt to GDP gets worse, not better. Conversely, when the economy is strong and the business sector is borrowing to expand operations is when the government sector should run a surplus.
Should We Panic Over the Level of Federal Debt?
Glenn Hubbard thinks our Federal debt problem is worse than it was at the end of World War II:
The US has addressed debt burdens before. Between the end of the second world war and 1960, the nation cut its debt-to-gross domestic product ratio in half from 109 per cent to 46 per cent through economic growth and avoiding additional debt accumulation. The US debt problem is now more difficult. Since 2008, the ratio of federal debt held by the public to GDP has risen from 40 per cent on its way to over 90 per cent by 2020, an alarming increase outside of major wartime experience. Today’s problem is not a past war, but ever-rising future debt burdens unless we take action.
Our chart shows the federal debt held by the public (DHP) to GDP ratio as well as total Federal Debt (TD) relative to GDP from 1939 to 2011 (projected) as reported in table B.79 of the Economic Report of the President 2010. Note that this 90% projection for DHP/GDP in 2020 is not as high as the ratio for 1945 but it is entirely possibly that TD/GDP will reach 120%.
Why would the Federal debt problem be more difficult now or even in 2020? This topic has received substantial attention of late – with a couple of mentions to Paul Krugman and the CBPP . Paul talks about debt arithmetic, which is reminiscent of Sargent and Wallace’s Unpleasant Monetarist Arithmetic . Let’s pessimistically assume that by 2020 we have a steady state real interest rate equal to 4% and real growth equal to 3%. If we could obtain a non-interest surplus to GDP ratio equal to or greater than 1.2%, then we could avoid a debt explosion and in fact might even see the debt ratio decline over time.
Glenn argued that we enjoyed a reduction in the debt ratio from 1945 to 1960, which is true. In fact, the debt ratio continued to decline during the 1960’s and 1970’s despite the Vietnam War spending and the various recessions we had during the Nixon, Ford, and Carter Administrations.
The CBPP chart shows that the explosion in the public debt ratio discussed by Glenn Hubbard comes from three primary sources: (1) the Bush tax cuts (I don’t exactly recall Glenn objecting to these when he worked for the Bush Administration); the two wars started at a similar time; and (3) the recession and fiscal policy moves designed to limit the recession. Robert Barro back in 1979 noted that the US economy often saw jumps in the debt to GDP ratio as the result of major wars and recessions but for its history up to then, long-term fiscal policy tended to retire this debt over time. Ah but this was another example of the Cheshire Cat in economics – as soon as an economist documents this tendency for long-term fiscal responsibility, we get the Reagan tax cuts which were not accompanied by meaningful spending cuts. So the debt ratio rose dramatically until the fiscal discipline movements of the 1990’s – which were in part defense spending cuts and largely tax increases – began to show up in a debt ratio that began to decline. At least until we had the fiscal irresponsibility of the Administration that Glenn Hubbard served.
We should, however, mention the elephant in the room which is the projected increase in Federal spending on health care. The Administration that Glenn Hubbard served made the problem worse as it added a prescription drug benefit without adding any revenues to pay for it. The current Administration managed to pass health care reforms that would tend to limit this growth in spending but with no support from the Republican Party. And yet it is this same Republican Party that not only refuses to consider any revenue increasing measures but wants to cut taxes even more.
We should close with admonition that fiscal discipline during a weak economy does not necessarily improve the situation with a hat tip to Brad DeLong .
Saturday, May 28, 2011
There Was Neither Medicare Nor Medicaid In 1958
So what, you might ask? Well, the word is out that the most recent year tax revenues as a percent of GDP were as low as they are now was 1958, http://www.usgovernmentrevenue.com/downchart_gr.pap?years1900_2010%units=p&title=Revenue%20%20percent%20%20GDP . This might explain why in the push for a balanced budget, while cutting taxes even further, the Ryan plan seeks to drastically cut Medicare by turning it into a premium support voucher system, with the elderly having to cover most of their expenses out of pocket. Back in 1958, both the old and the poor had to pay for all their own medical care. What a paradise!
So, if there was neither Medicare nor Medicaid, what was in the budget back then? Of course, government spending was lower as a percent today, those Eisenhower budgets generally being close to balanced, although as 1958 was a recession year, there was a deficit in that one. Well, the much bigger item in percent terms was national defense. After all, it was the Cold War, and the year before the Soviets had beaten us into space scarily with their launching of Sputnik.
But, we need to pay respect here to this drive to lower taxes. After all, we could go back further to when there was no Social Security either, and defense was lower, you know, maybe 1917 when we were just getting into WW I and that darned debt ceiling first got installed, only four years after the federal income tax was adopted, an even greater paradise!
Or, better yet, go all the way back to a century ago before there was a federal income tax. After all, newly possible prez candidate Rick Perry wants to get rid of it. And, hey, in the logic of the political supply siders who constantly tell us that revenues always go up when tax rates go down, this would be the ultimate solution for our budget woes and debt ceiling and all that, since zero tax rates should make the revenues higher than any other possible outcome, gosh darn it!
So, if there was neither Medicare nor Medicaid, what was in the budget back then? Of course, government spending was lower as a percent today, those Eisenhower budgets generally being close to balanced, although as 1958 was a recession year, there was a deficit in that one. Well, the much bigger item in percent terms was national defense. After all, it was the Cold War, and the year before the Soviets had beaten us into space scarily with their launching of Sputnik.
But, we need to pay respect here to this drive to lower taxes. After all, we could go back further to when there was no Social Security either, and defense was lower, you know, maybe 1917 when we were just getting into WW I and that darned debt ceiling first got installed, only four years after the federal income tax was adopted, an even greater paradise!
Or, better yet, go all the way back to a century ago before there was a federal income tax. After all, newly possible prez candidate Rick Perry wants to get rid of it. And, hey, in the logic of the political supply siders who constantly tell us that revenues always go up when tax rates go down, this would be the ultimate solution for our budget woes and debt ceiling and all that, since zero tax rates should make the revenues higher than any other possible outcome, gosh darn it!
Wednesday, May 25, 2011
Clearly Grounds For Impeachment!
That's it. First Obama openly states in a joint press conference with Israeli PM, Netanyahu, longstanding US policy with regard to Israeli-Palestinian negotiations that final borders should be based on the 1967 borders with land swaps, leading to Netanyahu not only openly objecting to this strenuously, but to getting 28 standing ovations in Congress for complaining further about this to a mere 26 that Obama received for his State of the Union message; but now Obama flubbed a toast to the Queen of England, speaking over their national anthem as the orchestra began playing it in the middle of Obama's toast, an unforgivable blunder on the part of Obama, who clearly should have stopped in mid-sentence, as Rush Limbaugh explained in a 6 minutes and 42 seconds moment by moment explanation, clearly showing Obama's total unsuitability to serve as president ( http://www.mediate.com/online/limbaugh-rails-obama-on-toast-flub-im-tired-of-people-making-excuses-for-these-people ). Clearly, these actions by Obama are grounds for impeachment.
And, actually, it might be good to have those impeachment hearings going on those vitally important grounds, so that nobody will bother if Obama ignores the debt ceiling limit come August 2 and just orders US Treasury Secretary Geithner to just keep on issuing fresh US bonds to cover bills previously approved by the US Congress as they come due. Makes sense to me, :-).
And, actually, it might be good to have those impeachment hearings going on those vitally important grounds, so that nobody will bother if Obama ignores the debt ceiling limit come August 2 and just orders US Treasury Secretary Geithner to just keep on issuing fresh US bonds to cover bills previously approved by the US Congress as they come due. Makes sense to me, :-).
Thursday, May 19, 2011
On The Lighter Side: How To Pick Up An Economist
This has been floating around the blogosphere for awhile now, but figure we could all use a few chuckles, originally due to Sarah Skwire , http://www.modifiedrapture.com/wp/?p=210 .
The Top Ten Lines for Hitting on an Economist
1. You've got the curves to supply my demand!
2. Let's go to bed and try to disprove the law of diminishing marginal utility.
3. You're my very favorite kind of moral hazard.
4. I have a feeling you really understand the "nature of the firm."
5. Baby, I love you so much, I'm willing to forgo my exit option.
6. Wanna talk about our private goods?
7. You're an economist, I'm an economist. How about a little horizontal integration?
8. Now those are some tangible assets.
9. I'll reveal my preferences if you will.
10. Bottom up or top down?
The Top Ten Lines for Hitting on an Economist
1. You've got the curves to supply my demand!
2. Let's go to bed and try to disprove the law of diminishing marginal utility.
3. You're my very favorite kind of moral hazard.
4. I have a feeling you really understand the "nature of the firm."
5. Baby, I love you so much, I'm willing to forgo my exit option.
6. Wanna talk about our private goods?
7. You're an economist, I'm an economist. How about a little horizontal integration?
8. Now those are some tangible assets.
9. I'll reveal my preferences if you will.
10. Bottom up or top down?
The Food Stamp Fight
Newt Gingrich is receiving a lot of well deserved criticism for calling President Obama “the food stamp President" but as Dottie Rosenbaum notes cutting the food stamp program is part of Paul Ryan’s long-term budget plan:
Figure 1 of her CBPP discussion says a lot. First of all – the rise in food stamp recipients is a consequence of the Great Recession. As the economy recovers, food stamp payments are projected to decline. Of course countercyclical fiscal policy is seen as a bad thing by this generation of Herbert Hoover Republicans.
The other thing to note is that food stamp expenditures were less than 0.3 percent of GDP before the Great Recession and are projected to fall below 0.3 percent of GDP over time. As usual – GOP fiscal “discipline” is limited to big cuts in small programs.
The House-passed plan to convert SNAP (the Supplemental Nutrition Assistance Program, formerly called food stamps) to a block grant and cut the program by almost 20 percent rests on the false claim that the program is experiencing “relentless and unsustainable growth.”
Figure 1 of her CBPP discussion says a lot. First of all – the rise in food stamp recipients is a consequence of the Great Recession. As the economy recovers, food stamp payments are projected to decline. Of course countercyclical fiscal policy is seen as a bad thing by this generation of Herbert Hoover Republicans.
The other thing to note is that food stamp expenditures were less than 0.3 percent of GDP before the Great Recession and are projected to fall below 0.3 percent of GDP over time. As usual – GOP fiscal “discipline” is limited to big cuts in small programs.
Monday, May 16, 2011
What To Do If The Debt Ceiling Is Not Raised? Ignore It
We are indeed approaching an unprecedented situation. As I have repeatedly pointed out, the US is the only nation ever to have a nominal debt ceiling, long ignored as a trivial matter since its imposition in 1917, given the routine way it has been raised so many times previously. But now we approach a battle royal, where House Republicans refuse to allow for any tax increases as part of any deficit reduction deal, and it would be extremely unwise of Obama or the Dems to agree to the more radical of their demands for spending cuts, including the fact that the only way they can defeat Obama next year is if they can engender a financial crisis leading to a return to a recession, which they can then blame on him. And if he is foolish enough to let them do that, well, then he may deserve not to be reelected.
So, my proposal is that if the Congress is unable to come to some sort of reasonable deal that will allow a vote on raising the debt ceiling, Treasury Secretary Geithner should simply ignore the debt ceiling and continue to pay the bills as they come in, thereby avoiding any defaults or spending cuts or financial crises. The fact is, in the absence of any direct instructions from the Congress on which bills should be paid and which should not be in the face of crashing into the debt ceiling (surely we are not talking about paying no bills at all), he has no authority not to follow the instructions of the Congress in its latest budget, and spend what has been mandated. That will be the last coherent instruction from the Congress, and I say he should obey that in the absence of anything else more specific. Indeed, it will be the only responsible thing to do.
Now, many might complain that "the law is not being obeyed." Well, yes, and I think that is too bad. But many laws fail to get enforced. The last administration clearly broke our laws against engaging in torture, but they were not and are not being punished, although supposedly we are torturing no more now. About half the states have anti-adultery laws, but the only case I am aware of within decades of any of them being enforced was an absurd one near me in Luray, Virginia, where a district attorney was arrested for it after his mistress turned him in, testifying against him. He had been stupid enough to cheat on this mistress, but it was for cheating on his wife that he was officially put away.
As it is, this debt ceiling limit, not in force in a form like ours anywhere else (The EU has rules tied to percent of GDP, 60%, but never enforced with some countries in permanent violation, e.g. Belgium), is a stupid law anyway, like those laws against adultery. It should simply be ignored, the sooner the better, so as to render it irrelevant. Tea baggers may bring lawsuits, but who is going to arrest the Treasury Secretary? Will a court have the nerve to start making specific rulings about what should be cut and what should not be cut, or what taxes should be raised to meet the debt ceiling? No.
My main regret is that this charade will move us ever that closer to becoming a banana republic. But, if it comes about, it will be because we have banana Republicans in the House of Representatives.
So, my proposal is that if the Congress is unable to come to some sort of reasonable deal that will allow a vote on raising the debt ceiling, Treasury Secretary Geithner should simply ignore the debt ceiling and continue to pay the bills as they come in, thereby avoiding any defaults or spending cuts or financial crises. The fact is, in the absence of any direct instructions from the Congress on which bills should be paid and which should not be in the face of crashing into the debt ceiling (surely we are not talking about paying no bills at all), he has no authority not to follow the instructions of the Congress in its latest budget, and spend what has been mandated. That will be the last coherent instruction from the Congress, and I say he should obey that in the absence of anything else more specific. Indeed, it will be the only responsible thing to do.
Now, many might complain that "the law is not being obeyed." Well, yes, and I think that is too bad. But many laws fail to get enforced. The last administration clearly broke our laws against engaging in torture, but they were not and are not being punished, although supposedly we are torturing no more now. About half the states have anti-adultery laws, but the only case I am aware of within decades of any of them being enforced was an absurd one near me in Luray, Virginia, where a district attorney was arrested for it after his mistress turned him in, testifying against him. He had been stupid enough to cheat on this mistress, but it was for cheating on his wife that he was officially put away.
As it is, this debt ceiling limit, not in force in a form like ours anywhere else (The EU has rules tied to percent of GDP, 60%, but never enforced with some countries in permanent violation, e.g. Belgium), is a stupid law anyway, like those laws against adultery. It should simply be ignored, the sooner the better, so as to render it irrelevant. Tea baggers may bring lawsuits, but who is going to arrest the Treasury Secretary? Will a court have the nerve to start making specific rulings about what should be cut and what should not be cut, or what taxes should be raised to meet the debt ceiling? No.
My main regret is that this charade will move us ever that closer to becoming a banana republic. But, if it comes about, it will be because we have banana Republicans in the House of Representatives.
Judgement
As Barkley reminds, the Day fast approaches. Sincerely do I hope, fervently do I pray that those who count on being raptured out of here come the 21st will indeed get their wish. But speaking of judgement, it's the grading season. My favorite exam was the one that defined "Aggregate Demand Externality" as follows: "When an increase in money demand leads to pollution."
Sunday, May 15, 2011
Mad About Mahdis: Will The Hidden Imam Dis-Occultate?
I have already been too worried about the Rapture supposedly going to happen on May 21, according to Harold Camping of Family Radio Ministry, although he said this would happen once before already, and it didn't. In any case, I am glad that my wife, Marina, is scheduled to fly home from Moscow on May 22, so she won't have her pilot zooping off to heaven while her plane is halfway across the Atlantic Ocean.
But now comes the news reported by John Burgess at http://xrdarabia.org/2011/05/12/on-the-end-times-iranian-shia-version that various Iranian Shi'i clerics are being charged with sorcery for forecasting that the 12th Imam, who has been Hidden in Occultation for many centuries, will appear soon, bringing the end of the world. If they Hidden Imam dis-occultates, nobody will need to obey the government, so, wow, big surprise that the current government (already reacked by internal conflicts of various sorts) is cracking down on this sort of stuff. The good news is that apparently the Hidden Imam will only pull this trick three years after King Abdullah of Saudi Arabia dies, and as he is still alive, well, I guess we have at least three more years before this happens. Of course by then, Oct. 21 will have passed by, when, according to Camping the world will have already ended following the upcoming Rapture on May 21.
In any case, with all this sort of stuff coming up, who needs to worry about a failure to raise the debt ceiling (or better yet, simply abolish it all together)?
But now comes the news reported by John Burgess at http://xrdarabia.org/2011/05/12/on-the-end-times-iranian-shia-version that various Iranian Shi'i clerics are being charged with sorcery for forecasting that the 12th Imam, who has been Hidden in Occultation for many centuries, will appear soon, bringing the end of the world. If they Hidden Imam dis-occultates, nobody will need to obey the government, so, wow, big surprise that the current government (already reacked by internal conflicts of various sorts) is cracking down on this sort of stuff. The good news is that apparently the Hidden Imam will only pull this trick three years after King Abdullah of Saudi Arabia dies, and as he is still alive, well, I guess we have at least three more years before this happens. Of course by then, Oct. 21 will have passed by, when, according to Camping the world will have already ended following the upcoming Rapture on May 21.
In any case, with all this sort of stuff coming up, who needs to worry about a failure to raise the debt ceiling (or better yet, simply abolish it all together)?
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