Opportunity Costs

Posted by PITHOCRATES - June 4th, 2012

Economics 101

Those on the Left are all for Choice as long as you Choose what they want you to Choose

Choice.  It’s what life is.  Every day we make hundreds of choices in our life.  The communists called that a burden.  And that their way removed all that stress from our lives.  The stress of constantly having to choose.  They came up with a new freedom.  Freedom from choice.  To live under oppression.  Like a slave.  Where you no longer had the burden of making a choice every waking hour of your day.  You simply took what the government gave you.  And relaxed.  Truly free.

It turned out the people living under communism preferred having that burden of choice.  And took every opportunity to escape the communist ‘freedom’.  To a freedom where you were free to choose whatever you wanted.  Instead of taking what central planners gave you.  Those on the Left always had a soft spot in their hearts for communism.  And Soviet central planners.  For they never cared that much for free markets.  Laissez faire capitalism.  Freedom of choice.  Because people so often chose poorly in their opinion.  For they weren’t as educated and enlightened as they were on the Left.  And therefore chose the wrong kind of foods to eat.  The wrong kind of beverages to drink.  The wrong kind of cars to drive.  The wrong kind of power to generate.  And the wrong people to vote for.

No.  Those on the Left are no fans of choice.  Except, of course, when it comes to abortion.  When it comes to abortion then they are big fans of choice.  But not so much when it comes to us choosing what to eat, drink and drive.  Or how we generate our energy.  So when it comes to choice those on the Left are like the Soviet central planners.  They are all for choice.  As long as you choose what they want you to choose.

When making any Economic Decisions we make our Choice based on Opportunity Costs 

But we choose.  Because we can.  At least with most things.  But how do we choose?  Does price determine what we choose?  Sometimes.  Quality?  Sometimes.  Loyalty?  Sometimes.  Sometimes it’s one of these things.  Sometimes a combination of all of these things.  Sometimes it’s none of these things.  So what is it that makes up your mind when confronted with a choice?  Do you know?  You do.  For obviously you’re making the choice.  But the ‘why’ we may have to coax out of you.  For you will probably not be able to explain why.  At least not as well an economist can.

The study of economics is all about choice.  And trying to determine what influences people’s choices.  So economists can offer economic policies to maximize economic activity.  By maximizing that thing we ultimately trade for.  Which is what?  Happiness.  We choose to increase our happiness.  Or utility in the parlance of economics.  The things we choose are the things that will give us the greatest happiness.  Or the greatest utility.  But if you’re like me you never saw ‘utility’ or ‘happiness’ expressed as units on a price tag in a store.  Price tags show only price.  Which tells us little how happy something will make us.  So how do we choose the things that will maximize our happiness?  Especially if you’re looking at two different things that have the same price?

Easy.  We don’t make our decision by looking at what we’re buying.  We make our decision based on what we’re not buying.  What we are giving up by buying this thing or that service?  What might have been had it not been for this purchase?  What opportunity we’re passing on to make this purchase?  What cost are we paying in lost opportunity by committing to this purchase?  In other words, when making any economic decisions we make our choice based on opportunity costs.  On an amount of happiness we’re giving up to acquire some other amount of happiness.  And whatever the number of our choices the end result is the same.  What we choose gives us more happiness than all other possible alternatives.  Regardless of price, quality or loyalty.  Though they could influence us when there is a tie.

Liberals make us Buy not what Increases our Happiness but what Increases their Happiness

You can’t put a price on happiness.  That’s what they say.  And they are right.  Whoever they are.  For example, luxury cars are nice.  But they are expensive.  Subcompacts are not as nice as luxury cars.  But they are not as expensive either.  So if you were choosing between these two cars which one would you choose?  I can’t tell because I don’t know your income.  But I can guess at your decision process.  You’re going to compare opportunity costs.  Driving a luxury car gives you enormous amounts of happiness.  For the limited time you spend driving it.  Enormous happiness for a limited amount of time.  Okay.  But what are the opportunity costs?

Let’s say your daily commute to and from work is one hour.  But when you get home you enjoy 4 hours between surfing the Internet and watching cable television.  When you’re not at work or home you like to use social media on your smartphone interacting with your friends.  And using your smart phone apps to maximize your fun in the evenings and on the weekend.  You like to spend your Sunday mornings at the coffee shop with you tablet reading the online Sunday papers.  The hours of driving happiness come to 10 hours a week.  And the hours of online/watching cable happiness comes to 32 hours a week.  Now being that you spend more time online or watching cable than driving then it’s safe to say that driving brings you less happiness than those other activities.  Because luxury cars are expensive they come with a high monthly payment and a high insurance premium.  Which means you will have to cut back on other spending to afford the luxury car.  So to afford the luxury car you have to give up your cable and home Internet access.  And cut back on your minutes on your smartphone.

The opportunity cost of the luxury car is giving up cable TV and cutting back on Internet access and smartphone minutes.  The opportunity cost of keeping those things is getting a subcompact car instead of a luxury car.  This is the ultimate decision we make in all of our economic decisions.  Which will cost us more in sacrificed happiness in the long run?  Which makes those decisions easy.  In the above example you would probably have never given the luxury car any serious thought.  This is why free markets work so well.  Why laissez faire capitalism works so well.  Because the economy is full of individuals making these decisions quickly.  Far quicker than any Soviet state planner.  And with far more insight into our own wants and desires than any Soviet state planner.  And in the aggregate this drives economic activity.  Bringing the things we want to market.  The things that give us the greatest amount of happiness.  The things that have the lowest opportunity costs.  Unlike Soviet central planning.  Or American liberal Democrat central planning. 

No.  These people try to change our purchasing decisions.  Making us buy not what increases our happiness.  But what increases their happiness.  Which is why when liberal Democrats are in power there is a general economic decline.  Because they do alter our purchasing decisions.  By increasing the opportunity costs of the things that increase our happiness.  So that we buy fewer of them.  But we don’t buy more of the things they want us to buy.  Because those things don’t increase our happiness.  When they subsidize hybrid cars (paid for with higher taxes from us) to get us to buy them it doesn’t make the hybrid cars give us any more happiness.  It just leaves us with less money because of the higher taxes.  So we buy less of everything else.  And in the aggregate this lowers economic activity.  Leaving us all less happy.

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Keynesians turn to Alien Invasions to Fix the Economy and to Stop Global Warming

Posted by PITHOCRATES - August 19th, 2011

Paying them to Dig Ditches, then Paying them to fill them back In

Leave it to a Keynesian to find the silver lining in a war of annihilation (see The Dimlight Zone posted 8/17/2011 on Investor’s Business Daily).

“If we discovered that space aliens were planning to attack,” Krugman told CNN’s Fareed Zakaria on Sunday, “and we needed a massive buildup to counter the space alien threat, and inflation and budget deficits took secondary place to that, this slump would be over in 18 months.”

Where did Krugman get his idea for “Up-in-the-Sky-Side Economics”? He told Zakaria, “There was a ‘Twilight Zone’ episode like this in which scientists fake an alien threat in order to achieve world peace. Well, this time we don’t need it; we need it in order to get some fiscal stimulus.”

And Paul Krugman won the Nobel Memorial Prize in Economics.  Not for his theory on space alien threats but for something about New Trade Theory and New Economic Geography

He’s Ivy League.  A Keynesian economist of the first order.  And an Orwellian socialist, apparently.  For in Orwell‘s Nineteen Eighty-Four, that was a key party tenet.  Perpetual war.  To unite the people against the common enemy (which often changed if one of their two possible enemies was losing too badly).  And to consume the products of state labor.  To provide permanent employment for the people.  (Sort of like paying them to dig ditches, then paying them to fill them back in.)  Building the things of war.  While they lived in desperate privation of the necessities of life.  A dark existence indeed.  But they kept the people occupied.  And obedient.

World War gave the U.S. a strong Export Market During and After the War

Being in favor of war spending is a bit strange.  Considering the Left’s vehement opposition to the Iraq Way, the War in Afghanistan, the Libyan War, the Vietnam War, etc.  All of these were quite costly.  And required enormous war production.  Creating near-perpetual jobs for people in the war economy.  There was a whole lot of deficit spending going on.  Just like you’d think an Orwellian socialist would like.  But no. 

Contrary to Keynesian belief, these wars did not stimulate the economy.  They were in effect paying people to dig ditches and then having them fill them back in.  Just moving money around in the economy.  Not creating anything new.  Unlike the war he refers to in that article.  The good war.  World War II

World War II was a different kind of war.  It was a world war.  Much like World War I.  Where the world’s economies were left in ashes.  Unlike America.  Who was unscathed during these wars.  Was ready and able to rebuild the world after these wars.  And feed it, too.  So not only did we have a strong export market during the war (we were the Arsenal of Democracy), we had an even stronger export market after the war. 

That’s what makes a war profitable.  When someone else pays for it.  Which is why the previously mentioned wars did not stimulate economic activity.  The United States paid for them.  Not other people.  It was just moving money around in the economy.  Not creating anything new.  Just digging ditches.  And filling them back in.

Before acting to Save the World a Keynesian would Consider its Impact on the Next Election First

Besides, do we really want Keynesians fighting our wars?  For they are more concerned in winning political battles than military ones.  No matter the costs.  Whether it threatens the fiscal solvency of the country.  Or military strategy (see Bad luck? Bad faith? by Charles Krauthammer posted 8/18/2011 on The Washington Post).

The charge [wishing to see America fail for their own political gain] is not just ugly. It’s laughable. All but five Republican members of the House — moderate, establishment, Tea Party, freshmen alike — voted for a budget containing radical Medicare reform knowing it could very well end many of their careers. Democrats launched gleefully into Mediscare attacks, hardly believing their luck that Republicans should have proposed something so politically risky in pursuit of fiscal solvency. Yet Obama accuses Republicans of acting for nothing but partisan advantage.

This from a man who has cagily refused to propose a single structural reform to entitlements in his three years in office. A man who ordered that the Afghan surge be unwound by September 2012, a date that makes no military sense (it occurs during the fighting season), a date not recommended by his commanders, a date whose sole purpose is to give Obama political relief on the eve of the 2012 election. And Obama dares accuse others of placing politics above country?

Let’s just hope that when the aliens attack we don’t have Keynesians in power.  For with them it’s about the money and the power.  And political expediency.  Who would, in the face of an alien evasion, dither about what action would benefit them most in the next election before acting to save the world.

Global Warming bringing the Final Frontier to Us?

Paul Krugman isn’t the only one thinking about alien invasions.  Climate scientists are, too (see Aliens may destroy humanity to protect other civilisations, say scientists by Ian Sample posted 8/18/2011 on the Guardian).

It may not rank as the most compelling reason to curb greenhouse gases, but reducing our emissions might just save humanity from a pre-emptive alien attack, scientists claim.

Watching from afar, extraterrestrial beings might view changes in Earth’s atmosphere as symptomatic of a civilisation growing out of control – and take drastic action to keep us from becoming a more serious threat, the researchers explain.

This highly speculative scenario is one of several described by a Nasa-affiliated scientist and colleagues at Pennsylvania State University that, while considered unlikely, they say could play out were humans and alien life to make contact at some point in the future.

This isn’t hyperbole from Al Gore.  It’s NASA affiliated.  So this must be serious stuff.

The authors warn that extraterrestrials may be wary of civilisations that expand very rapidly, as these may be prone to destroy other life as they grow, just as humans have pushed species to extinction on Earth. In the most extreme scenario, aliens might choose to destroy humanity to protect other civilisations.

“A preemptive strike would be particularly likely in the early phases of our expansion because a civilisation may become increasingly difficult to destroy as it continues to expand. Humanity may just now be entering the period in which its rapid civilisational expansion could be detected by an ETI because our expansion is changing the composition of the Earth’s atmosphere, via greenhouse gas emissions,” the report states.

“Green” aliens might object to the environmental damage humans have caused on Earth and wipe us out to save the planet. “These scenarios give us reason to limit our growth and reduce our impact on global ecosystems. It would be particularly important for us to limit our emissions of greenhouse gases, since atmospheric composition can be observed from other planets,” the authors write.

Talk about taking it up a notch.  And this after those emails leaked from the University of East Anglia.  Showing that they fudged many of the numbers they used to sell global warming.  So they changed tack.  Propose absolute gibberish that is completely independent of data.  And sanity.  Thus making it impervious to attack.  Or scientific scrutiny.

Who would have thunk it?  That global warming would bring the final frontier to us.  Where others would travel here.  In their quest to explore strange new worlds.  To seek out new life and new civilizations.  To boldly go where no man has gone before.  And possibly bring a cook book with them entitled To Serve Man

I wonder how many Trekkies were in that group at the Pennsylvania State University.

Long Lines of Communication and Costs make the odds of an Alien Invasion Slim

Let’s apply a little historical perspective on this.  Why did Napoleon not conquer Russia?  Because Russia is a very big place.  It stretched Napoleon’s lines of communication to the breaking point.  He could no longer support his Grande Armée.  And the Russian winter only compounded his misery.  He had no choice but to retreat.

Why did Hitler not conquer Russia?  Ditto.

Now let’s look at some economic history.  Why did NASA cancel Apollo missions 18, 19 and 20 to the moon?  Because they were too costly.  Why have we not landed a man on Mars?  Because it’s too costly.  Why did we cancel the Space Shuttle program?  Because it was too costly.

Put long lines of communication and costs together and what do they tell you?  The odds are slim for an alien invasion.  Because you have to benefit somehow for the costs you expend.  Hitler wanted living space.  Grain.  And Caucasus oil.  His hatred of Jews, Russians and communists was one thing.  But killing all of them meant little if he didn’t get the living space, grain and oil.  That was the desired payoff for his investment in the invasion of Russia.

“There is Nothing more Dangerous than a Wounded Mosquito”

Granted, this is pure speculation, but let’s assume invading aliens are like all other conquering people history has known.  That is, they want something.  Something real.  Food.  Resources.  Whatever.  And if they are able to conquer the space-time continuum, they’d be pretty darn smart aliens.  And resourceful.  They could probably do just about anything when it came to food and resources.  Probably even make a clothes washer that can fold and wrap clothes in a plastic wrap.  And if we become an annoyance they could probably dispatch our world before we could put the first thoughts of a starship on a drawing board.

So there is little point in expending any time, effort or money in preparing a defense for an alien invasion.  And there is little chance that our so called global warming is going to bring a Death Star to our corner of the universe.  Such talk appears to be a ruse to increase government spending.  What some would call ‘grasping at straws’.  Just another way for the Keynesians to continue their failed policies. 

The Obama administration has shown the futility of Keynesian economic policies.  And it has wounded the Keynesians deeply.  But like the mosquito, we should be careful.  For as they said on Monty Python’s Flying Circus, “There is nothing more dangerous than a wounded mosquito.”  They will find other ways to tax and spend.  No matter how silly, ridiculous or costly it is.

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The Debt Limit Debacle goes on, Obama and the Democrats unable to Govern Responsibly like Responsible State Governors

Posted by PITHOCRATES - July 17th, 2011

An Explosion of Government Spending will require an Explosion of New Taxes, Borrowing and/or Printing

Blah, blah, blah.  And the budget debate goes on.  It is interesting that it is the Republicans that are being intransigent.  They’re the reason why there is no deal.  But the Democrats aren’t intransigent when they’re being intransigent.  Funny how that works.  Well now there’s a fallback plan.  In case the Republicans refuse to compromise and agree to all of the Democrat’s terms.  Here it is (see Five questions on the debt-ceiling debate posted 7/15/2011 on The Washington Post).

The third, and increasingly likely, option is a fallback proposed by Senate Republican leader Mitch McConnell (Ky.). Congress would allow Obama to raise the debt limit in three increments totaling $2.5 trillion. It would also vote on resolutions disapproving of the debt increases, letting Republicans formally blame the increases on Obama.

To get House Republicans behind the deal, McConnell and Senate Majority Leader Harry Reid (D-Nev.) are revising it to include $1.5 trillion in cuts to government agencies and a new bipartisan committee to produce a framework for long-term debt reduction. Obama signalled Friday that he could live with the McConnell-Reid fallback.

So they will agree to disagree and let Obama do what is ‘best’ for the country.  And let him have full blame for doing it.  It’s a trap.  So when the nation implodes under unsustainable debt and a destroyed economy, the Republicans can point at Obama and say, “He did it.”  The Republicans may win the battle.  But they will lose the war.

A new bipartisan committee?  Didn’t we already do this?  The president’s own bipartisan committee of Erskine Bowles and former-Sen. Alan Simpson already did this.  And Obama promptly ignored their recommendations.  Then Joe Biden gave it a whirl.  And failed.  Then the president sat in meetings himself.  And failed. 

Another committee?  Why?  It’s just going to fail, too.  They need to cut government spending.  They know it.  All of these bipartisan committees know it.  Even the Chi-Coms know it.  But Obama and the Democrats just aren’t going to do it.  They’ll just keep wasting time with these meetings until they can get the Republicans to cave.  Because that’s their idea of compromise.

A “grand bargain” would mean settling for smaller tax increases on the wealthy than if Obama simply let the George W. Bush-era tax cuts expire at the end of 2012. And it could impede the economic recovery by ratcheting back government spending, thus reducing demand.

A bargain implies two competing viewpoints reconciled to best satisfy both sides.  It doesn’t work well when the Democrats simply reject the Republican’s views in toto.  And hold on to failed, dogmatic Keynesian economic policies.  For if government spending worked there would be no recession.  Or a budget debate to raise the debt limit. 

This pervasive view that these Keynesian policies are accepted as the only viable policies by the Democrats is the reason why we’re in the mess we’re in.  It appears that no amount of empirical evidence discrediting Keynesian economics will ever dissuade the Democrats from their reckless spending ways.  Thickheaded, stubborn and imbued with an air of all-knowing condescension and infallibility, they will let the country crash and burn before ever considering the idea that maybe they aren’t as brilliant as they think they are.

But as Obama sees it, the debt-ceiling crisis has offered an opportunity to fulfill his grand if nebulous campaign promise to get serious about attacking the nation’s fundamental problems. Being able to campaign on a major debt deal could outweigh giving up the chance to attack Republicans over Medicare. Settling now for a smaller tax increase on the wealthy would spare Obama a divisive fight over the Bush tax cuts. And getting the nation’s fiscal house in order could make it easier to win support for spending on education, research and infrastructure in a second term.

As for the economy, Obama seems to have adopted, at least to some degree, the Republican theory that businesses will invest more if they see Washington getting a handle on the debt. And a 10-year debt deal could be arranged so that few of the cuts went into effect immediately — there could even be some upfront stimulus included in the deal.

More spending?!?  You’re going to get your fiscal house in order (i.e., reduce the deficit) by spending more?  Well there’s only one way of doing that then, isn’t there?  With massive new taxes.  And not just on the wealthy.  These are going to have to reach deep into the middle class.  Because Obama has increased the deficit by a trillion dollars.  He’s the king of deficit spending.  He’s taken deficit spending to uncharted heights.  And it will take trillions in new taxes to reduce his deficits.  And this is the problem.  He is spending too much.

The Reagan Revolution was animated by “supply side” theory, but Ronald Reagan himself presided over several tax increases after his initial big cuts of 1981. He escaped GOP opprobrium, but George H.W. Bush caught his party’s ire when he signed a 1990 deficit-reduction deal with higher taxes. George W. Bush passed two big tax cuts, which nonpartisan budget experts now say were a major factor in today’s deficits.

Those ‘budget experts’ are no doubt Big Government Keynesian economists who love stroking their egos by advising governments on macroeconomics.  Talk to an Austrian School economist and you will hear a far different story.  And one that better stacks up against history.

Reagan made a deal with Tip O’Neil and the Democrats to cut $3 dollars of spending for every new $1 in taxes.  Of course, the Democrats lied.  They never honored their spending cuts promise.  Still his tax rate cuts nearly doubled tax receipts.  So tax rate cuts can and have increased tax revenue.  It was the out of control spending of Tip and company that gave Reagan those $200 billion deficits.  Chump change by Obama’s deficit standards. 

Bill Clinton fell ass-backwards into an economic boom thanks to the irrational exuberance of the dot-com bubble.  Money from capital gains tax from all those exercised stock options poured into federal coffers.  Then the bubble popped.  And George W. Bush started his presidency with the dot-com recession.  So, in response to the recession, Bush cut taxes in 2001 and 2003 to stimulate the economy.  In 2003 federal tax receipts were $1.782 trillion.  In 2008 they increased to $2.524 trillion.  That’s an increase of $742 billion.  Or an increase of 41.6%. 

So, no, the Bush tax cuts did not cause the deficit.  It was TARP (caused by the Democrat’s poor oversight of, and profiting from, Fannie Mae and Freddie Mac and their great subprime mortgage scam).  Obama’s stimulus.  And Obamacare.  An explosion of federal spending that will require an explosion of federal taxes, borrowing and/or printing to pay for.  No, this isn’t George W. Bush’s deficit.  This is Obama’s deficit.

A Shortage of Health Care Workers in Canada?

And speaking of national health care, let’s take a look at how well it is working in Canada (see Interactive Billboards: Bringing Billboards To Life by Misty Belardo posted 4/24/2011 on Bit Rebels).

An example of a great interactive campaign is this interactive billboard placed at bus stops. The campaign’s objective was to raise awareness about careers in public service. The challenge for the ad agency was to create enough interest in people so that they might seriously consider pursuing a career in public health. The big idea was to give people the feeling that they are capable of saving a life.

The billboard consisted of a huge interactive screen that illustrated a patient dying (as morbid as that may be). When a passerby pushed the hand marks on the sign, the electrocardiogram beeped, indicating that the man came back to life. Right at that moment a message read “Choose a career in public health, visit SaveLives.com.” It would be interesting to find out how many people interacted with the billboard, and even more importantly, how many of those registered and inquired about that career. Usually for campaigns like this it takes a couple months to find out the results.

The ad is apparently to attract health care workers in the province of Québec, Canada.  Which means they must have a shortage of health care workers.  And must be rationing care.  For that is an expensive way to advertise.  And you don’t do that unless the need is critical.  Whereas in America, it is one of the few growing sectors of employment.  Until the government takes it over under Obamacare, that is.  Then the Americans, too, no doubt, will be advertising to get more people to work in the bloated bureaucracy that American health care will become.

And it’s going to be bad in America.  The debate over raising the debt limit so they can pay their current bills?  Those bills don’t even include the explosive costs of Obamacare.  Those costly benefits are yet to kick in.  When they do there will be a whole lot more people covered by the same amount of health care workers, thus creating a shortage of them.  Which will require the rationing of limited health care resources.  (Unless the government finds an extra trillion dollars in some old coat in the closet.)  And then Obamacare will limp along like Medicare.  Chronically in the red.  And forever threatening to cut providers’ pay.

The State Governors know how to Govern

Part of Obama’s grand plan is to pass a lot of costs along to the states.  Because they can.  And states have to bite the bullet and absorb these costs.  Because they can’t pass them onto anyone else.  Or print money.  We call them unfunded mandates.  State governors call them bull [deleted expletive].

You see, states don’t have the options of the federal government.  They can’t be forever silly and irresponsible.  They can’t bluster in hyperbole, thump their chests with pride for a job not done and then just kick the can down the road.  They have to do what Obama and the Democrats in Washington won’t do.  Govern (see For governors, a personal toll from budget battles by Dan Balz posted 7/16/2011 on The Washington Post).

Talk to state executives gathered here at the summer meeting of the National Governors Association and it quickly becomes clear that the budget fights this year have not just left political scars, but some personal ones as well. As Washington Gov. Christine Gregoire (D) put it, “I’ve just come through a session in which I made rotten decisions.”

In Gregoire’s view, those decisions weren’t bad because they failed to solve the state’s budgetary problems or left her budget hopelessly out of balance. To the contrary, Gregoire oversaw cuts of more than $4 billion that balanced her biennial budget.

Like many governors, Gregoire cut pay for state workers, reformed the state pension system, asked state employees to pay more for health care and retirement, eliminated cost-of-living increases for some retired state employees and revamped the state’s worker compensation system.

She cut education spending and raised college tuition.

Now that’s governing.  Doing the right thing no matter how much it pains you.  This is the way it’s supposed to be.  Politics just isn’t a game, a path to riches and a fat pension.  It’s doing what’s best for the people you govern.  Even when it goes against your own personal philosophy.

We’ve come a long way from the Intent of the Founding Fathers

It’s just more of the same from Washington.  And this is what Thomas Jefferson feared.  And why he hated Alexander Hamilton so.  Permanent government debt is a dangerous thing.  It can give you an out of control federal behemoth.  Intruding ever more on our individual liberties to feed it’s appetite for ever more revenue.  Which is what Washington is today.

Jefferson cut federal spending so much he could hardly defend American shipping.  Today the federal government collects in taxes enough to pay for one Apollo moon program each month and it still isn’t enough. 

We’ve come a long way from the intent of the Founding Fathers.  Lucky for them they didn’t live to see what we’ve done to their beloved republic.

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Liberals are Exasperated by Republicans and their Responsible Governing

Posted by PITHOCRATES - July 2nd, 2011

If we can’t Afford Tax Cuts we can’t Afford more Spending

They’re still arguing about the budget.  And trying to strike a deal that will allow them to raise the debt limit.  Republicans are trying to get spending cuts from the Democrats.  The Democrats want to get the Republicans to say ‘yes’ to increasing taxes.  And President Obama is trying to broker a bipartisan deal where the Democrats get what they want.  And the Republicans let them get what they want (see Obama says ‘nothing can be off-limits’ in budget debate; Republicans say tax increases are by Associated Press posted 7/2/2011 on The Washington Post).

President Barack Obama said Saturday that “nothing can be off-limits” in the budget debate — even though Republicans have said tax increases are. The president said every tax break and federal program must come under scrutiny…

He also renewed his call for Congress to eliminate some tax breaks for the well-off as part of any agreement. Republicans want deep spending cuts without any tax increases while Obama and Democrats call for what they term a “balanced” approach. That means one that also includes new revenue in the form of higher taxes for some, though Democrats steer clear of using phrases like “tax increases” or “higher taxes.”

“Now, it would be nice if we could keep every tax break, but we can’t afford them,” Obama said. “Because if we choose to keep those tax breaks for millionaires and billionaires, or for hedge fund managers and corporate jet owners, or for oil and gas companies pulling in huge profits without our help — then we’ll have to make even deeper cuts somewhere else.”

Obama has a point.  The government can’t afford a lot of things.  So he should listen to his own advice.  And STOP spending so much.  It has a proven track record to cut deficits.  And it works every time.  Spending too much?  Well stop spending too much.  And presto, spending problem goes away.  Problem solved.  Without having to raise the debt limit.  Which would only make a bad situation worse.  Because if you’re spending too much spending more will only make your ‘spending too much’ problem worse.  Duh.  You don’t have to be an Ivy League trained economist to understand this.

Ignore the Man behind the Curtain

President Obama has had about enough of the Republicans’ obstructionism.  And their trying to govern responsibly.  Can’t the Republicans understand that he’s right?  And they’re wrong?  This representative government would be a whole lot easier if the Republicans would just shut up and do what they’re told.  To be good and mind their president (see Obama’s Risky Belittling Tactic by Lee Siegel posted 7/1/2011 on The Daily Beast).

The story of The One, the Messianic Figure, the Soulful Black Man Come to Redeem a Fallen America, the Quintessential Stranger Who Was Thus the Quintessential Figure of American Democracy—the thrilling, universal tale of Obama’s rise through a torn family with a world-wandering mother and an absent father had become tired and irrelevant. It was all used up.

Instead, you were left with the off-putting image of the dry, arrogant law professor, with his superior intellectual airs, that had occasionally appeared during the last presidential campaign. Back then, that unlovely side of the candidate was quickly eclipsed by The One’s universal tale. Now it has emerged as the only storyline the president can muster. Which means that Obama and the Democrats could be in big trouble.

I guess we should ignore the man behind the curtain.  For the president is no different that the Great and Powerful Oz.  More silly old man than messianic.  For he can play the role of philosopher king.  But he can’t be one.  And he sure doesn’t like when these young whippersnappers in the Republican Party play on his ideological lawn.

Or to frame it another way, imagine Obama as the right sees him, as a substitute teacher from another town who has no legitimacy in their classroom. He lectures, he scolds, he wants everyone to stay after school. He has no idea what the lives of his students are like: their parents looking for work; their early marriages and pregnancies and all the attendant difficulties and mishaps; the way they pour their frustrated ambitions into love and hope for their children. He sees them as kids who need the guidance of a grown-up. They see him as refusing to understand their grown-up problems.

So it is hardly surprising that so many of the current crop of Republican presidential hopefuls, or potential hopefuls, strike liberals as the equivalent of problem children. How many times have we read that Palin “didn’t do her homework” before a debate or a public appearance? Gingrich is portrayed as a juvenile delinquent. Herman Cain, we learn, is popular for speaking out of turn. With all her adopted children and her tragic pregnancy, Bachmann comes across like that teenage girl who dreamily draws hearts (and daggers) in her textbook while the teacher is talking. Even the more polished, informed, self-possessed Romney seems cursed with an Eddie Haskell air of insincerity and deceitfulness. “Hi, Ms. Obama! Don’t you look swell in that pretty new dress.”

Arrogant.  Condescending.  Professorial.  Elitist.  Ladies and gentlemen, I give you the president of the United States.  And his liberal base.

Tax Cuts are Recurring Stimulus

True liberals in America are only about 20% of the population.  But they have big mouths.  Or big bully pulpits.  So their politics seems more universally accepted than they really are.  Who are they?  College professors who live in a mystical fairyland outside the realm of reality (the college campus).  The guilty rich who’ve inherited their wealth.  Big Government politicians (liberal Democrats and RINO Republicans).  The mainstream media who yearn for Walter Cronkite celebrity.  Celebrities who haven’t a clue about economics, history or geopolitics but yearn to be seen as smart and enlightened.  (Just like those in the mainstream media who yearn for Walter Cronkite celebrity).  And most economists who bow down and worship John Maynard Keynes.  And his activist government policies to control the free market.  Because they’re smarter than the common, stupid masses.  At least they think they are.  Nay, in their minds they know they are.

Paul Krugman is a Keynesian.  And he likes to throw up a chart or graph on The New York Times to show how right he and Keynes are.  And how wrong the Keynesian-deniers are.  But it’s guys like him that Mark Twain had in mind when he said “figures don’t lie, but liars figure.”  For that’s something Krugman likes to do.  Use facts and figures to his advantage whenever he can.  No matter how wrong he is (see Cash Is Not the Problem by Paul Krugman posted 7/2/2011 on The New York Times).

These aren’t abstruse points. On the contrary, the fact that corporations aren’t investing as much as they could has become a major right-wing talking point, with repeated claims that companies are holding back because of political uncertainty. Actually, they’re holding back because they don’t see enough consumer demand — but in any case, cash is not the problem.

So it’s truly remarkable — an impressive case of doublethink — that the same people who decry the fact that firms and banks are sitting on cash insist that it’s totally vital that we give those firms and banks more cash, so that they can invest and create jobs.

Not investing as much as they could?  Give those firms and banks more money (by cutting taxes)?  Krugman is as much an arrogant, condescending, professorial elitist as Obama is.  I mean, who are they to deign to allow people to keep their own money?

Krugman is right about why they’re sitting on all that cash.  There is a lack of demand.  Because of the high unemployment and the depressing economic outlook.  But he’s wrong about the tax cuts.  As he always is.  As his type (Big Government Keynesians) always are.  They prefer federal stimulus spending.  Which always fails to stimulate.  Because it isn’t recurring.  Whereas tax cuts are.  Because they make bigger paychecks.  Week after week.  Whereas stimulus spending is more like a bonus check.  Once spent it’s gone.  So why would businesses invest in new capacity and hire more people for a temporary increase in consumer spending?  For after that stimulus is spent, what are they supposed to do then with all that excess capacity?

That’s why they’re sitting on all that cash.  Political uncertainty.  Especially about the government’s fiscal and regulatory policies.  Which determines what their costs will be.  And how much disposable cash consumers will have.  Because high taxes and costly regulations raise costs for businesses.  And prices for consumers.  Who ultimately always pay for the high cost of government.

The Laffer Curve gets the Last Laugh

Ronald Reagan wasn’t a Keynesian.  And he understood the power of tax cuts (see IBD’s Editorial: A Laffer Curve For Liberals posted 7/1/2011 on Investors.com).

Remember the left’s contempt for the Laffer Curve — which posited that certain tax cuts will pay for themselves by accelerating economic growth? Well, now they’re pushing their own version of voodoo economics.

Largely overlooked in the coverage of President Obama’s latest press conference was his call for another round of deficit-fueled stimulus spending as part of a debt reduction package.

Wait, what?  We can’t afford tax cuts but we can afford another round of deficit-fueled stimulus?  What kind of asinine logic is that?

Ronald Reagan based his economic policies on the Laffer Curve.  His Reaganomics cut tax rates.  The economy grew.  Federal tax receipts almost doubled.  Proving the Laffer Curve.  But because Congress spent money faster than Washington collected it, the deficit grew (which was a spending problem, not a revenue problem).  Because Big Government Keynesians hated that it worked, they belittled the policies as ‘trickle-down’ and ‘voodoo economics’.

That’s what the left’s favorite economist — Paul Krugman — argued in late 2009: “Spending more on recovery will lead to a stronger economy, both now and in the future — and a stronger economy means more government revenue.”

Krugman later wrote that “people like me have been hesitant to make this argument loudly, for fear of being cast as the left equivalent of Arthur Laffer.”

By spending more Krugman means that the government should spend more.  Tax and spend.  Borrow and spend.  Print and spend.  Just spend.  Run up huge deficits in the short term.  Because it will unleash a tsunami of economic activity that will rain money down on Washington.  Much like Reaganomics did with tax cuts.  And how has this worked?

Of course, this is the same Krugman who said that “the notion that tax cuts pay for themselves has no empirical support.”

Except there’s more evidence to support Laffer than Krugman. Reagan’s tax cuts helped power the ’80s boom, which eventually pushed down deficits. The cut in capital gains taxes under Clinton helped spark a market rally and a huge surge in tax revenues from investors.

And what do we have to show from Obama’s historic “pay for itself” stimulus spending spree? A recovery weaker than any since the Great Depression. A jobless rate that — two years after the recession ended — remains above 9%.  Three years of $1 trillion-plus deficits. A debt burden that’s climbed more than 40%. And no hope in sight of any of this getting much better.

Not well.  In fact, their policies have a track record of dismal failure.  But it’s never the fault of the policies.  It always because of some other misbehaving force.  Like employers who sit on piles of money instead of hiring.  Or consumers who sit on money instead of spending it with abandon.  For if they only would do what they’re supposed to do their policies would work.  So it’s not their fault.  It’s all these people who are just too stupid.

Apparently the people were smarter during the Eighties.  And the Nineties.  When there were economic booms.

Liberals are Arrogant, Condescending, Professorial Elitists

The problem with liberals is that they are arrogant, condescending, professorial elitists.  Whose idea of bipartisanship is for the Republicans to shut up and be their bitch.  They cannot conceive that they or their policies are wrong.  And when they are they blame everyone else.  Scolding American business and the American consumer for misbehaving.  They have had it up to here (hand under chin) with our impertinence and are this close (thumb and index finger about an inch apart) to taking away our toys.  And by toys I mean our wealth.  And our liberty.

The height of this audacity is their lecturing us on the irresponsibility of tax cuts while they argue for more spending.  That’s what the budget debate is all about.  To get the debt limit raised so they can spend more.  Talk about doublethink.  But this is what happens when your government is full of Keynesians.  And they listen to Keynesian economists.  They throw all reason out the window.  And double-down on bad ideology that has a track record of failure.  Because to do otherwise would diminish their power.  And return the government to the limited one envisioned by the Founding Fathers.  Which is something they could never have.

www.PITHOCRATES.com

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