Taxpayers are ultimately on the hook for the federal debt, regardless of financial finagling. And yet Galbraith acts as if adding trillions of dollars to the federal debt carries no strings at all. FULL ARTICLE by Robert P. Murphy
Source link: http://archive.mises.org/13450/nonsense-on-the-deficit-question/
Nonsense on the Deficit Question
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There is a fallacy in regard to the long term government bonds and their prices.
These bonds are always referred as being a signal regarding long term interest rate but that is not true.
That is because all these bonds have second hand markets. If these bonds had be held till maturity and if nobody could sell them in the second hand market, then the long term expectations would be reflected in the interest rates of these bonds.
Interest rates of the bonds, thus the prices of them, respond to the supply and demand laws like everything else. If there is no or little demand for a given supply of 10 year bonds, rates tend to go higher, or there is a failed auction. But currently these auctions, where rates like 4 percent arise, are actually not auctions of credit with a 10 year term. People buy these papers because they know they can unload them anytime they want. Maybe they would take losses along the way, but they know they will never have to hold them till maturity.
So the interest rates of the long term bonds are very closely linked to the short term bonds where the real situation is reflected on the rates.
And one more thing.
When things start to get worse, first the second hand markets of these long term bonds, will start to dry up and only then the long term rates will start to sky rocket.
These markets will dry up, because slowly the time structure of the whole US debt will slowly shift to the short term bonds. Every auction, the weight of the long term bonds relative to the overall treasury debt will diminish and the second hand market for 30 year, 10 year and later 5 and 2 year bonds will get smaller and smaller.
And then we will see the divergence of the short term and long term yields.
Kerem, a couple of things. First, if things start looking shaky, the second hand market on 20-year, 4% bonds isn’t going to be very attractive. I don’t think the purchasers are looking at that as being their back door out. My feeling is that they seriously think over the next 20 years our government is going to continue to be viable and crisis-free, the dollar strong and inflation well under control. Their yield is not healthy enough for them to want to ever sell these notes at a steep discount.
The second thing is this: you say “If there is no or little demand for a given supply of 10 year bonds, rates tend to go higher, or there is a failed auction.”
Not the way I understand it. Whenever demand at a Treasury auction looks weak, the Fed always pops up to buy the rest of the issue, keeping interest rates low.
It’s a good thing, too. Otherwise the first time investors started to balk, our interest payment on the national debt would skyrocket to become our most expensive payment. Right now it’s in number 4 position, after Medicare, Social Security and war. And we’d like to keep it that way.
And not being glib either, but–
Galbraith: [One theory is] that the market isn’t rational. And if the market isn’t rational, there’s no point in designing policy to accommodate the markets…”
If he stopped there, I might be in this guy’s camp. Actually if he stopped at the word “policy”, I’d definitely be there.
How to make a libertarian argument:
If the markets are rational, they don’t need to be driven from any outside source as they already make the correct decisions.
If the markets are irrational, we cannot drive them as irrational markets indicate irrational people, and since irrational people are all that’s available to come up with the rules, it’s best we not have central rules or policy decisions as we now make everyone follow the exact same path to failure.
At best, we shouldn’t have debt or economic control of any sort because the market is already rational and and any efforts to the contrary only impede the market. At worst, government debts and economic controls only sets up the inevitable failure to happen all at the same time, instead of staggered around. In both cases, all government action is bad.
The same argument applies to any government at all. Government is needed, it is argued, because people are incapable of running their own lives. But government is made up of people. So we are incapable of running our own lives but somehow capable of running the lives of others? Incredible.
Us plebes are incapable of running our own lives. We need the overlords to take care of us.
This is pure fantasy based on fallacy. Just because bond prices are not as high as the “should” be well we can do anything we want and not affect anybody else negatively. The worst critic of this is history itself as it is littered with empires all of which crushed themselves with inflation. The interesting part is that the empires in the distant past prior to 1870 knew their spending and inflation did damage to the economy at large while the more current ones have mutated the science of economics to say this is not a bad thing but an overall positive.
Being the largest economy in the world with the most weapons while having lots of friends who want to keep it that way has it’s advantages.
Only for a certain period of time…..
James Galbraith, I have only this to say to you.
Sorry I can’t add anything else useful. I’m still reeling from reading Galbraith’s answers.
Wow… my jaw needs to be re-attached after it just fell on the floor. Virtually all of Galbraith’s comments flirt with insanity. No words really… especially the Paris comment.
Here’s a clip of Peter Schiff destroying Galbraith:
http://www.youtube.com/watch?v=fZrWoZiB9HY&feature=player_embedded
Thanks for the clip, Andy.
Did you see this one:
http://www.youtube.com/watch?v=Z8XVvS91CtI
My very favorite line from the aristocrat:
“banks don’t need money in order to lend”
It could be defended in its context, but still funny.
to mpolzkill,
on a different tangent, i liked your video “soviet subversion of the free world press”.
schiff’s line “the markets are irrational” was a lousy way to explain bubble-behaviour. he trapped himself, notwithstanding the truth of his message.
Don’t they realize that when bonds are cashed in, the money has to come from the printing press or from taxpayers – both ways that make us worse off? The disturbing logic above would almost have a shred of truth if politicians didn’t accelerate their spending habits. And, there is no bond emergency fund anywhere, so what do we do when China wants their money some day?
“so what do we do when China wants their money some day”
Why, print it naturally. Isn’t the dollar simply the biggest ponzi scheme of all time?
I think an equally interesting question is what happens when China decides to stop LENDING us anymore money.
The worst thing that could happen is China actually doing something with that money than let it pile up. Imagine the day China comes to America and actually demands we sell them stuff. That day would be horrible. No more cheap imports, we’d have to work our behinds off and get nothing in return but sending goods and services overseas. We’d have plenty of work, but nothing to show for it.
I’m puzzled by the notion that you can’t have private savings without government deficits. Can one of our resident Keynesians explain that to me? Are you saying that if I save my money and there’s no deficit, the money disappears?
I’m not sure if the idea is strictly Keynesian. I’ve seen it mentioned far more often by proponents of Modern Monetary Theory. I am not entirely sure if this is their reasoning, but this is one plausible explanation that I see. We are currently in a liquidity trap, where there high demand for money both by savers and lenders, meaning that this represents some form of disequilibrium between savings and investment. This should result in monetary deflation, as money previously in circulation is now taken out and hoarded.
Government deficit spending is usually financed by selling bonds, or offering debt. Generally speaking, during the liquidity trap money is more desirable than bonds, because the low low-interest rate offered on the bonds do not cover the risk of holding them (risk augmented by the uncertainty caused by the business cycle). Government debt, on the other hand, is generally considered to be riskless, because the government can simply monetize the debt in order to repay it.
As such, deficit spending can be considered a method by which to restore equilibrium between savings and investment. Of course, the problem (as inferred by Robert Murphy), is that government spending does not necessarily mean that whatever the government spends the money on will be put towards wealth creation. So, this really represents the depletion of savings, as people’s savings are used towards unproductive ends. The result is some price inflation and the depletion of capital.
Now, a comment on the article: it should be considered that in net terms, an increase in federal deficit spending has been met by a decrease in state-level expenditure.
Where exactly is this money hoarded? Under the bed? In safety deposit boxes?
If it’s put into any type of savings or money market account, is this considered hoarded?
Now gold coins, that I can see under the bed. But do people really hoard dollars?
Eric,
I think hoarding should not be interpreted in the literal sense. In other words, people usually don’t stash dollar bills under their mattress. I think that this is just a method of illustrating it. Hoarding is a broad term that to me represents the concept of disequilibrium between savings and investment caused by an increase in entrepreneurial uncertainty. Cyclical fluctuations usually cause an increase in demand for money, both by wage-earners and capitalists. This means that while individuals will usually save more, preferring to hold money rather than spend it on present goods, this savings does not usually manifest itself as investment, because investors perceive no benefits which may override the costs.
“Oh, what sad times are these when passing economists can say ‘Pah’ to mounting deficits. There is a pestilence upon this land. Nothing is sacred. Even those who arrange and design shrubberies are under considerable economic stress at this period in history.”
Two thumbs up.
Interest rates are low because of the crisis in Europe and a flight to a safe “haven”, the dollar appreciated in value as well. This is merely a temporary blip, we are made to appear well off simply by virtue of the fact that Europe is in such desperate straits. If their measures bear fruit the dollar should weaken once more and rates will climb, this is already happening now but further progress is contingent on discipline prevailing abroad.
Is it true that we have so much debt now that interest rates will go only so high as to avoid default on the debt servicing? If so, then how can anyone advocate piling on more debt? Won’t we get to a point where all interest rates will be essentially zero?
Michael confirmed my thoughts above. Michael’s got my back – watch out!!!!!
I have a problem with statements like this:
“..the basic economic fact is that all government spending diverts real, physical resources out of the private sector and into politically-determined sectors.”
What he’s saying is that the bond market would be more lucrative were it not for government competition. With fewer bonds available for purchase, rates could be kept low (less bidding for funds). Of course, they’re low as can be already. Even with US Treasury competition we’re awash in a sea of money. Lender-savers are all but giving it away for free. Close down the Treasury and give everyone their money back and they wouldn’t know what to do with it.
Look to the evidence: if the private bond market were running short of investors, we’d see it in rising bond rates. And I don’t think we’re seeing that.
The other problem is, a major portion of Treasury issues are purchased by foreign central banks. If they didn’t have the USA available to invest in they’d be more likely to invest their money at home. Probably not on Fortune 500 bond issues. So this is actually a conduit by which overseas money ENTERS America.
Then there’s this:
“If the government borrows money to build a highway, the labor hours, concrete, and other materials used in the project are not available to private entrepreneurs.”
Are you saying we have a shortage of labor hours? That will be news to the twenty million desperate people looking for some kind of work.
Plus, concrete is not something we have only a finite store of. The more demand there is, the more we make. And right now we have a depressed demand in the private construction industry, with building starts at such a low. So government orders actually keep concrete companies from having to shut down plant and fire help. It increases the volume of business being done, as without it there would be LESS production of concrete.
Galbraith makes a lot of sense. Right now most central banks and many private lenders park their cash in low-return T-bills because they think they’re the safest thing around. They’re betting with their little balls of wax that they’ll be safer there than anywhere else.
They’re tying up money for 20 years at only four percent? Maybe they know something you don’t know: that the USG will continue to be solvent and pay its bills into the continuing future. And also, they’re betting that over the next twenty, dollar inflation’s going to be considerably less than four percent.
The market’s not always right. But that’s what they appear to be banking on: no inflation, no defaults and no fiscal crisis. Not for the next 20 years.
Just a few comments – if people don’t know what to do with their money, blame regulation, taxation, and all the other obstacles that have enslaved us. Plenty of people would start businesses, buy property, etc., if not for the nightmare world we have allowed to be forced on them. Look at all the people who try now. The problem isn’t with people. And, the problem isn’t with a labor shortage, it’s that we are creating jobs by draining the private sector – the very place where the money comes from to pay for the concrete, etc. You can’t continue to increase the burden on the money suppliers and expect this grand empire of ours to survive. Sure, 20 years, we will still be around… What about later?
“Plenty of people would start businesses, buy property, etc., if not for the nightmare world we have allowed to be forced on them.”
Dave, I don’t think that reflects real-world conditions. First, let’s take those twenty million among us who are now desperately seeking work. The reason they don’t all start businesses is their shortage of capital. They’re either already broke or they’re trying to delay going broke. The most fortunate among them are paying down debt and trying to budget to meet living expenses.
They can’t borrow capital to start new businesses because the private capital markets aren’t lending to them.
Now let’s go to the fortunate class: those with enough money to be able to live from the labors of their investments. That crowd just lost $38 trillion in investor value– an amount I would consider a whole lot of lost value. And my point is, all those people who shared in the loss put up a heap of cash in order just to buy $38 trillion in value.
Obviously, they didn’t know what to do with their money. They misspent it, on crazy derivative schemes they failed to understand, on the futures of the futures market, on hedges against every possible outcome.. they were too smart by half, and outsmarted themselves instead of the markets. No meaningful or productive work was done by any of that money.
Don’t blame the government. It doesn’t tell people what to invest in. Blame the fact that so much of the money that remained in private hands was foolishly invested, and has been wasted. At least the money being spent on federal highway projects (for example) has resulted in many temporary jobs, much business for paving suppliers and contractors, and a highway system that will be usable for another decade before it needs another major repairs project.
Everyone who buys goods that have been trucked from their point of origin to the store you shop in benefits. We benefit from low prices. And much of the money that’s been spent renewing our roads has been in the form of fuel taxes. I think it’s been a better deal for America than the recent fad in purchasing great quantities of no-doc subprime mortgages… which came about from investors exercising their free choice. All that money went to the same place your gambling losses in Vegas went.
My opinion.
“Don’t blame the government. It doesn’t tell people what to invest in.”
It doesn’t have to tell them when it already confiscates their money, or forces the taxpayers to finance social engineering (see Fannie, Freddie).
Re: Michael,
Not all of those 20 million can pour concrete.
Broken Window Fallacy.
You still don’t understand. Bidding up prices of anything, through money that was printed or stolen from productive people, makes any recovery more difficult, because businesses will find the factors of production more EXPENSIVE than they needed to be. If may be good (in the VERY short term) for the cement manufacturers to see more business from the government for these bridge-to-nowhere projects, but those businesses who counted on cheaper materials will find themselves having to postpone growth.
Yeah, you’re right – people are stupid, our overlords are, however, sage and wise. Why complicate matters, right?
Talk about a fallacy! Mex, you really didn’t think this one through:
“You still don’t understand. Bidding up prices of anything, through money that was printed or stolen from productive people, makes any recovery more difficult, because businesses will find the factors of production more EXPENSIVE than they needed to be.”
When the mortgage mess tumbled around our ears, concrete companies stalled from lack of demand. Business was way down, as you can easily track in a metric like housing starts. So they had to mothball capacity and lay off help.
That’s precisely the time it would be useful to start a major highway renewal project. We needed to renew those highways anyway, but were only putting the task off from cost. And if we’d started the current project at the top of the real estate development market, we’d have had to compete for concrete, making it scarce and either bidding up price or hitting the ceiling of potential production. But that’s not how it happened.
Instead the government waited until demand was weak, and then provided enough of a demand push to induce those concrete providers to open back up for business. This was a very well designed stimulus, and is achieving its purpose in every way.
You really wouldn’t have wanted to use those highways much longer if their managers had decided to no longer keep them up.
How does Michael know which highways need it? Well, after the fact, the ones that see growth along them are the ones that needed it.
First, let’s assume for sake of argument that roads can only be built by the government. (I don’t agree with that, necessarily, but let’s say that.)
“So they [concrete companies] had to mothball capacity and lay off help. That’s precisely the time it would be useful to start a major highway renewal project.”
No. The time at which it would be useful to start a major higway renewal project is when the highways really need a major renewal, not when some politician’s pet industry asks for “stimulus”. If a major renewal is really called for, then fine. If not, then all you’re doing is creating makework, and using resources on projects that don’t really need to be done. Malinvestment of resources is not the answer.
Also, major projects take money, obviously. And that money comes from taxes, which come from the incomes of citizens. Assuming that a major renewal is not needed, and assuming that the money needed to do it is just lying around, the best thing to do with that money is to refund it to the taxpayers, so they can spend it on what is really needed, and stimulate the economy by stimulating demand for things that people really value. Assuming that the money isn’t lying around, a recession is the worst possible time to raise taxes to generate money needed to fund the project.
In short, the fact that some concrete company had to mothball some capacity has absolutely no bearing on when it is the right time to start a highway renewal project. The condition of the road, and the demand of “customers” (voters) for better roads are the only considerations that should be taken into account.
But until you get off your idea that constant full employment is the ideal, presumably because you feel compassion for the unemployed, you will never be able to understand this. You still start out with the wishful assumption that constant full employment can be had without negatively affecting the economy in some way, because you want that to be true. Then you work from there. Economics is a matter for the head, not the heart. You have to learn to dampen the twanging of your heartstrings before you will ever be able to have a correct understanding of how economies function.
Me: “So they [concrete companies] had to mothball capacity and lay off help. That’s precisely the time it would be useful to start a major highway renewal project.”
Russ: “No. The time at which it would be useful to start a major higway renewal project is when the highways really need a major renewal, not when some politician’s pet industry asks for “stimulus”. If a major renewal is really called for, then fine. If not, then all you’re doing is creating makework, and using resources on projects that don’t really need to be done. Malinvestment of resources is not the answer.”
Russ, I’m really not trying to be contentious. I agree totally. And I know highways are a major avenue for the pork to flow. But let me ask you this:
The state of our highways varies greatly around the country. I do a lot of driving, in a lot of states. And in some of them the roads are in atrocious shape. Most recently I was in Pennsylvania, driving I-81 up through Harrisburg and Scranton-Wilkes-Barre. And every few miles I’d get stopped behind another flag man. The federal money was a-gushing up there.
But it was all being well spent, so far as I could see. These were heavily used interstates and urban arteries being repaired. The sections that hadn’t yet been resurfaced were in terrible shape. The time was right.
Meanwhile across the border in New York State, there were no resurfacing projects. The roads were already in halfway decent repair.
So here’s my question: in your area, have you seen evidence that these highway repair funds are being misspent? I haven’t. In fact around my part of the country, they can’t come fast enough.
“So here’s my question: in your area, have you seen evidence that these highway repair funds are being misspent?”
Absolutely. Don’t get me wrong. I don’t like driving on crap roads. But the answer isn’t to keep “fixing” (i.e. patching) the same roads every year. That causes killer traffic congestion. (A couple years ago, I had to drive somewhere here in the Detroit metro area, about an hour away under normal circumstances. It took me 3 hours to get there, because every freeway I could have possibly used to get there was shut down for construction. If you look on a map of the area, that’s 94, 96, 296 and 75, all shut down at the same time!) What I would prefer is roads that are built correctly, so that water does not freeze underneath them in the winter and buckle them so they need to be patched again every summer. But doing the job correctly would not provide constant employment (minus winter vacations) for the road crews.
Again, total agreement. DOT heads are notorious for buddying up with paving contractors. What we need is better watchdogs, from outside the department.
DC city streets are notorious for falling apart every December. The reason is they’re not built to withstand freezing, wet conditions. A consultant from New Jersey once showed up and shook his head in disbelief.
“They’re using no. 2 asphalt to patch the roads with! Don’t they know it can’t be used in this zone? You need no. 4 asphalt to keep the patches in place when it freezes.”
Which I’m sure appalled the front-end alignment shops. They’ve been selling wheel alignments and tires for years. To improve the grade of asphalt we use would be to impose undue hardship on the repair industry. (I think I hear Fred Bastiat laughing.)
“You have to learn to dampen the twanging of your heartstrings”
Russ is exactly right. Maybe, Michael, you can understand if you look at it from the outside. Take Russ. He knows that a bureaucracy can’t efficiently do much of anything, that when one takes over something as important as the medical industry sure disaster awaits us. But when his emotions take over, say his irrational or misplaced fear and hatred of Muslims, then he is down for a massive tax-funded super-secret spying apparatus in the hands of these very same anacountable, bumbling illiterates.
I was just reading how Newt’s possibly errecting a new home for you away from all these mean anarchists, Russ:
http://original.antiwar.com/vlahos/2010/08/02/newt-gingrich/
*sigh* You just couldn’t resist cross-threading to get in more jabs at me, could you, Matt?
The difference between Michael’s position and mine, of course, is that we know that the private sector can provide medical care. It has in the past, and done so quite well. We don’t know that it can provide a workable system of military-scale defence, a legal system, etc. Anarcho-capitalists want it to be able to, and so assume that it can. Then they stitch together all sorts of free-market arguments to support their position, blithely ignoring the real possibility that a strong free market is dependent on an infrastructure of law and order that cannot be supplied by the free market itself. In other words, it is possible that an anarchistic free market cannot lift itself up by its bootstraps. And in fact, we’ve never seen this in real life in any place with a serious market economy. So, I would say that the ancaps are more guilty of wishful thinking than I am.
Perfectly on your topic about emotion and interventionism, and what I can’t resist is disabusing Michael of his ideas that we are extreme rightists. It is wonderful that there should be a rightist here to make it more clear. Once again, get over yourself, and do please give us another frightening rant about around a fifth of the world’s population.
I *know* about the over 100,000,000 people killed by their own governments in the 20th Century.
And again, your strawmen are laughable and your advanced age and ignorance of libertarian literature makes your possible education a formidable task. I definitely wouldn’t try it here, other than to say that you don’t know any such things regarding your claims on what is possible and what is not.
“Once again, get over yourself…”
I’m not the one who has appointed himself mises.org’s ideological watchdog.
“…your advanced age and ignorance of libertarian literature…”
43 is not an advanced age. I believe SK is older. And what really cheeses you off is not my ignorance of “libertarian literature” (read: ancap literature), but my knowledge of it. The zealous believer in the One True Religion hates nothing more than an apostate.
19 is an advanced ideological age.
For your own good, look into the concept of “projection” (or don’t). You have appointed yourself all manner of things here, you say so all the time. You are the one who always has the angry outbursts when leftists are informed that you are a rightist.
Get over yourself, yet again. I don’t hate you, you are a sorry specimen. I feel great pity for all as well-trained by the State as you. Don’t know what I can do for you though.
What a silly narrative you’ve invented. You pathetically keep calling yourself an apostate; don’t think so, you’d have to have been an anarchist first and I’ve seen you demonstrate your knowledge of that subject time and again. I guess you could be a lying propagandist deliberately strawmanning. No, you’re too emotional to be that. At any rate, I believe that conversion for adults is a one-in-a-million prospect. Really, not child psychology here, please stay and represent all the fears of rightism. You stay too please, Michael, and do the same for leftism.
“You are the one who always has the angry outbursts when leftists are informed that you are a rightist.”
That would be because that’s a lie.
“You pathetically keep calling yourself an apostate; don’t think so, you’d have to have been an anarchist first and I’ve seen you demonstrate your knowledge of that subject time and again.”
I’ve told you before, I was once an anarchist. The only reason you think I couldn’t possibly have been one is because you can’t fathom the thought that somebody could, having once basked in the light of the One True Religion, remove himself again to the “darkness”. And the only reason you think I have no knowledge of ancap is because you think that if I “truly” understood it, I would still be an ancap. You can’t conceive that a reasonable person could understand the arguments for ancap, and not find them convincing.
Funny, I didn’t have one when Michael called me an extreme rightist.
Yeah, I’ll take you down to the mall right now and show you 15 anarchists in black with mohawks or rings in their noses.
It is perfectly understandable, the state of darkness you are in.
“Funny, I didn’t have one when Michael called me an extreme rightist.”
So? Everyone has to have the same exact reaction to being lied about that you do?
“Yeah, I’ll take you down to the mall right now and show you 15 anarchists in black with mohawks or rings in their noses.”
Yeah, and they probably throw bricks into Starbucks windows, too. Not exactly the sort of anarchist we are talking about.
“It is perfectly understandable, the state of darkness you are in.”
Sing on, Brother Matthew, sing on!
As anyone reading this little subthread can easily see, all you’ve done is insult me, question my intelligence, and resort to the most tired cliches to psycho-analyze me. You’re obviously not stupid enough to think that this could convince me of the correctness of your position. So what purpose could these posts of yours possibly have? Trying to taunt me into going away, like the French knight in Monty Python’s Holy Grail? Preaching to the choir? Or just having fun by spitting on the infidel?
Russ, I would agree. I also know the private sector is perfectly capable of providing medical care. And very good care. Just not affordable care.
The top two quintiles should encounter few problems in being able to afford good medical coverage. And the middle quintile should also have no problem. That is, unless they’re over 45 or have any sort of pre-existing condition. So if they’re in a group that actually might be likely to USE it, their coverage will be unaffordable.
The bottom two-fifths? Forget it. It’s beyond reach.
That’s why my vote would have gone to a public option. That is, a plan set up independently of the federal budget in much the same way as Social Security, so it could be revenue-neutral. It could offer an alternative to those private health plans we depend on so badly, and be run on a nonprofit basis.
I was thinking that private insurors should have no problem with fresh competition. Let the market decide! Everyone could choose the best coverage at the least rate, right?
Wrong. It was the insurance lobby that killed that plan. Now we have no alternative but to pay for plans (if we can) that are highly lucrative for their principals.
As for the balance of your comment, I’m in total agreement.
You started with the psychoanalysis! I just showed how the “analysis” applies better to you: projection.
You make sweeping condemnations of all Muslims in your defense of the most horrifying moves by your government to date = darkness
I’ll try real hard to find some 43 year-old-ex-anarchists who voted for McCain and W. twice.
Read my lips: please, please stay. I have never had any hope of convincing you of anything, you are long gone, since grade school evidently (you know, where you were pledging your allegiance to a piece of cloth). I’m making a clear demarcation between us and rightists so that we are no longer associated by anyone with you and W and McCain and Rand and Hitler. What on earth is wrong with you? Projection I know, I had no other diagnoses.
“You started with the psychoanalysis!”
Fair enough. But if I’m not mistaken, Michael has said explicity that getting everybody employed is the only thing that really matters. And by assuming that the reason he espouses his position is because he cares about people, I’m not exactly insulting him.
“I just showed how the “analysis” applies better to you…”
No, you haven’t. And you’re trying to distort my arguments into claims that I want all Muslims killed, and let Allah sort them out. Not even close to what I have said.
“I’ll try real hard to find some 43 year-old-ex-anarchists who voted for McCain and W. twice.”
I did vote for McCain, it’s true. But I really voted against Obama more than I voted for McCain; and I had to hold my nose when I did that. Before that, I hadn’t voted since the second Reagan election, when I was 19 and had never heard of libertarianism.
“I’m making a clear demarcation between us and rightists…”
More like you’re trying to make a clear distinction between the People’s Front of Judea and the Judean People’s Front, to borrow again from Monty Python. (Do I have to pay them for that?)
michael wrote:
“I also know the private sector is perfectly capable of providing medical care. And very good care. Just not affordable care.”
Yeah, well, what if good health care happens to be expensive to provide (which it is, even under a true free market that doesn’t artificially jack up prices with regulations and such)? What gives people the right to good health care, if they can’t afford it? What gives people the right to use other peoples’ hard-earned money to pay for health care, if they can’t use it themselves?
“And the middle quintile should also have no problem. That is, unless they’re over 45 or have any sort of pre-existing condition. So if they’re in a group that actually might be likely to USE it, their coverage will be unaffordable.”
Pre-existing conditions were never a problem when people bought their own medical insurance, instead of having it provided by an employer (as a tax dodge), so that they couldn’t maintain the same coverage across employers. Again, an example of government interference into the market having unintended effects.
“I was thinking that private insurors should have no problem with fresh competition. Let the market decide! Everyone could choose the best coverage at the least rate, right?”
Would this system be something that we citizens can opt out of? And would this system be completely isolated from the tax revenue stream, so that people who opt out will truly not have to pay for it? If so, then while I am still not crazy about it, I wouldn’t care so much. Of course, if it were possible to make a government-run system that met these requirements, and was still financially sustainable, I can’t see why a non-profit private organization couldn’t do the same. So I would still prefer that it not be run by the government.
“Now we have no alternative but to pay for plans (if we can) that are highly lucrative for their principals.”
I would rather pay into a plan that actually provides me with good healthcare, even if it is highly lucrative to someone else, than pay into a plan that renders it impossible for me to get truly good healthcare at any price, even though it is “non-profit”. Same with food. I don’t care so much if the butcher and the baker profit off of me when I buy their bread and meat, so long as I can get bread and meat, which, judging from the Soviet Union, I wouldn’t be able to get if the government took over that market segment.
Russ wrote:
“What gives people the right to use other peoples’ hard-earned money to pay for health care, if they can’t use it themselves?”
F@#$. I meant to write:
What gives people the right to use other peoples’ hard-earned money to pay for health care, if they can’t afford it themselves?
Russ, you ask the $64 question:
“..what if good health care happens to be expensive to provide (which it is, even under a true free market that doesn’t artificially jack up prices with regulations and such)? What gives people the right to good health care, if they can’t afford it? What gives people the right to use other peoples’ hard-earned money to pay for health care, if they can’t use it themselves?”
I can see you’re not a right-to-lifer.
Let them all die, if they can’t afford to survive. Treat ‘em rough. Otherwise they’ll just be sucking up to the federal teat, and wanting to use my hard-earned money to prolong their miserable existences. Cut them all off the lifeline.
That kind of Social Darwinism hasn’t been very popular since the 1920s. It’s heartwarming to see it coming back into vogue.
I was just pulling your leg, Russ. I think your plan is very commendable. Cutting the bottom half of society out of affordable health care should focus their minds admirably.
You make other excellent points:
“Pre-existing conditions were never a problem when people bought their own medical insurance, instead of having it provided by an employer (as a tax dodge), so that they couldn’t maintain the same coverage across employers. Again, an example of government interference into the market having unintended effects.”
It would surprise you to find that many mainstream and liberal economists are thinking the same thought. Robert Reich, for instance, sees the linking of employment and healthcare as both artificial and market-distorting.
Here’s your response to a public option:
“Would this system be something that we citizens can opt out of? And would this system be completely isolated from the tax revenue stream, so that people who opt out will truly not have to pay for it? If so, then while I am still not crazy about it, I wouldn’t care so much.”
Yes, that’s what I wrote. To answer valid objections from the Right, any public option plan put out by the government would have to be self-funding and totally independent from the federal operating budget, the General Fund. We have a model, of course: it should be run the way the Social Security Trust Fund is run. Except, of course, that with this one I’d want to see the reserve fund kept idle in a locked account. Not just given up to the feds so they could mask the true size of the deficit.
“Of course, if it were possible to make a government-run system that met these requirements, and was still financially sustainable, I can’t see why a non-profit private organization couldn’t do the same. So I would still prefer that it not be run by the government.”
Correct me if I’m wrong, Russ. Doesn’t Blue Cross Blue Shield already do that? In one state after another, over the past 20 years, they’ve forced the camel’s nose under the tent, by influencing legislation that permits them to carry very large reserves in the place of profits, and to make expenditures outside their original mission, which once was to provide health care benefits to subscribers only?
In my state BCBS gobbled up the competition until they dominated (60% of all plan holders in the state). Then with most of the competition gone, they started doing things like purchasing the naming rights to sports stadiums, and finding a myriad other ways to fiddle funds out of the reserves. You wouldn’t get that in a federally managed plan. It would be known by its real name: graft and corruption.
Now we get to the core of your complaint:
“I would rather pay into a plan that actually provides me with good healthcare, even if it is highly lucrative to someone else, than pay into a plan that renders it impossible for me to get truly good healthcare at any price, even though it is “non-profit”. Same with food. I don’t care so much if the butcher and the baker profit off of me when I buy their bread and meat, so long as I can get bread and meat, which, judging from the Soviet Union, I wouldn’t be able to get if the government took over that market segment.”
As this argument appeals to the emotions, it can’t really be addressed. To me, it seems apparent that not every government program must by some invisible law be as unworkable as the old-style, command-driven Soviet economy. I’ve seen that economy close up, during the Brezhnev years when it was at its unworkable worst. Apartment blocks went up and were finished except for the roof, which came last. After wintering over without roofs, brand new buildings were total wrecks.
I think government can be run better than that. Only not with half the elected officials wanting to make it better while the other half want to tear it down. It’s a political problem, not a structural one.
Instead, consider what we would have if we just did away with Medicare-Medicaid and let everyone go to a private plan of their choice. The for-profit response has been to do little about containing costs, but just raising premiums to cover payouts. That’s why HC costs have been rising at triple to sextuple the background rate of price inflation. It’s an unmanaged sector of the economy, despite what you and others may think.
What you’d end up with is insurors achieving their maximum price point at rates only a half or a third of the country could afford. The cheaper plans would offer insufficient returns on investment, and would be scrapped. The unwashed masses would get their HC scraps at walk-in clinics at K-Mart, from physicians’ assistants and pharmacists. Surgery would be beyond their meager reach.
Not the same as harrassing Kinsella and anarchists, is it Russ? This is a glimpse into the real world of policy battling. Tens of millions of nearly helpless charity cases who believe they are entitled to your money, emoting jackasses like Michael coming out of the wordwork, vote buying scum Democrats multiplying like rabbits. Keep selling ‘em all that “minarchy”, it’s good for a grim laugh.
Tiresome:
“I’m not the one who has appointed himself mises.org’s ideological watchdog.”
Paraphrasing years of your proclamations: “I’m here to keep Kinsella honest”, “I’m here to counter the silly dreams of anarchists”, “we will never be accepted because of this this and this, so I’m here to moderate…yada, yada, yada.”
About fifty claims that I was angry.
You are the one who is angry.
About fifty claims that I believe this is some sort of club
You believe this is a club. To the extent that that might be true, you have a far more understandable place here than I do. The general purpose of the place I believe is to influence our masters’ public policy. I certainly don’t care about that and know that it can only be a direct influence there if people like you take the place over (well they’d have to be more industrious than you, maybe even write articles. Now *that’s* a dig). I’m here to try to hone my skills for the time your side’s and Michael’s side’s death grip brings what is inevitable.
You have clearly stated that attacks on this country by Muslims do not come from grievances but from the nature of their religion. Quite racist, really. There have been many successful and unsuccessful terror campaigns by people of all many religions and of no religion at all.
I could have sworn you said you voted for W, I could be wrong I guess, sorry if I was. Sorry I can’t really believe a believer in the political means. If you did, it would be sweet if I could find where you said that.
And Reagan. We have Michael here, the anti-war crusader that just keep getting fooled by the Dems, and we also have the free-marketer who voted for Reagan and for McCain to save him from Obama. Yes, its pity I feel.
“Paraphrasing years of your proclamations: “I’m here to keep Kinsella honest”, “I’m here to counter the silly dreams of anarchists”, “we will never be accepted because of this this and this, so I’m here to moderate…yada, yada, yada.””
Yeah, I like to gadfly Kinsella, I’ll admit. It’s not his positions themselves, so much. It’s just that he’s such an intellectual bully, I can’t help myself. And yeah, I try to be someone who represents libertarianism in such a way that the noobs and lurkers don’t think that all libertarians are completely ideologized whackjobs. But I don’t normally go into all-out flame mode on people, just because I don’t like being associated with their positions. You know, like some people do.
“You have clearly stated that attacks on this country by Muslims do not come from grievances but from the nature of their religion.”
I do think that the teachings of Islam, and especially the spin put on them by radical imams, have a lot to do with the problem. Hell, they say they do what they do because Allah commands it. I do believe the attacks are not motivated solely by legitmate grievances, or even mainly by legitmate grievances. I also do not buy into the leftie position that every evil in the world today is the fault of the evil American government. That does not mean I believe the US government does no wrong. It also does not mean I think we should kill them all and let Allah sort them out.
“Quite racist, really.”
No. It’s quite “culturist”, I’ll admit, but that’s another thing entirely. I’ll freely admit that I find some cultures inferior to others. I wasn’t aware that I had to be a member of the multi-culti cult to be a libertarian.
“There have been many successful and unsuccessful terror campaigns by people of all many religions and of no religion at all.”
Yeah. So? That doesn’t change the fact that the great majority of terrorist acts in the world today are committed by extremist Muslims.
“…(well they’d have to be more industrious than you, maybe even write articles. Now *that’s* a dig).”
I must have missed the articles that you’ve written. Or do you hold me to a higher standard than yourself? Hmmmm……
“We have Michael here, the anti-war crusader that just keep getting fooled by the Dems, and we also have the free-marketer who voted for Reagan and for McCain to save him from Obama.”
Yeah, Dukakis would have been so much better than Reagan, and Obama is a dream come true.
“Yes, its pity I feel.”
I’m overwhelmed by your con
descensioncern.No other general group has got more juicy oil fields all around them.
I have never whined about this site.You are constantly aggrieved.
Last word for you, I already did what I said I wanted to do sometime ago.
[I just thought of one quibble I have with the site: the theorizing on the future which provides much grist for people like you. Probably can't be helped though]
Whether you are a conscious rightie or a dupe makes no difference, the two basic types of political man are marked by their uncontrollable fears.
“I have never whined about this site.”
No, you just flame anyone who isn’t your idea of what a libertarian should be.
“Whether you are a conscious rightie or a dupe makes no difference, the two basic types of political man are marked by their uncontrollable fears.”
More condescending drivel. What a surprise.
Oh I lied, I’m not angry (haha), but I can’t let you lie about me unchallenged. I could go find a hundred examples of times I didn’t flame all kinds of people with strange ideas about how and why the State must help them. You on the other hand are an active and dishonest enemy of anarchists.
I don’t see how one can’t look down on children who will never grow up. You are a child of the State and you are bound and determined to never grow up.
“You have to learn to dampen the twanging of your heartstrings”
(mpolzkill): “Russ is exactly right. Maybe, Michael, you can understand if you look at it from the outside. Take Russ. He knows that a bureaucracy can’t efficiently do much of anything, that when one takes over something as important as the medical industry sure disaster awaits us.”
I can only approve the new level to which you’ve ratcheted down your delivery. It’s downright civil!
The decision as to whether or not to buy into a public option would have been ours. It would have been forced on no one. And if it were self-funded, the way Social Security is, you wouldn’t have had to pay ten cents for my coverage. Then the market could have decided whether they thought it was a good buy.
And the federal government, not making a dime either way, would never have cared. It would have been a optional service they provided.
But that choice was taken away from us, by the totalitarian despots of the private insurance industry. THEY decide. We have to take what they force on us. Because it was the insurance lobby that killed Public Option. Am I right in this?
“But when his emotions take over, say his irrational or misplaced fear and hatred of Muslims, then he is down for a massive tax-funded super-secret spying apparatus in the hands of these very same anacountable, bumbling illiterates.”
Who are you responding to? Who’s the person here with such a misplaced fear and hatred of Muslims? And who supports either the focus or the immense costs of the federal security apparatus? I know that’s not me you’re referring to.
“I can only approve the new level to which you’ve ratcheted down your delivery. It’s downright civil”
As I was telling Russ, when I’m convinced someone is not a pro but instead a dupe, a natural pity overcomes me.
We don’t want any public option, you senile old fart. You are so confused and confusing that almost no one can begin with you, and those who do soon think better of it.
Read more closely, Michael, follow the conversations. I think it’s clear I was speaking of Russ.
So much for “downright civil!”
Those who advocate theft like you and Michael should be grateful for the amount of civility you receive.
“The decision as to whether or not to buy into a public option would have been ours. It would have been forced on no one. And if it were self-funded, the way Social Security is, you wouldn’t have had to pay ten cents for my coverage. Then the market could have decided whether they thought it was a good buy.”
Social Security does not allow people to opt out. Public schooling does not allow people to opt out (you have to pay for the public option, through taxes, whether you use the option or not). Neither will a public option for healthcare allow people to opt out. If you want private health care, you will have to pay twice, once for the public “option” that you don’t use, and again for the private option that actually works. This double-dipping will effectively chase all but the richest out of being able to afford private health insurance. This is not an option.
Re: Michael,
My heart bleeds for them. AND?
What’s with this “we” business, Kimosabe? Who do you think pays for those “projects” – Santa? The Highway Fairy?
Michael, don’t you think other economic actors were waiting for the very same thing, yet they were preempted by a government that decided to make these “projects”?
I don’t even understand how any of this contradicts what I argue: That the government not only bids up factors of production, it does it with money that came from the same producers, so these have a) less money to invest and b) find the factors (much to ther dismay) still not bottoming out.
I would instead take a plane and keep my hard-earned cash instead of seeing it wasted on a government “project”, thank you very much. Authoritarians pressume to think for others, as if their thoughts were divinely-inspired.
“Who do you think pays for those “projects” – Santa? The Highway Fairy?”
I pay for those projects, Mex. I’m a highway user. Also I like being able to buy stuff in stores.
With highways we can get any fruit or vegetable any time of year, and any factory-made product on earth, trucked out of Bentonville, Arkansas. That is, except fresh rhubarb. Without them we’d have the same selection we get at the local farmer’s market. Corn and tomatos in season and potatos about any time of year. We’d all be eating a lot of potatos.
And we’d have to hitch up the mules just to get there. Federal funds have been well spent putting America on wheels.
“Michael, don’t you think other economic actors were waiting for the very same thing, yet they were preempted by a government that decided to make these “projects”?”
No.
They had the perfect chance, back in 1925. The economy had gotten back on track, after a few very bad years, and everyone in the country was buying cars. They were widely seen both as being the key to prosperity and the way our future transportation needs would be met. A perfect moment for private roads corporations to spring into existence.
It didn’t happen. The numbers didn’t work out. And by 1934 the entire country had been paved, except for the local and farm roads, by federal, state and county authorities. (I have the 1934 road atlas here on my desk.)
“I would instead take a plane and keep my hard-earned cash instead of seeing it wasted on a government “project”, thank you very much.”
I really don’t want any of your “hard-earned” cash. But also, I don’t want you hitching a free ride on my country. It’s an expensive one to maintain. So if you don’t want to contribute along with everyone else, maybe you really should consider your other options.
Re: Michael,
Sure, Michael. When the government takes it from my paycheck by bayonet point, I also console myself saying “I paid for it.”
Actually, rail is much more efficient than trucking for that. But, alas, people that like to “pay” for things by being forced to pay for them were content to subsidize trucking, instead of letting the market use rail more.
Darn! We’re too late, then!
“You still don’t understand. Bidding up prices of anything, through money that was printed or stolen from productive people, makes any recovery more difficult, because businesses will find the factors of production more EXPENSIVE than they needed to be.”
You’re right, I don’t understand. Developers weren’t buying much of that overpriced concrete anyway, were they? And by overpriced, I think you mean just not deeply discounted, at fire sale prices. Government highway purchases have probably kept concrete prices (and profits) at normal levels. The bastards!
It’s a weak argument.
“Government highway purchases have probably kept concrete prices (and profits) at normal levels.”
There is no such thing as a “normal” price level, in the sense of a natural price. There is only a price that the industry has become accustomed to. Just because an industry has become accustomed to sell their product at a certain price, that doesn’t mean they have a right to do so.
“Developers weren’t buying much of that overpriced concrete anyway, were they?”
That’s not the point.
The point is:
1) When the government forces people to pay for concrete for something they don’t value, they forego being able to buy something else with that money that they would value more. You keep overlooking opportunity costs. And without opportunity costs, you will continue to misunderstand the broken window fallacy.
2) When people are forced to pay for concrete they don’t want, the few who do want it will have to pay more for it. The extra money that those people spend on concrete could also have been used to buy something else they would have valued more. Again, opportunity costs.
Re: Michael,
I work for a cement manufacturing company – and I tell you, they were buying the cement at higher prices, because of the boom.
Indeed, the bastards, because they prop up prices using MY MONEY! I don’t care if the company I work for goes under because of slow sales, those are the breaks. But I am NOT happy about subsidizing it with MY MONEY.
He says stuff like this becuase most of the people that take him seriously haven’t got a clue about what he is talking about, but they do respect the letters that follow his name and where he went to school. Let’s be realistic also, it isn’t as though the bar is set all that high on the left if one wants to get away with spouting economic nonsense. I think most lefties are truly mystified by business and economics.
Bob,
Great work on this. We’d make an excellent tag-team– you with the logic and reason, me with the egregious ad hominem calling into question of the man’s intelligence and motives: http://conant.economicpolicyjournal.com/2010/06/is-utas-james-galbraith-true-economist.html
Where is the money going to come from to pay all this back? Oh, I forgot – high taxes, extended unemployment benefits, and another stimulus package, and possibly a cap and trade energy tax are going to produce the biggest economic boom we have ever seen. We are going to be rolling in it!
And when those fail to bring home the bacon they can always nationalize the oil industry under the cover of some kind of “crisis” caused by “foreign” oil companies. This strategy has worked out great for Mexican[ politician]s.
“Where is the money going to come from to pay all this back?”
Actually it’s coming from low-cost bond issues. Major investors from around the world are so anxious to share in the dollar’s fortunes that they’re actually snatching up our 20-year bonds at four percent.
Obviously none of the heavy hitters are worried about a fiscal default. Nor are they worrying that the dollar may deflate. Long term, they’re all betting that the dollar will remain healthy and strong, compared to any competing investment out there. They think the amount of debt the USA is carrying is within fiscally responsible limits.
This is not my opinion. It’s their opinion.
the chinese are pursuing their own mercantilist policies. keep the yuan low so as to favour the party-affiliated exporters, and beggar the average citizen. even the chinese students laughed at geithner when he visited and touted the dollar’s integrity. where’s your sense of humour?
Stagflation will be better than a dollar collapse. The pain will force the election of better politicians. Investments in real estate, gold and businesses will soften the blow. Savers in CDs and treasuries are going to lose their wealth. If you look at a 60 yr chart of interest rates, you can imagine that falling rates will start climbing soon. The dollar is going to lose another 75% of it’s value in the next ten years. Retired boomers are go to pay for government overspending with an inflation tax. What they did not pay in taxes while working they will pay in high prices while retired.
The pain will force the election of better politicians.
That’s right — when our guy claims the Ring for his own, why then all will be well!
Hasn’t “better politicians” been tried before, like every election ever held?
I am not holding my breath.
Mr. Galbraith refuses to see the simple truths that are right in front of him. Instead, he elaborately rationalizes poor policy with a lot of hocus pocus. It’s almost as if in all of his talk of % rates and GDP that he forgets that outrageous spending and huge deficits are generally bad ideas.
Every time I hear Galbraith talk all I can think of is that line from Ghostbusters –
“Personally, I liked the university. They gave us money and facilities, we didn’t have to produce anything! You’ve never been out of college! You don’t know what it’s like out there! I’ve *worked* in the private sector. They expect *results*.” – Dr. Ray Stantz (Dan Akroyd)
“Nor is public debt a burden on future generations. It does not have to be re-paid, and in practice it will never be repaid. Personal debts are generally settled during the lifetime of the debtor or at death, because one person cannot easily encumber another. But public debt does not ever have to be repaid. Governments do not die – except in war or revolution, and when that happens, their debts are generally moot anyway.”
gailbraith, the nation, march 4, 2010. the last line says it all.
Dr. Murphy,
Here you have another candidate for a true beliver in Keynesianism… and he is also a Nobel!
http://www.project-syndicate.org/commentary/stiglitz127/English
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