Brad Delong lays into Thomas Nagel's new book for its claim that Naturalism ultimately fails to make sense of the world. I haven't read Nagel's book yet, but I certainly agree with Nagel that naturalism is nonsense. This isn't because I am a super-naturalist, but because I am a normative realist:: a naturalist picture of the world doesn't allow for the reality of authoritative norms. For naturalists, whether Humeans or (most but not all) Kantians, there is no fact of the matter about what we have reason to do. If so, science itself - because it depends on the objective authority of norms concerning what we have reason to believe - wouldn't make sense. Economists in general are naturalists avant la lettre: they believe, almost to a person, that our reasons flow simply from our desires. This is normative nihilism. Normative realists believe that something's being good gives us a reason to want it, while a nihilist reverses this and makes its being good simply consist in our wanting it. Nihilism is absurd and should be rejected. If Delong wants to maintain his naturalism, he needs to answer not only Nagel, but Derek Parfit's new book, On What Matters - his masterpiece- which makes the case for normative (especially moral) realism (what he calls cognitivist non-naturalism ) better than I've ever seen it made.
Happy New Year, everyone!
Thursday, January 3, 2013
Was That the Last Word on Taxes?
Senator McConnell:
Predictably, the President is already claiming that his tax hike on the “rich” isn’t enough. I have news for him: the moment that he and virtually every elected Democrat in Washington signed off on the terms of the current arrangement, it was the last word on taxes.Economist Andrew Samwick:
In over eight years of blogging, you won't find a single word of praise for the Bush-Obama tax cuts. As a matter of revenue, we now permanently have a tax system that will not raise enough revenue to cover our expenditures.Mind you – Dr. Samwick served as the chief economist on the staff of the Council of Economic Advisors in 2003 and 2004 (when George W. Bush was President). The question is not whether we will eventually have higher taxes – we will. The question is in what form will those extra taxes be and who will pay them. Naturally, we are not getting as much honesty on this score from Republican politicians as we are getting from Republican economists.
Wednesday, January 2, 2013
Manufacturing a criterion of judgement
Almost anyone who has viewed images such as those, for example, presented by Edward Burtynsky would probably feel a high degree of anxiety. For surely, the implications behind the emergence of giant urban-industrial wastelands are staggering. Nature has been "pronounced dead" and is "desacrilised". Writer Theodore Roszak noted this observation 40 years ago in 1972.
Roszak warned then that "as time goes on, the technocracy is bound to grow exquisitely adept at distracting protest and tranquilising anxiety. He prophesied that "the bulk of our brainpower and governmental energy will one day be employed concocting cover stories, propagating ingenious alibis, and applying public relations" with a "vast mandarin establishment of professional obfuscators" "at the top of our society"[1].
And so it passed. ...
http://globe-alive.blogspot.com.au/2013/01/manufacturing-criterion-of-judgement.html
The Big Issues For 2013
Tyler Cowen has presented 14 big stories to watch for 2013 and has provided links to similar stories at The Guardian and the Financial Times, http://marginalrevolution.com/marginalrevolution/2012/12/stories-to-watch-for-in-2013.html . I shall comment on a few of these both that he states and links to, as well as some I have on my own mind.
Given the passage of the minimalist fiscal cliff deal that raises some taxes but makes no major spending cuts, with the GOP supposedly now aiming to try to squeeze those out in a showdown later this year over raising the debt ceiling, I think that the top story for the US and world economy is indeed this forthcoming fight. Cowen has as his fourth point a genuine concern that the fight will actually result in a failure to raise it on time and a default with potentially devastating consequences. I agree that this is a real possibility and is indeed a serious danger to all of the above. Maybe the coalition that passed the fiscal cliff bill will be reasonable on the debt ceiling, but some of those voting for it are lame ducks going out the door. Obama has said that he will not stand for another replay of the insanity of what went down in August, 2011, but this will indeed require some drastic action. The one that a lot of us have been urging is if the House goes bonkers then he should move to shut this down once and for all by declaring the debt ceiling unconstitutional. If he does not quite have he chutzpah for that, there is also the trillion dollar coin out, although I find that gimmicky. If one is going to shut down this blackmail game once and for all, then eliminating the debt ceiling once and for all by declaring it unconstitutional is clearly the way to go. In his speech this evening, Obama clearly has laid the ground by noting that the bills authorized by Congress must be paid. In the end what may be holding him back on declaring it unconstitutional is that back in 2011 his old constitutional law professor at Harvard, Lawrence Tribe, declared it constitutional, but he needs to think about this very carefully and seriously. If he screws up on this, and the House gets run by the loonies, things could indeed really go off the rails for the US and the world economies.
Cowen's seventh point is that China needs to have a decent rebound. Many may not realize how dicey things have gotten there. Growth has decelerated to a 7.1% rate as of the third quarter of 2012. Certainly China will need to adjust to having lower growth rates than it has had in the past, and this rate may be about what it can manage, although clearly many are hoping (and predicting) that it will rise again somewhat soon. That would certainly aid global economic growth, but there remains a major fly in the ointment, aside from its overreliance on massive construction projects that seem to be increasingly of the diminishing returns variety, and that is its property bubble. That may not burst, but there have been quite a few observers both in and out of China who have been very worried about this. I would have to say that based on my own personal contacts, those in China have been more pessimistic about this situation than those outside of China. I would say that a possible collapse of property values in China leading to a much more serious slowdown of the Chinese economy is probably the second (and possibly first) most serious threat to the global economy after the possibility of a screwup regarding the US debt ceiling.
His second point is concern about the Catalan independence movement in Spain. This has not gotten much attention in the US, and there are a variety of ways that it could be resolved with little disruption to the world economy. However, Spain remains the most crucial linchpin in the Eurozone, currently in a bad recession with youth unemployment at 50% and struggling to get its public finances sufficiently in order to keep the support from Germany and the various Eurozone financial institutions coming (and it should be kept in mind that prior to 2008, Spain was actually running a budget surplus, in contrast with Greece and some of the other troubled Eurozone economies). While Cowen and others worry about Italy, I figure it will muddle through, but the Spanish efforts are completely complicated by the Catalan move to declare independence, both because it is one of the highest income parts of Spain, but also because its own debts are very large and it is likely that the EU may not even let it join, much less offer any assistance to it for dealing with them (arguments over Catalunya's ability control its own taxes is a central feature of its debate with the Spanish central government). The bottom line is that the Spanish central government may simply be unable to negotiate successfully with both the Catalans and the Germans and other Eurozone powers. A full bore Spanish default cannot be ruled out, and it is sufficiently large that this is the case that could really push the broader Eurozone situation into becoming the trigger for a broader global crisis.
Having mentioned China's problems, I note that more broadly the BRICS are not doing so well, and this will become a more serious problem in this coming year, although probably the problems of the other constituents of that group will not be bad enough to drag down the global economy. But their collective problems constitute a dragging element where they had been a leading part of helping the world economy to recover from the Great Recession. India's accumulating and multiple problems are Cowen's 12th point, and the possibility of a major political crisis in South Africa is his 7th. Neither he nor his links mention Brazil or Russia, but the former has declerated to barely a 1% growth rate, which is far below what it has been doing in recent years. Russia may be in the best shape of these, but if oil prices fall, it could also fall into difficulties, and clearly there is a serious political and corruption problem there that does not seem to disappear.
The Guardian provides discussons of both Iran and Israel, noting that both will have elections this year, with Israel's coming up quite soon. Quite likely Netanyahu will be reelected, most likely with an even more hawkish coalition in his government. Iran has a presidential election in June, and incumbent Ahmadinejad cannot run for reelection. He has become quite alienated from the Mullah establishment, which will make it hard for him to get his favored candidate through. Amazingly enough there is serious talk of relatively moderate former president Khatami running, although he will have to kowtow to the clerical establishment to do so. This suggests the possibility of perhaps some opening to a settlement with the US over the nuclear issue that would keep the Israelis at bay from attacking. Of course, the real leader is Vilayat-el-faqih Ali Khamene'i. While hawks in Israel and the US have been warning for years that Iran will be at the point of being able to "break out" to build nuclear weapons quickly, there are more serious voices at this time saying that indeed this may be the year when that capability may be achieved. If this is the case (or strongly perceived to be) and there is no agreement, there could be war, which could be catastrophic both economically and in other ways for the world economy and the world more generally. However, it must be kept in mind that the US intelligence establishment, and even the Israeli one reportedly, agree that Khamene'i has not decided to build nuclear weapons and has issued numerous fatwas against having them at all. It would be tragic if we go to war just on the possibility that they might have the capability of doing so.
Let me close this on a positive note. I agree with Dean Baker and others that there is now a solid foundation for the US economy to continue to grow in a fairly solid, if unspectacular, way for the coming year, if it does not get derailed by one of the above potential crises, or something else not listed and possibly unforeseeable at this time. There are two main sources for this optimism. The most important one is that the crucial sector that generated the 2008 crisis has really hit bottom and now appears to be growing solidly, namely housing construction. It will take a bad crisis to derail this recovery, which has been a long time coming, although it could happen (if a debt ceiling crisis resulted in an interest rate spike, that could do it).
The other is the turnaround in the financial situation of most state and local governments, which unlike the federal government mostly face serious balanced budget rules. The major source of decline in GDP and particularly of employment during the last two years has been this sector. This decline now appears to be over. While nobody is forecasting any noticeable increase coming from this sector (and a major move to austerity at the federal level could renew their decline), just having them not declining should help provide a support for the overall US economy to continue to grow in a reasonably solid way if one or another of the potential catastrophes lurking out there can be avoided. And they could surprise everybody and actually engage in some expansion of spending and hiring.
So, happy new year one and all!
Given the passage of the minimalist fiscal cliff deal that raises some taxes but makes no major spending cuts, with the GOP supposedly now aiming to try to squeeze those out in a showdown later this year over raising the debt ceiling, I think that the top story for the US and world economy is indeed this forthcoming fight. Cowen has as his fourth point a genuine concern that the fight will actually result in a failure to raise it on time and a default with potentially devastating consequences. I agree that this is a real possibility and is indeed a serious danger to all of the above. Maybe the coalition that passed the fiscal cliff bill will be reasonable on the debt ceiling, but some of those voting for it are lame ducks going out the door. Obama has said that he will not stand for another replay of the insanity of what went down in August, 2011, but this will indeed require some drastic action. The one that a lot of us have been urging is if the House goes bonkers then he should move to shut this down once and for all by declaring the debt ceiling unconstitutional. If he does not quite have he chutzpah for that, there is also the trillion dollar coin out, although I find that gimmicky. If one is going to shut down this blackmail game once and for all, then eliminating the debt ceiling once and for all by declaring it unconstitutional is clearly the way to go. In his speech this evening, Obama clearly has laid the ground by noting that the bills authorized by Congress must be paid. In the end what may be holding him back on declaring it unconstitutional is that back in 2011 his old constitutional law professor at Harvard, Lawrence Tribe, declared it constitutional, but he needs to think about this very carefully and seriously. If he screws up on this, and the House gets run by the loonies, things could indeed really go off the rails for the US and the world economies.
Cowen's seventh point is that China needs to have a decent rebound. Many may not realize how dicey things have gotten there. Growth has decelerated to a 7.1% rate as of the third quarter of 2012. Certainly China will need to adjust to having lower growth rates than it has had in the past, and this rate may be about what it can manage, although clearly many are hoping (and predicting) that it will rise again somewhat soon. That would certainly aid global economic growth, but there remains a major fly in the ointment, aside from its overreliance on massive construction projects that seem to be increasingly of the diminishing returns variety, and that is its property bubble. That may not burst, but there have been quite a few observers both in and out of China who have been very worried about this. I would have to say that based on my own personal contacts, those in China have been more pessimistic about this situation than those outside of China. I would say that a possible collapse of property values in China leading to a much more serious slowdown of the Chinese economy is probably the second (and possibly first) most serious threat to the global economy after the possibility of a screwup regarding the US debt ceiling.
His second point is concern about the Catalan independence movement in Spain. This has not gotten much attention in the US, and there are a variety of ways that it could be resolved with little disruption to the world economy. However, Spain remains the most crucial linchpin in the Eurozone, currently in a bad recession with youth unemployment at 50% and struggling to get its public finances sufficiently in order to keep the support from Germany and the various Eurozone financial institutions coming (and it should be kept in mind that prior to 2008, Spain was actually running a budget surplus, in contrast with Greece and some of the other troubled Eurozone economies). While Cowen and others worry about Italy, I figure it will muddle through, but the Spanish efforts are completely complicated by the Catalan move to declare independence, both because it is one of the highest income parts of Spain, but also because its own debts are very large and it is likely that the EU may not even let it join, much less offer any assistance to it for dealing with them (arguments over Catalunya's ability control its own taxes is a central feature of its debate with the Spanish central government). The bottom line is that the Spanish central government may simply be unable to negotiate successfully with both the Catalans and the Germans and other Eurozone powers. A full bore Spanish default cannot be ruled out, and it is sufficiently large that this is the case that could really push the broader Eurozone situation into becoming the trigger for a broader global crisis.
Having mentioned China's problems, I note that more broadly the BRICS are not doing so well, and this will become a more serious problem in this coming year, although probably the problems of the other constituents of that group will not be bad enough to drag down the global economy. But their collective problems constitute a dragging element where they had been a leading part of helping the world economy to recover from the Great Recession. India's accumulating and multiple problems are Cowen's 12th point, and the possibility of a major political crisis in South Africa is his 7th. Neither he nor his links mention Brazil or Russia, but the former has declerated to barely a 1% growth rate, which is far below what it has been doing in recent years. Russia may be in the best shape of these, but if oil prices fall, it could also fall into difficulties, and clearly there is a serious political and corruption problem there that does not seem to disappear.
The Guardian provides discussons of both Iran and Israel, noting that both will have elections this year, with Israel's coming up quite soon. Quite likely Netanyahu will be reelected, most likely with an even more hawkish coalition in his government. Iran has a presidential election in June, and incumbent Ahmadinejad cannot run for reelection. He has become quite alienated from the Mullah establishment, which will make it hard for him to get his favored candidate through. Amazingly enough there is serious talk of relatively moderate former president Khatami running, although he will have to kowtow to the clerical establishment to do so. This suggests the possibility of perhaps some opening to a settlement with the US over the nuclear issue that would keep the Israelis at bay from attacking. Of course, the real leader is Vilayat-el-faqih Ali Khamene'i. While hawks in Israel and the US have been warning for years that Iran will be at the point of being able to "break out" to build nuclear weapons quickly, there are more serious voices at this time saying that indeed this may be the year when that capability may be achieved. If this is the case (or strongly perceived to be) and there is no agreement, there could be war, which could be catastrophic both economically and in other ways for the world economy and the world more generally. However, it must be kept in mind that the US intelligence establishment, and even the Israeli one reportedly, agree that Khamene'i has not decided to build nuclear weapons and has issued numerous fatwas against having them at all. It would be tragic if we go to war just on the possibility that they might have the capability of doing so.
Let me close this on a positive note. I agree with Dean Baker and others that there is now a solid foundation for the US economy to continue to grow in a fairly solid, if unspectacular, way for the coming year, if it does not get derailed by one of the above potential crises, or something else not listed and possibly unforeseeable at this time. There are two main sources for this optimism. The most important one is that the crucial sector that generated the 2008 crisis has really hit bottom and now appears to be growing solidly, namely housing construction. It will take a bad crisis to derail this recovery, which has been a long time coming, although it could happen (if a debt ceiling crisis resulted in an interest rate spike, that could do it).
The other is the turnaround in the financial situation of most state and local governments, which unlike the federal government mostly face serious balanced budget rules. The major source of decline in GDP and particularly of employment during the last two years has been this sector. This decline now appears to be over. While nobody is forecasting any noticeable increase coming from this sector (and a major move to austerity at the federal level could renew their decline), just having them not declining should help provide a support for the overall US economy to continue to grow in a reasonably solid way if one or another of the potential catastrophes lurking out there can be avoided. And they could surprise everybody and actually engage in some expansion of spending and hiring.
So, happy new year one and all!
Tuesday, January 1, 2013
Mankiw – Soak the Middle Class
Mark Thoma reads Greg Mankiw so we don’t have to:
If people like Mankiw wanted cuts to social insurance so badly, why didn't they speak up and make this absolutely clear before the election? When Republicans accused Democrats of, for example, wanting to cut Medicare, why didn't Mankiw say yes, that's exactly what President Romney should do! I'm one of his advisors, I've made that clear, and here's his plan for cuts to Medicare, Social Security, Medicaid, and the like. Why pretend you are the defenders instead of the cutters? The answer is, of course, is that it's not what the public wants. The bipartisan budget wonks in Washington may have their own plan to cut social insurance, but guess what? We live in a Democracy, and the Romney/Mankiw view was rejected (so now Republicans try to get it through the back door by gumming up the legislative works and holding the economy hostage). It's not what people want. Acting like it is what they want through a misleading suggestion that it's in some bipartsan commission report that doesn't actually exist is contrary to the message the election delivered.I’m not sure if Mark has read Greg’s latest NY Times oped yet:
Fairness, like beauty, is in the eye of the beholder. Unfortunately, people’s judgment is often based on anecdotes that distort rather than illuminate. The story of the undertaxed Warren Buffett and his overtaxed secretary looms larger in the public’s mind than it should ... These data suggest that the rich are not, as a general matter, shirking their responsibilities to support the federal government. To me, the current tax system looks plenty progressive. Others may disagree. One point, however, cannot be disputed: Even if President Obama wins all the tax increases on the rich that he is asking for, the long-term fiscal picture will still look grim. Perhaps we can stabilize the situation for a few years just by taxing the rich, but as greater numbers of baby boomers retire and start collecting Social Security and Medicare, more will need to be done. Which brings us back to the middle class … Ultimately, unless we scale back entitlement programs far more than anyone in Washington is now seriously considering, we will have no choice but to increase taxes on a vast majority of Americans.Shorter Mankiw – if the middle class wants their Social Security and Medicare benefits, they must pay higher taxes as we already tax the rich way too much. Let’s be fair to Greg – there are a lot of Romney Republicans who privately agree with this sentiment. But this is not the public message that Mitt Romney campaigned on. Nor is it the message that the rest of the Republican political leaders wish to admit publicly.
After the Deal on Taxes – Where Are We Going on Expenditures?
Jonathan Weisman reports on the deal that passed the Senate:
In one final piece of the puzzle, negotiators agreed to put off $110 billion in across-the-board cuts to military and domestic programs for two months while broader deficit reduction talks continue ... Democrats were incredulous that the president had ultimately agreed to around $600 billion in new tax revenue over 10 years when even Mr. Boehner had promised $800 billion. But the White House said it had also won concessions on unemployment insurance and the inheritance tax among other wins.Before spring arrives, we will have to face up to the issue of spending cuts. I suspect that the Republicans will insist that these cuts represent at least $600 billion over the next ten years and that none of these cuts come from the defense department. In other words, the Republicans will want cuts in Social Security, Federal expenditures on health care (think Medicaid and SCHIP), and a host of large cuts in other small Federal programs. But why not reduce defense spending? Progressives should call for all of this $600 billion over the next ten years – which turns out to be a mere 0.3% of the decade’s potential GDP. After all, current defense spending is running at 5.3% of GDP. Barney Frank recently made this case. Progressives need to continue to hammer this argument. We may not get all of the cuts in government spending from defense but if we don’t make this argument, I fear that the Republicans will get all they want at the end of the day.
Monday, December 31, 2012
How Bad is the New Year’s Eve Deal to Avoid the Fiscal Cliff?
Tim Noah makes the case that is so bad that we should kill it. Tim also provides an update from Sam Stein and Ryan Grim:
The preliminary fiscal cliff deal being negotiated by Senate Minority Leader Mitch McConnell (R-Ky.) and Vice President Joe Biden would achieve up to $790 billion in revenue over the next decade. Some of that money would be offset by extensions of tax credits and other stimulative policy, leaving roughly $715 billion in debt reduction over that same time period. Because the revenue is counted over a decade, much depends on a variety of inexact assumptions, which is why the White House calculation of the total revenue raised by the deal is only $600 billion … Under the framework, the Bush-era tax cuts would be extended permanently for individuals at $400,000 and joint filers at $450,000. A second Senate Democratic source familiar with the state of play confirmed those details. The top rate on ordinary income would go back to 39.6 percent and raise an estimated $370 billion in revenue over 10 years. The same thresholds would be applied for capital gains and dividends, with the top rates in that case going up to 20 percent -- a concession to Republicans (the rate on dividends was set to return to 39.6 percent) but not far from the president's position during the campaign. Left unaddressed, at the moment, are the $1.2 trillion in sequestration-related cuts that will be triggered on Jan. 1. The parties are arguing over how long to stave off the cuts, and whether and how to offset them.So what if we do not get as much 10-year deficit reduction as some had hoped? Wasn’t the real concern how much immediate austerity we would get without a deal? The progressive complaint that the deal will not raise tax rates on those making between $250,000 and $450,000 under this idea that the “Bush-era tax cuts would be extended permanently”. Of course, the 1981 tax cuts were supposed to be permanent too but that didn’t prevent the 1993 tax increase. I realize how difficult it was for President Clinton to get that bill through Congress. And the current Republicans are even more stubborn than the Republicans some 20 years ago. But isn’t that why we have elections? The choice now is either this less than hoped for deal or to fall over the fiscal cliff and duke this out in the new Congress, which doesn’t appear to be that different from the outgoing Congress.
Saturday, December 29, 2012
The Economic Consequences Of Banning Semi-Automatic Weapons
It is bad enough that we have to watch the Dow slip below 13,000 in fear of the impending fiscal cliff, but now our economy is threatened by all these unAmerican gun control nuts who want to ban sales of new semi-automatic weapons. The danger from this is far worse. Now, I know some might say that "We banned them from 1994-2004, and it was not so bad," but gun owners are extremely rational and therefore with their rational expectations could forecast that the ban would be overturned. So, nothing bad happened. A more relevant case involves the banning of sales of new fully automatic weapons in 1986 by that commie anti-gun nut, Ronald Reagan, which ban remains in place. That is the case we need to consider, given that of course the Republicans in Congress clearly will go along with whatever our Commander-in-Chief says, even though he is not only a commie anti-gun nut, but a foreign-born Islamofascist.
So, after Reagan banned fully automatic gun sales, in 1987 we had the largest single one day crash of the stock market ever on Oct. 19! I mean really. Here we are, struggling to overcome the crisis of 2008, and these gun control nuts want to subject us to renewed danger on this front (on top of the fiscal cliff threat, oh wow). It gets worse. Careful observers of the current scene have uncovered links between mass shootings and the LIBOR scandal. It appears that the fathers of the mass murderers in Aurora, CO and in Newtown, CT both had connections with the scandal. If you do not believe me, well, check out http://www.pakalertpress.com/2012/12/19/two-mass-shootings-connected-to-libor-scandal . This is a high quality source, and what this tells me is that if these gun control fanatics get there way, not only will we have a stock market crash, but probably an all out full blown international financial collapse that will make 2008 look like 2007!!! Believe me.
Now, another likely outcome of such a ban would be a major decline of the gun producing industry. I know, record sales are going on right now. But this is our freedom-loving-red-blooded American gun lovers rationally anticipating what is to come, and they plan to be armed so that nobody will take away their arms. After the ban, there will be all these layoffs in the gun industry, right when we are still trying to get unemployment down from our bad recession! And these people might have access to heavy weapons and go nuts on gun shooting rampages!
Of course, Reagan had an answer to this when he banned fully automatic weapons sales. In order to keep demand up, he began shipping guns to Iran. Given his Islamofascist identity, clearly Obama might try to do the same thing, indeed, he has probably been itching to do just this all along! It is bad enough that he is letting the Iranians build nukes, but now he might ship them guns as well! This is a very serious threat, I can assure you.
Yet another likely terrible outcome is that we shall all die from lyme disease. It is our patriotic hunters who keep the deer population in check since we got rid of their natural predators. It is impossible to shoot a deer unless one is using at least a semi-automatic gun. So, this ban will lead to a population explosion of Bambis who will litter up our streets and spread lyme disease. Maybe this is what the Mayans were warning us about with their calendar!
Yet another threat to public safety involves suicides. After all, 18,000 people a year in the US kill themselves with guns. One can only do that with a Glock semi-automatic, and we know from what the NRA tells us that if somebody wants to commit suicide, well, by golly, they will find a way to do so! Therefore, if there is a semi-automatic weapons ban, we shall have an epidemic of frustrated suiciders throwing themselves out of windows high in buildings. I cannot imagine what this will do to the safety of God-fearing pedestrians just trying to get to the store to do some shopping to keep America from falling off the fiscal cliff!
And this is only the tip of the iceberg of all the terrible consequences for our economy and society that this threat to ban semi-automatic guns presents, :-).
So, after Reagan banned fully automatic gun sales, in 1987 we had the largest single one day crash of the stock market ever on Oct. 19! I mean really. Here we are, struggling to overcome the crisis of 2008, and these gun control nuts want to subject us to renewed danger on this front (on top of the fiscal cliff threat, oh wow). It gets worse. Careful observers of the current scene have uncovered links between mass shootings and the LIBOR scandal. It appears that the fathers of the mass murderers in Aurora, CO and in Newtown, CT both had connections with the scandal. If you do not believe me, well, check out http://www.pakalertpress.com/2012/12/19/two-mass-shootings-connected-to-libor-scandal . This is a high quality source, and what this tells me is that if these gun control fanatics get there way, not only will we have a stock market crash, but probably an all out full blown international financial collapse that will make 2008 look like 2007!!! Believe me.
Now, another likely outcome of such a ban would be a major decline of the gun producing industry. I know, record sales are going on right now. But this is our freedom-loving-red-blooded American gun lovers rationally anticipating what is to come, and they plan to be armed so that nobody will take away their arms. After the ban, there will be all these layoffs in the gun industry, right when we are still trying to get unemployment down from our bad recession! And these people might have access to heavy weapons and go nuts on gun shooting rampages!
Of course, Reagan had an answer to this when he banned fully automatic weapons sales. In order to keep demand up, he began shipping guns to Iran. Given his Islamofascist identity, clearly Obama might try to do the same thing, indeed, he has probably been itching to do just this all along! It is bad enough that he is letting the Iranians build nukes, but now he might ship them guns as well! This is a very serious threat, I can assure you.
Yet another likely terrible outcome is that we shall all die from lyme disease. It is our patriotic hunters who keep the deer population in check since we got rid of their natural predators. It is impossible to shoot a deer unless one is using at least a semi-automatic gun. So, this ban will lead to a population explosion of Bambis who will litter up our streets and spread lyme disease. Maybe this is what the Mayans were warning us about with their calendar!
Yet another threat to public safety involves suicides. After all, 18,000 people a year in the US kill themselves with guns. One can only do that with a Glock semi-automatic, and we know from what the NRA tells us that if somebody wants to commit suicide, well, by golly, they will find a way to do so! Therefore, if there is a semi-automatic weapons ban, we shall have an epidemic of frustrated suiciders throwing themselves out of windows high in buildings. I cannot imagine what this will do to the safety of God-fearing pedestrians just trying to get to the store to do some shopping to keep America from falling off the fiscal cliff!
And this is only the tip of the iceberg of all the terrible consequences for our economy and society that this threat to ban semi-automatic guns presents, :-).
E. Cary Brown on Recent Fiscal Policy
While E. Cary Brown died in 2007, any intelligent commentary on fiscal policy should consider his 1956 paper - Fiscal Policy in the Thirties, which reminds us that the actual deficit may be rising even if fiscal policy has turned contractionary. Evan Soltas (with hat tip to Paul Krugman) follows in the tradition of Cary Brown:
The right way to evaluate the U.S.'s current fiscal condition is not to look at at its budget deficit, which fluctuates sharply due to economic conditions. Rather, it is to calculate the structural budget deficit, the difference between government spending and revenues when the economy is normal. (More technically, it is when the "output gap," the difference between actual and long-run potential economic output, is zero.) … For fiscal year 2012, the annual structural deficit was $325 billion, or 2.1 percent of GDP. (See the first graph accompanying this post.)This graph is instructive for other reasons. It not only shows that the reason why the deficit has exploded in the last 5 years is the recession and not fiscal stimulus. It also shows that last two significant episodes of fiscal stimulus were the Reagan years and the reign of George W. Bush. The fiscal stimulus of the Reagan years was entirely unnecessary as it was the actions of the Federal Reserve that drove the economy during those years. And the Federal Reserve tended in insure that this fiscal stimulus crowded-out investment, which led to less long-term growth. And we were told the 1981 tax cuts were supposed to be pro-growth. Greg Mankiw in his first edition of Macroeconomics not only refer to this Laffer crowd as “cranks and charlatans but also describe how the reduction in national savings from this ill-advised fiscal stimulus increased real interest rates and crowded-out investment. Interestingly, Mankiw defended the Bush43 tax cuts as needed to offset the weak economy during the period of time. Of course, Bush43’s other economic advisors (e.g., Glenn Hubbard and Lawrence Lindsey) claimed the tax cuts were designed to increase national savings rather than reduce it. We could also argue whether we needed assistance from fiscal stimulus at the time since the Federal Reserve was capable to lower interest rates even more than it did. But even if Mankiw was right with his Keynesian defense of the 2001 tax cut, there was never any excuse of making it a 10-year tax cut since its expiration might occur just when the economy did not need fiscal restraint – which is precisely where we are right now with that fiscal cliff.
Monday, December 24, 2012
Paul Krugman Puzzles Greg Mankiw
When I read the latest from Greg Mankiw, my initial reaction was to think he was being argumentative:
I often disagree with Paul Krugman, but I usually understand him. Lately, however, I have been puzzled about his view of the bond market. In a recent post, he takes President Obama to task for believing that the failure to deal with our long-term fiscal imbalance might cause a spike in interest ratesGreg contrasts Paul’s latest on this topic to something Paul wrote back in 2003 when Paul was worried that financial markets might quickly lose faith that the U.S. government would ever be serious about addressing its long-term fiscal balance:
I am having trouble reconciling these points of views. Has Paul changed his mind since 2003 about how the bond market works? Or are circumstances different now? If anything, I would have thought that the fiscal situation is more dire now and so the logic from 2003 would apply with more force. I am puzzled.Paul has addressed his 2003 post before and I’ll invite him to remind Greg of what he has said about that. But yes – the circumstances now are clearly different from what they were as of March 11, 2003. First of all – we are currently further below full employment to the point where the Federal Reserve has clearly announced it would not initiate monetary restraint until the labor market significantly improves. Does Greg remember that the Federal Reserve started raising interest rates a little over a year after Paul wrote his piece back in 2003? But I guess the key portion of Paul’s 2003 post that troubled Greg was this:
How will the train wreck play itself out? Maybe a future administration will use butterfly ballots to disenfranchise retirees, making it possible to slash Social Security and Medicare. Or maybe a repentant Rush Limbaugh will lead the drive to raise taxes on the rich. But my prediction is that politicians will eventually be tempted to resolve the crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to inflate away debt. And as that temptation becomes obvious, interest rates will soar.Greg is emphasizing the fact that the debt/GDP ratio is higher than it was 9 years ago and the deficit is also quite high. But let me protest by arguing that the long-run fiscal situation depends more on what markets expect future fiscal policy will be. Paul was likely worried that the Grover Norquist pledge imposed on most Republicans never to raise taxes combined with their willingness to load up defense spending (after all – Paul wrote on the eve of the Iraq invasion) would tell financial markets that our fiscal folly was doomed to continue forever. Note, however, that the Obama Administration is much more willing to both raise taxes and cut spending than the Administration that Greg served in. Then again – the Grover Norquist crowd still has a strangle hold over Congress so maybe Greg is right to be puzzled.
Sunday, December 23, 2012
Norquist and LaPierre: Emperors Losing Their Clothes?
Two figures have held near-dictatorial sway over a majority of members of Congress for several decades: Grover Norquist and Wayne LaPierre. However, both may be losing their grip to some extent at this time, although it is too soon to count them out yet. Both may yet get their ways to some extent despite appearances to the contrary.
Norquist's schtick has been the pledge he has foisted on largely Republican members of Congress never to raise taxes in any way, shape, or form. This effort dates to the Reagan presidency and has only gradually gained the nearly universal submission that it currently has among Republican politicians at both the state and national levels. In the face of the current huge deficit and the oncoming "fiscal cliff" (curb, slope, whatever), some are now making noises about abandoning ship on this. Indeed, this past Thursday saw House Speaker John Boehner proposing to raise income taxes on those earning more than $1 million per year. While this was a cutoff higher than the $400,000 President Obama was demanding (which is in turn higher than the $250,000 he successfully campaigned on this year), it was a significant break for Speaker Boehner. However, in the end he was unable to convince his caucus to support him. The rank and file of Republicans in the House are simply not yet willing to go against their pledges to the will of Norquist. Norquist's clothing may be getting pulled at and a bit messy, but he continues to seem pretty fully dressed.
Wayne LaPierre has not made Congressional members sign a specific pledge, but he has demanded that those the NRA supports do exactly as it requests on pain of facing primary or other opposition backed by strong funding and advertising. Whereas Norquist's group largely focuses just on Republicans, LaPierre has worked his ways on polticians of both parties, although increasingly his focus has been on Republicans as Democrats have begun to thumb their noses at him. This movement has accelerated since the massacre at Sandy Hook Elementary School in Newtown, CT just over a week ago, and the reaction to LaPierre's speech a week after it calling for armed guards at schools has been ridiculed widely. Nevertheless, despite a lot of discomfiture, at least Republicans continue to appear to be completely obedient with not a single GOP member of Congress expressing support for any movement to control guns in any way. One can expect my own representative, Bob Goodlatte, to prove to be the ultimate blocker of any efforts to change gun laws in his new position as House Judiciary Committee Chairman, as he has strongly stated opposition to any changes in gun laws. So, LaPierre also appears to be keeping most of his clothing on as well for the near term.
A curious details is that this authoritarian pair has a curious mutual connection. Norquist is on the board of the NRA, and both are closely connected to John R. Lott, Jr. Lott has most recently coauthored a book with Norquist, and he has long been the most prominent pro-gun rights advocate in the nation, much relied on and praised by LaPierre. His book, _More Guns, Less Crime_ has been cited repeatedly by those pushing to loosen gun laws in many states and also at the national level, such as when the NRA succeeded in blocking a renewal of the assault weapons ban in 2004. Curiously, Lott's effort to step forward to defend gun rights at this time has brought much focus on his long record of data manipulation and outright fraud, most notoriously in his creating a sock puppet named "Mary Rosh" to praise himself on the internet over a decade ago. His studies have come under strong criticism on multiple grounds by many, such as Mark Duggan in his "More Guns, More Crime," Journal of Political Economy, 2001. His recent claims that mass murders happen only in gun free zones, except for the Gabby Giffords tragedy last year, appear to be false, with at least three this year happening in non-gun free zones: the Clackamas OR shopping mall attack, the Sikh Temple attack in Oak Creek WI, and the Accent Signage attack in Minneapoli, MNs. For more detailed discussions of the various fraudulent activities Lott has engaged in see http://www.tnr.com/blog/plank/111063/meet-john-lott-the-man-who-wants-teachers-carry-guns and http://mediamatters.org/research/2012/12/17/who-is-gun-advocate-john-lott/191855 . Ironically, while Norquist and LaPierre may just barely be able to keep their clothes on, it looks like it may end up being Lott, who may finally lose his.
Norquist's schtick has been the pledge he has foisted on largely Republican members of Congress never to raise taxes in any way, shape, or form. This effort dates to the Reagan presidency and has only gradually gained the nearly universal submission that it currently has among Republican politicians at both the state and national levels. In the face of the current huge deficit and the oncoming "fiscal cliff" (curb, slope, whatever), some are now making noises about abandoning ship on this. Indeed, this past Thursday saw House Speaker John Boehner proposing to raise income taxes on those earning more than $1 million per year. While this was a cutoff higher than the $400,000 President Obama was demanding (which is in turn higher than the $250,000 he successfully campaigned on this year), it was a significant break for Speaker Boehner. However, in the end he was unable to convince his caucus to support him. The rank and file of Republicans in the House are simply not yet willing to go against their pledges to the will of Norquist. Norquist's clothing may be getting pulled at and a bit messy, but he continues to seem pretty fully dressed.
Wayne LaPierre has not made Congressional members sign a specific pledge, but he has demanded that those the NRA supports do exactly as it requests on pain of facing primary or other opposition backed by strong funding and advertising. Whereas Norquist's group largely focuses just on Republicans, LaPierre has worked his ways on polticians of both parties, although increasingly his focus has been on Republicans as Democrats have begun to thumb their noses at him. This movement has accelerated since the massacre at Sandy Hook Elementary School in Newtown, CT just over a week ago, and the reaction to LaPierre's speech a week after it calling for armed guards at schools has been ridiculed widely. Nevertheless, despite a lot of discomfiture, at least Republicans continue to appear to be completely obedient with not a single GOP member of Congress expressing support for any movement to control guns in any way. One can expect my own representative, Bob Goodlatte, to prove to be the ultimate blocker of any efforts to change gun laws in his new position as House Judiciary Committee Chairman, as he has strongly stated opposition to any changes in gun laws. So, LaPierre also appears to be keeping most of his clothing on as well for the near term.
A curious details is that this authoritarian pair has a curious mutual connection. Norquist is on the board of the NRA, and both are closely connected to John R. Lott, Jr. Lott has most recently coauthored a book with Norquist, and he has long been the most prominent pro-gun rights advocate in the nation, much relied on and praised by LaPierre. His book, _More Guns, Less Crime_ has been cited repeatedly by those pushing to loosen gun laws in many states and also at the national level, such as when the NRA succeeded in blocking a renewal of the assault weapons ban in 2004. Curiously, Lott's effort to step forward to defend gun rights at this time has brought much focus on his long record of data manipulation and outright fraud, most notoriously in his creating a sock puppet named "Mary Rosh" to praise himself on the internet over a decade ago. His studies have come under strong criticism on multiple grounds by many, such as Mark Duggan in his "More Guns, More Crime," Journal of Political Economy, 2001. His recent claims that mass murders happen only in gun free zones, except for the Gabby Giffords tragedy last year, appear to be false, with at least three this year happening in non-gun free zones: the Clackamas OR shopping mall attack, the Sikh Temple attack in Oak Creek WI, and the Accent Signage attack in Minneapoli, MNs. For more detailed discussions of the various fraudulent activities Lott has engaged in see http://www.tnr.com/blog/plank/111063/meet-john-lott-the-man-who-wants-teachers-carry-guns and http://mediamatters.org/research/2012/12/17/who-is-gun-advocate-john-lott/191855 . Ironically, while Norquist and LaPierre may just barely be able to keep their clothes on, it looks like it may end up being Lott, who may finally lose his.
Saturday, December 22, 2012
We’ve Been Falling Off That Fiscal Cliff
President Obama’s concessions to Republicans on taxes and Social Security have grabbed the headlines, but there’s another big area where the White House has shifted considerably in the GOP’s direction: direct stimulus to revive the short-term economy. In his original offer, Obama asked for $425 billion in stimulus through jobs measures and tax extenders, according to the Committee for a Responsible Federal Budget, including $50 billion in infrastructure spending and other stimulus measures; mass mortgage refinancing to boost the housing market; $30 billion in unemployment extension; a $115 billion extension of the payroll tax holiday; and the extension of a host of business tax breaks known as extenders. The stimulus measures are intended to counteract the impact of a fiscal cliff that would put major austerity into effect immediately. But they’re also meant to counter the fiscal tightening in a fiscal cliff deal, which both Democrats and Republicans have agreed should promote major austerity in the longer term through deficit reduction. Republicans, however, have argued that more explicit stimulus right now isn’t the answer: House Speaker John Boehner included no explicit stimulus measures in his original offer and has only proposed to extend a handful of business tax breaks since then. It’s clearly been a point of contention in the negotiations as Obama’s stimulus proposal has progressively shrunk over time: In his third offer, reported Monday, Obama dropped his ask from $425 billion to $175 billion in stimulusSuzy’s reporting reminds us what Ben Bernanke meant by the fiscal cliff:
Even as fiscal policymakers address the urgent issue of fiscal sustainability, a second objective should be to avoid unnecessarily impeding the current economic recovery. Indeed, a severe tightening of fiscal policy at the beginning of next year that is built into current law--the so-called fiscal cliff--would, if allowed to occur, pose a significant threat to the recovery.In other words, we need the stimulus that the President originally proposed to avoid the fiscal tightening that the Federal Reserve chair warned us to avoid. Our graph reminds us that the original Federal fiscal stimulus (FED) early during Obama’s first term has been dissipated over time. It also reminds us that state and local government purchases (S/L) has been contractionary over the past few years, a point that Bernanke also made in his June 7 testimony to Congress:
Another factor likely to weigh on the U.S. recovery is the drag being exerted by fiscal policy. Reflecting ongoing budgetary pressures, real spending by state and local governments has continued to decline. Real federal government spending has also declined, on net, since the third quarter of last year, and the future course of federal fiscal policies remains quite uncertain, as I will discuss shortly.The Federal Reserve chairman has repeatedly begged Congress to reverse its unwise shift to austerity. We had hoped that President Obama in his fiscal cliff negotiations had actually started listening to Bernanke. But it seems he has stopped listening to him and most of us in the economics profession. If the President is not going to push for this fiscal stimulus, then why bother? Some might say we’ll fall off the fiscal cliff but it looks like we’ve been heading down that road for a while.
Friday, December 21, 2012
Saturday, December 15, 2012
To Hell With The Second Amendment And At Least Reinstate 1994 Ban on Assault Weapons Sales
Yet again we have had a nutcase engaging in mass murder in the US using semi-automatic weapons with massive magazine capacities. We banned the sale of these in 1994, but let it lapse in 2004 under pressure from the NRA, who had managed to defeat such supporters of the ban as the late Jack Brooks, a longtime gun rights supporter and Congressional powerhouse who had the nerve to support this ban in 1994. Nobody had the nerve to go up against them in 2004 (and the then president was certainly not in favor of renewing it). All these people have the blood of innocents on their hands, even if they continue to protest that if only we had universal "open carry," these things would not happen. I doubt that for the simple reason that most of these mass murderers have ended up killing themselves. They are not to be deterred by the threat that they might die.
Over the last century we have had 25 mass murders in the US. China is second with 10, Israel and the Philippines are tied for third at 8 each, and India is fifth with 7. We are far ahead of other nations in terms of per capita gun ownership, at 88.8 per 1,000 population. Serbia is second at barely over 60, wth Yemen barely over 50. Fourth place Switzerland is at 47.5. Gun rights nuts often cite Switzerland, which has low rates of gun homicides, mass murders, and so on, although it has the highest gun suicide rate in Europe. But guns are very strictly regulated there. Most homes have them, but they are issued to those who served in the military through the draft and have been trained. They are particular weapons to be kept under lock and key in the homes, with other types of guns simply banned, and only security officers allowed to carry guns in public.
Reading or listening to gun rights advocates one would believe that US liberty depends on the Second Amendment. It does not. Of the 48 rights advocated in the 1948 UN Declaration of Human Rights, gun rights are not among them (the other US constitutional rights not among them are the right to not self incriminate and the right to a trial by jury). The only other nation with gun laws as loose as those in the US is Honduras, which competes with the US for providing guns to the Mexican drug gangs.
The Second Amendment is a historical mistake and should be repealed. Short of that, the 1994 law should be reinstated. Heck, if we had gun laws like Switzerland's we would be in far better shape, although there is unfortunately no way to get our guns per capita down anywhere near to where they are in the rest of the world, which means we are probably doomed to more Newtowns.
Over the last century we have had 25 mass murders in the US. China is second with 10, Israel and the Philippines are tied for third at 8 each, and India is fifth with 7. We are far ahead of other nations in terms of per capita gun ownership, at 88.8 per 1,000 population. Serbia is second at barely over 60, wth Yemen barely over 50. Fourth place Switzerland is at 47.5. Gun rights nuts often cite Switzerland, which has low rates of gun homicides, mass murders, and so on, although it has the highest gun suicide rate in Europe. But guns are very strictly regulated there. Most homes have them, but they are issued to those who served in the military through the draft and have been trained. They are particular weapons to be kept under lock and key in the homes, with other types of guns simply banned, and only security officers allowed to carry guns in public.
Reading or listening to gun rights advocates one would believe that US liberty depends on the Second Amendment. It does not. Of the 48 rights advocated in the 1948 UN Declaration of Human Rights, gun rights are not among them (the other US constitutional rights not among them are the right to not self incriminate and the right to a trial by jury). The only other nation with gun laws as loose as those in the US is Honduras, which competes with the US for providing guns to the Mexican drug gangs.
The Second Amendment is a historical mistake and should be repealed. Short of that, the 1994 law should be reinstated. Heck, if we had gun laws like Switzerland's we would be in far better shape, although there is unfortunately no way to get our guns per capita down anywhere near to where they are in the rest of the world, which means we are probably doomed to more Newtowns.
Kevin Drum on Why the Social Security Trust Fund is Real
Kevin Drum has a short and sweet analogy for the position that the assets in the Social Security Trust Fund are real:
Now, suppose this surplus had been invested in corporate bonds. What exactly would that mean? It means that workers would be giving money to corporations, who would turn around and spend it. In return, the Social Security trust fund would receive bonds that represent promises to repay the money later out of the company's cash flow. In effect, it gives workers a claim on the cash flows of the company at a later date in time. When that time comes, the company would have to pay up, which would make it less profitable. If the company was already unprofitable, it would make their deficit even worse. If that's what had happened, there would be no confusion about the trust fund. Everyone agrees that corporate bonds are real things, and that the corporations who sell them have an obligation to pay them back, even though it means less money for shareholder dividends.He then substitutes treasury bonds for corporate bonds and draws the same conclusion. QED! While I agree, let me try to offer the rightwing rebuttal, which begins with the proposition that the general fund is essentially bankrupt. Is it and why? Well – it is true that the Reagan years cut taxes on the very rich just as it raised payroll taxes. It is also true that President Reagan increased defense spending. Although we had the peace dividend and some reversals of those tax cuts during the 1990’s, George W. Bush put us back on the path of high defense spending and low taxes on the rich in 2001. The Republican Party seems to believe that we must forever have high defense spending and low taxes on the rich. Well if that is true, it is analogous to paying high dividends to corporate shareholders even as corporate profits are well below the dividend policy. But do we really have to accept this Republican belief system? No we can honor these promises to pay Social Security benefits if we as a nation are willing to tell the rich to pay higher taxes and tell the military industrial complex that it gets less largesse. But I guess some Republicans see the promises of low tax rates for the rich and continuing largesse for the military industrial complex as sacrosanct, which of course leads them to conclude that the problem is those promises to Social Security beneficiaries.
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