The Head Of the CBO Is Dead Wrong

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I Couldn’t Ignore This Stupidity.

Go ahead and check this out on Bloomberg, but the key parts will be shown below.

A permanent extension of Bush-era tax cuts would provide a temporary boost to the U.S. economy and then become a drag on growth by pushing up interest rates, the head of the nonpartisan Congressional Budget Office said.

Douglas Elmendorf said extending all of the breaks due to expire at year’s end would increase demand in the next few years by putting more money in consumers’ pockets.

He says that like it’s a bad thing.

I mean, seriously, hasn’t the main argument been, we need to increase demand? Isn’t that a Good Thing anymore?

There’s more.

Over the long term, he said, the tax cuts would hurt the economy because the government would have to borrow so much money to finance them that it would begin competing with private companies seeking loans. That, in turn, would drive up interest rates, Elmendorf said.

“The problem is that if those tax cuts are not accompanied by other changes in the government budget and are simply funded through borrowing,” the borrowing “crowds out other private investment in productive capital — in the sorts of equipment, the computers, the machinery, the buildings — that are the source of long-term economy growth,” Elmendorf told the Senate Budget Committee today.

“That connection is less visible, and I think thus less apparent in most people’s intuition, but it is no less important for being not-so-visible,” he said.

I see that he is trying to be cute, to offer up what is essentially a supply-side idea that the real source of long-term economic growth is private investment in productive capital (the “supply” part).

Note that those who are concerned about the government crowding out private borrowing say that it’s already happening, but at any rate, this seems to me to be a disingenuous argument. Totally aside from that…

It’s Just Stupid.

I mean, seriously? Raising demand is bad? News flash: if the economy improves due to raised demand, we won’t have to worry as much about borrowing! For that matter, a country on the upswing has people rushing to throw money at it since they know they’ll recoup the investment.

Totally aside from that… this is the same logic with the $30 billion loan support program for small businesses. By and large, small businesses are NOT borrowing, because businesses borrow to EXPAND. When your production is already under capacity due to a lack of customers and orders – that is, due to a lack of DEMAND – there is no point in borrowing more money.

Let the big, bad corporations and the Mom and Pop businesses worry about how to borrow money from the private sector after the economy is back on track and their profits – and the lure of more profits – provide a genuine factual basis for borrowing and expansion.

One More Thing.

Incidentally, I realize the CBO has priced the expiration of the tax cuts for “the wealthy” (and small businesses with gross over 250k yearly – my best assessment of news reports is that there is simply no reliable statistical information publicly available to say how many businesses this includes) into its budget projections. Congress and the White House have similarly factored it in, deciding that the government has a right to that money and speaking of how the nation cannot afford to give a tax cut over and above… the raised level of taxes that will soon arrive as a result of inaction.

They have priced it in, but ordinary families have not. In fact, ordinary people are aghast at the lack of an extension for even the middle class, in addition to a reversal of relief from the Alternative Minimum Tax (AMT) and other “trap” provisions in the tax code that snare the middle class.

In other words, we are not discussing the cost of a “tax cut.” We are discussing the cost of not going through with a heavy tax increase, of which one component is raising the base income tax on the wealthy. (The AMT will surely squeeze a lot more than a simple base rise would.)

In other words, we are discussing raising taxes in a recession, and being proud of it.

Look, I thought this thought but, seeing someone else write it – not to engage in partisan politics, I won’t link, but… the idea is, Democrats are now willing to forgo job creation and economic revival. I’m stopping short of impugning their reasons. The fact is awesome enough in its raw stupidity that it requires no application of malice.

Supply Without Demand Is Ruin

Incidentally, to the extent supply-siders would actually support the idea that demand is irrelevant because supply creates it, that is a stupid and ruinous idea.

Broadly speaking, I’m not quick to support simply throwing money at people, but I’d support throwing money at people a lot faster than spending it in spectacularly wasteful ways that don’t give people the visceral feeling of a free lunch to encourage spending. That’s not really the point here.

The fact you have a factory means nothing if it is idle because you have no customers.

Therefore, a tax increase to support the government’s bloated finances just so that it does not “compete with private business” in borrowing years down the road is openly sacrificing the present for the future.

Look… keep your mind in the here and now, young Padawan. Do not be mindful of the future at the expense of the present.

The present is bad. To admit that not raising taxes would be beneficial in the short term is to make a mockery of the criticism of the long-term “problems.”

Without demand, none of us can do business, period. Without increased demand, few of us can do good business.

Let’s recognize that fact and drain the ideology from the issue. If we want prosperity, it must begin with allowing the economy to heal.

This won’t do it. This is actually choosing to continue the pain in order to create a politically appealing public lashing of the “wealthy” without the slightest regard for the consequences.

I still despise partisan politics in general, but my goodness, I never thought that a party going to the polls would actually choose to shun economic improvement because it doesn’t fit a redistribution agenda.

Pastor Jones Made Superstar By Gen. Petraeus

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Setting The Record Straight

In four days, the fact that Pastor Jones’ Koran book burning event was made a sensation in America has been erased from the collective memory of the news media.

Four days.

Actually, I was getting the sense of this back on Thursday, so that would make it three, but that’s nitpicking.

Somehow we have entered a period of navel-gazing in which we express shock – shock!! – that the media picked up this story, as if General Petraeus had never said anything. Thus is he held blameless and the mainstream media is held responsible for having made a sensation out of Pastor Jones, an extremist Christian with a tiny congregation who demanded too much wool from his flock and was thus chased out of Germany a while back.

This blame is thoroughly misplaced.

Yes, the book burning was news in the Middle East, and had been since a condemnation by a major Islamic university in Cairo, said by some to be the closest thing they have to a Vatican for Islam (sui generis). That’s not the point.

Petraeus made it news in the United States.

And why shouldn’t he have? Here you had a serving general, in uniform, the anointed head of U.S. forces in Afghanistan, essentially our Proconsul for the Asian theater, arguing that this book burning was a national security threat aimed at the men and women in uniform of the armed forces of the United States of America.

And you’re trying to tell me that it’s not news?

What is this nonsense?

Now, I’m not a fan of what Gen. Petraeus did. At all. Distasteful as this might be, it is a sacred right of Americans to perform actions of religion and politics that are distasteful to others. No faith has a right to have its holy books preserved against all harm under the law, as Sharia law demands. That is not the U.S. Constitution that Gen. Petraeus is sworn to uphold. His job is to defend the right of Americans to practice any religion, or none, not to pontificate on the wisdom of doing so, and certainly not characterizing the practice of freedom of religion and freedom of speech as having shades of sedition, treason or the act of an enemy combatant.

That’s when the media ran with it, demanding, and receiving, piles of condemnations from the Secretary of State, the President of the United States (echoing Petraeus’ words initially, then expanding to argue that burning holy books is un-American and contrary to the principles upon which America was founded, which is a bad joke considering what the Vatican thought of the heathen protestants of the Americas, and vice versa), and a whole legion of other figures lining up. We had the ambassador of Pakistan demanding Glenn Beck condemn it (though Beck already had). Even Sarah Palin asked that the pastor stand down, as if this was a military nation-at-war issue.

So now we have a bunch of hand-wringers moaning over how the terrible mainstream media made a sensation out of Pastor Jones. In the process, in the vast majority of cases, Gen. Petraeus’ unwise media intervention has simply vanished into the ether, after three to four days only.

Combine this with Fox News’ refusal to cover the book burning (if it happens) and the AP’s promise of preemptive self-censorship (no images of the burning, no audio), and a crazy MSNBC segment where Pastor Jones was cut off from a live feed without being able to say a word, leaving the other side of the debate with a nice speech and the host saying they hope the Pastor reflects on these words and “we don’t need to hear any more,” and well…

Just which rights and freedoms are we defending in Afghanistan, again?

Seems to me we’re throwing them away so fast, no one will ever need to succeed in snatching them from our grasp.

P.S. The book burning is stupid, stupid, stupid… but in America, unlike Canada and many other countries, the man has a right to do it. Perhaps not much longer, the way all this is going…

Prosperity As A Broader Goal

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Wealth is held by individuals, but prosperity is a high level of wealth across society at large.

Prosperity is not, and cannot, be equal or utopian. It need not be in the other direction, but absolute equality in wealth isn’t likely to work out.

Identifying prosperity as a strategic goal leads to several corollaries:

  • Freedom allows the enjoyment of wealth large and small.
  • So far as possible, freedom should be maximized.
  • So far as possible, the creation of wealth should be encouraged.
  • Redistribution of wealth is not a priority.
  • Equalization of society is not a priority.
  • Every effort should be made to encourage bottom-up prosperity.

Now, about that last point.

Bottom-Up Prosperity

Simply put, people should be able to make a profit with the least means possible. Barriers to entry into small business should be low. Government regulation should be the minimum possible. Taxation should be limited as far as possible.

It’s not a matter of handouts or redistribution. It’s a matter of empowering people to make money themselves.

This leads to:

  • Pride in one’s work
  • Higher quality of effort
  • Greater creativity

These are the things that add value, not only to products, but to society itself.

Personal wealth is obviously a goal for people in business, but insofar as the broader world can be influenced by us, it is mutually beneficial for prosperity to be a goal for society.

Prosperity is something that should be beyond reproach, but sadly, this is not so. It is something that should recognize that both supply and demand, both labor and capital, play crucial roles in creating prosperity, and both must exist for prosperity to exist, but sadly, this is discarded in favor of political jockeying on a wide scale.

To me, it’s rather simple. It got simple when I studied the issue and discovered it to be so.

Prosperity: The Most Benefit For Most People

Making prosperity a goal is to hold the general interest, the societal interest, above any particular section thereof for the purposes of creating big-picture, wide-ranging policy.

Being simple does not make it easy. In fact, I find it hard to believe much of anyone will agree with what I have written. It is a hard lesson for some. But, I see no point in not writing what I have come to believe over years of studying these issues.