TCS Daily

Time for a Choice — Not an Echo

By Larry Kudlow - December 30, 2008 12:00 AM

The GOP must bolster its argument for spending discipline with a loud case for tax cuts.

Republican Senate leader Mitch McConnell is absolutely right to warn against Obama's gigantic stimulus-spending package. McConnell says it "will be the largest spending bill in the history of our country at a time when our national debt is already the largest in history." As a result, he says the bill "will require tough scrutiny and oversight."

According to McConnell, scrutiny should include this simple test: "Will the yet unwritten, reportedly trillion-dollar spending bill really create jobs and grow the economy — or will it simply create more government spending, more bureaucrats, and deeper deficits?"

The Republican leader is drawing a clear line in the sand. Okay, good. But the GOP has got to do more. It must start talking about tax cuts to grow the economy. And it must get back to the supply-side by talking about lower marginal tax rates on individuals, businesses, and investors.

We don't need bailout nation. Nor do we need the government picking winners and losers in a massive, Keynesian, new-New Deal spending extravaganza. And it's not Obama's middle-class tax cut that's going to get us out of this economic jam. At best his vision is incomplete. But at worst his aversion to successful earners and investors is a real obstacle to full economic recovery.Social historian and early supply-side activist Irving Kristol taught us three decades ago that the top earners are the economic activists. They're the ones with the highest propensity to consume and invest. They're the ones who buy the yachts, which are built by blue-collar workers. And they're the ones who run the small businesses and provide the capital for the new entrepreneurial start-ups that are the lifeblood of the economy. It is they who energize free-market capitalism.

If we had an economy without rich people we wouldn't have much of an economy. That's why lower tax rates to reward the economic activists — the most prominent capitalists — are so essential.

In fact, the GOP has a great opportunity to challenge Obama's Keynesian pump-priming by insisting there be a major tax-cut component in any new fiscal package. Republicans shouldn't merely push for somewhat less government spending. They have to make a bold case that tax rates matter for economic growth and job creation. They must insist that any recovery package includes this key element. Shift the debate. Say clearly that a reenergized economy cannot occur without lower marginal tax rates.

In particular, the GOP position should include lower tax rates on large and small businesses. Right now the top federal tax rate for C-corps is 35 percent. Small businesses, which pay the individual rate, also are taxed at 35 percent. These rates should be 20 percent for both C-corps and S-corps (including LLCs). This would make a huge difference. It would be a boon for our global competitiveness, since companies in the U.S. (as well as Japan) are taxed way above the rates of other advanced countries. It also would attract job-creating investment flows to the U.S. at a time when capital is on strike in our financial markets and economy. And while businesses collect corporate taxes, it's really consumers who pay the final cost.

Republicans also could promote a middle-class tax cut that would reduce the 28 percent and 25 percent brackets down to 15 percent. And of course, the GOP should work hard to maintain the Bush tax cuts on capital gains, dividends, inheritance, and top individual rates.

Senior Obama advisor David Axelrod recently told the Sunday talk-show hosts that the Bush tax-cut package of 2003 is "something we plainly can't afford moving forward." Well, in static terms, the sum-total of the 2003 tax cuts comes to somewhere between $25 billion and $40 billion. Compare that to a trillion-dollar spending plan.

In fact, lower capital-gains tax rates will raise revenues, since this is the single most sensitive tax on the Laffer curve. Indeed, many economists — including Alan Reynolds at the Cato Institute — argue that the growth and simplification effects of reducing the corporate tax rate would be revenue positive.

But the congressional Republicans have to step up to the plate right now. Me-too-ism on spending is a big mistake in both political and economic terms. Instead, the GOP should argue that fiscal policy needs a choice — not an echo (to paraphrase the late conservative stalwart Barry Goldwater).

The whole debate in Washington is heavily skewed toward government spending on infrastructure. It's all spending and virtually no tax cuts. For a more balanced and effective recovery policy, the GOP has to bolster its argument for spending discipline with a loud case for tax cuts.

It truly is time for a choice, not an echo.



The few, the proud
The US Marines are selective, have high standards and have little trouble recruiting. Navy SEALS are even more selective and rigorous yet have no shortage of applicants.
Those big tent Republicans who believe they must follow the path of the Democrats and cater to every special interest group will kill the Republican party. As long as the deck is stack in favor of two parties, conservatives need to retake control of the Republican party.
If Republicans want to win, again, they need to take principled stands and work to implement those principles. When those principles are life, prosperity and security for all, the sheeple will follow. Especially when those applied principles are proven successful, again.

In praise of rich people
"Irving Kristol taught us three decades ago that the top earners are the economic activists. They're the ones with the highest propensity to consume and invest. They're the ones who buy the yachts, which are built by blue-collar workers. And they're the ones who run the small businesses and provide the capital for the new entrepreneurial start-ups that are the lifeblood of the economy. It is they who energize free-market capitalism."

So how much of the economy is dependent on selling tiny numbers of yachts to this demographic sliver? And how much is dependent on selling cars and trucks to those blue collar workers?

What this is is a presc ription for shrinking the economy.. to the point where this tiny number of participants each enjoy a greater share of our collective wealth than they would enjoy if it were more evenly spread, between all the participants in the economy.

As a sidelight on the yacht market, my son bought a small yacht a couple of years ago, when times were good. But now he's working so hard he never gets a chance to take it out. He's had it up for sale for the last six months. No takers.

The yacht market's as dead as the car and truck market. I think we need to find a better model than just allowing rampant deflation to continue. If we do that, the only survivors will be those with lots of cash. Everyone else will be sleeping in the park.

Wrigley wealth?
Wrigley became wealthy by selling chewing gum to the masses with a minor markup.
Chewing gum is not rocket science and easy to make.

Yachts, high end motor cars, communication satellites, jumbo jets, plasma HDTVs, etc. are sold in very small quantities with a very high percentage of the price covering non-recurring engineering and development costs.

Let's thank those rich people for paying to push the technology envelope which benefits us all.

Once again, 'collective wealth'. What a socialist!

Who "pushes the technology envelope"?
"Let's thank those rich people for paying to push the technology envelope which benefits us all."

There are the occasional, much bally-hooed prizes someone offers for putting a satellite in orbit. But these haven't advanced technology one inch. What HAS pushed the envelope technology-wise is massive government expenditures in R&D.. projects like NASA, that put us on the moon and brought us Tang. Or NIH, which has provided goverment-funded research into pharmaceuticals that private firms can then make their millions off for free. Or the military, which has brought us countless innovations.. just one of which is the internet as we know it.

Innovation today largely occurs in universities and private labs that receive generous amounts of government funding. They're all on contract, and the taxpayers pay the bills. A comparatively tiny share of R&D happens because rich people endow some lab and ask it to fulfill a mission.

It's the same with other countries. And in fact you can rate every advanced nation by the amount of government funding they devote to research.. the more they put in, the more they get out.

rich people
When you make comments like; 'collective wealth', and 'spread between all participants', do you still expect us to belive you're not a marxist.
People are not a herd of sheep, but individuals, and individuals have wealth, it's not collective. And when you advocate for distributing it out, it's a marxist notion whether you deny it or not.

government funding

How much government funding did guys like Einstein get? And he's not an exception but there were many of the greatest discoveries made in all sorts of fields without and corporate welfare.

How to 'spread the wealth'
I'm not sure what you are advocating so I'll present some options.

1. Because the rich buy more stuff, and more expensive stuff, such wealth is spread about to the workers creating demand for luxury goods for the less well to do creating more jobs and more products for the rich and workers to buy.

2. The rich shouldn't buy more expensive stuff and should voluntarily restrain themselves from buying yachts and mansions so the workers, like your son, won't be tempted to buy something he doesn't need.

3. The rich should be taxed so they can't afford to buy yachts (Kennedy did this a while back) putting yacht makers out of business. Then taxes collected from the rich can be used to support the out of work yacht makers.

Deflation is bad? Gas,food, rents, all the basic costs of living are down. Why is that bad for workers?

Video games and cell phones are pushing technology
Government developed system are obsolete by the time they are completed. The USA won't have a vehicle to get into space after the shuttle is retired.

Market driven R&D has created Viagra (which generates money for other research), LEDs, faster cheaper optics for cell phone cameras.

Because of the inertia of government programs, NASA and the military are using technology developed by gamers and cell phone makers for use in their systems.

I want to use our yacht.
Since the yacht your son bought is part of our collective wealth, I want to use it this summer.

What goes up must come down
The only reason economies "must" collapse is that people create bubbles.. in a speculative frenzy to create instant wealth for themselves. So they create exchanges that don't just become bourses, for the trading of shares. They become casimos, rigged to give the illusion that everyone at the table can win, every time.

It can't be done. A quick examination of the math will tell you that an economy can expand as long as something new is added from outside.. more buyers, more raw materials, more sales to stimulate more products.. but that it can't just expand indefinitely because we think we're the best damn way of life in the best damn country that ever existed. It doesn't work like that.

Here's how it works with shares in a manufacturing company.. just as one example. Let's say you have your operation running lean and efficiently, and you make a ten percent profit one year. Great. Everyone buys your shares, because you're good at what you do.

If you don't mess things up, you'll make ten percent the next year, and the year after that. But that's no good for your shareholders. Their stock didn't go up one whit. So they're unhappy.

Along comes the Music Man.. a magical CEO, who promises to increase share price. And he has a few tricks up his sleeve to do just that. So you lure him with millions of dollars and hire him on.

What he does is very simple: he hollows out the company by shorting on expenses. He fires people you really need.. and tells the survivors they'll have to do two jobs now for the pay of one. And share price goes up.. this'll work, for a little while.

Then he hires on a team of accountants who are talented at skewing the appearance of profitability by posting gains and deferring expenses. This works for year two, and the company posts another increase in profitability.

But on year three, the shareholders want the stock to continue going up. So he has to go a little bit further out on that limb. Eventually, with the company starved for operating funds due to the accumulation of bad decisions, the branch will break. And the price will collapse.

We go through this cycle again and again and again, with no one ever learning any lesson from any of these repeated experiences. You'd think we'd have learned from the Great Depression of 1907, for instance, not to have been so gullible in the late 1920s that we did much the same thing over again.

Economists who don't want to admit this to you will point to the wealth of details that make each time a little buit different from the last time. But they're just throwing sand in your eyes. It's greed, giving rise to unrealizable expectations, that blows the bubble up until it pops, and you're broke again.

That's what happens when markets aren't controlled. And that's why we need better regulation than we've seen so far.

BTW, what do I do with my spare cash? I put a lot of it into dividend-producing stocks. Share price doesn't go up much, indicating the company is stodgy, conservative and stable. But it does provide me with a steady income for my retirement.

Share price may go down some, in a recession like this one. But not as much as most other companies. And most importantly, so far my dividends continue coming in all fat and healthy. I stick with those outfits that don't succumb to inflated expectations of vast wealth.

More sterling insights from the pen of RB
Hi again, Joan. I hope I've gotten you laughing.

"A few months ago, you were pushing for them to keep printing money. Do you understand that that causes inflation? Do you really believe that we can do that forever? We can't, Roy."

The trouble with most of the thinking you'll see around here is that they'll take a perfectly good general principle, such as you've stated here, and try to apply it universally by not looking at the results.

As it happens, since this recession has hit we're finding some of the most important prices going down, not up. So if you're looking at the theory, prices must be going up. But if you look in the store ads, or fill up your gas tank, or go to buy a house, you find that in reality they're coming down.


It's the same thing that happened in the Great Depression. The bottom fell out of consumer demand (now, incidentally, at an all time low since they've been measuring it). And vendors have the option of either going out of business or slashing prices to the bone, just to be selling something.

So now is EXACTLY the wrong time to be stinting on federal spending. And in fact you find that what made the Great Depression so much deeper and longer was that initially, Herb Hoover tried to balance the budget. Wrong move. And Roosevelt knew to try to prime the pump. But he didn't inject nearly as much money as the economy neded to right itself. Only the massive, unprecedented deficit spending to pay for World War Two could set the economy right again.

You see, when there isn't enough money out there on the street, and lenders are pulling in their tentacles to await better times, people have no option but to spend less. So factories selling them stuff go out of business, laying off more people, who then have to spend less. It's a feedback mechanism.

With less money being spent there's less being earned, obviously. So people pay A LOT less taxes. And the federal and state governments watch as their bank balances get further and further behind.

Invent a huge pile of money and you can throw it all out in the street, for people to pick up and spend. This puts everyone back to work making stuff to sell to one another. And the jobs come back. And the federal government gains enough revenue (income) to both award critically needed money to the states, AND, once the economy's been kick started, to start paying down all that debt.

Here comes the important part. Now we're in a position to balance the books, because we're healthy again. What we must do now is learn DISCIPLINE. We need to return tobudget surpluses for the next many years.. to pay off in the good times the debts we accrued in the bad times.

We've never done that second part, historically. And when we run up debts to promote a boom, but then choose to become fabulously wealthy instead of paying off our obligations in the good times.. what happens?

Right. Just as theory would predict, inflation ensues. And then the bubble pops, from overspeculation.

Don't listen to people who would tell you any differently.

It must be OCD
Whatever that is.

Prices.. rising or falling?
I'm looking over your comments again.. and in many ways we're both saying the same thing. One thing differs, I think, in that I'm saying the higher the highs, the lower the lows have to go. And I would very strongly prefer an economy that was managed to minimize both excessive highs and the hangovers that result from them.

But yes, by all means your husband should hop into the conversation. He would be a breath if fresh air, after some of the dingbats we've been dealing with.

About the cost of your bananas, food costs are famously "sticky". That means they're quick to go up and slow to come back down, relative to most other prices.

Grains are already starting to drop back down though (a boon to starving third worlders who got priced out of the market this past year). But look for them to go back up if Tom Vilsack has his way. He's Obama's disappointment of a pick for Ag Secretary, and a big backer of ethanol. If we continue with the ethanol we'll have more CO2 emissions, a bigger Dead Zone in the Gulf and higher corn prices.. which Vilsack will love, being an Iowan.

One encouraging thing about the current collapse is that people are paying down their consumer debt now, reversing a strong trend throughout the 90s and oughts.

There is one bone I should still pick with you though:

"If your son can't sell his yacht, it is most likely because of the price of gas. But everyone knows that the demand for oil was increasing significantly because developing countries like China and India were using more oil. It wasn't some sinister plot. It was supply and demand."

I incline toward the "sinister plot" theory.. along with many observers better placed than you or I. There are, of course, a lot of VERY bright people who track oil supply, demand and price. And they find an anomaly here. Consumption has indeed fallen off in emerging nations (India and China) since gas prices spiked to $4 US. But now the bottom has fallen out of the market, and twice OPEC has reduced their member quotas to push price back up. And both times they have failed.

So the balance between supply and demand alone would seem to indicate that prices should be rising.. but in fact they continue to drop. Gas was $1.56-1.58 last week here. And yesterday I filled up at $1.46. So what happened?

The current wisdom is that the oil speculators, who last year were pushing futures up in a speculative frenzy, have now been scared off. Oil futures have been hovering near zero the last few months. So without the speculators, what we're seeing is the normal market price oil should be right now.

It kind of makes you wish someone would pass some laws to limit speculation, doesn't it? Of course, that would be awfully anti-capitalist. :)

And oh god yes, we are having a great new year so far!

Sure can, come on down..
Tommy says it'll cost you though.

Thing is, he's already paid for the public portion (that's the part you own) in the form of luxury sales tax. It went toward some street lights and curbs. And you get to use them already, free of charge.

But now you want to use HIS part of the boat. And he's got some docking and storage fees he'd like you to share.

Try Vinod Khosla instead
Einstein was making his discoveries almost a century ago.. and in an area governments didn't even know they should be taking an interest in. It was just the threshold of the modern world. Things have changed quite a lot since 1909.

A much better example would have been if you'd mentioned Vinod Khosla.

There's a lot of exciting work getting backed by forward looking, savvy venture capitalists like Khosla.. especially in bio-engineering and cyber specialties. But if you look at the overall numbers, you'll find dollar for dollar the USG and the other Western governments still lead the basic research field by a wide margin over venture capitalists.

You're certainly right that if the government doesn't press its right to own intellectual property it developed, but just gives it away to firms like Big Pharma, it amounts to corporate welfare. It's income transference on a huge whopping scale.

So when Big Pharma tells you how much they need incentives in the form of humongous prices for their products, they're pulling your leg and getting half their research for free. Check out their profit margins and see for yourself.

'management' attempts create the higher highs and lower lows
It is perfectly understandable that an economy will NOT grow at a continuous rate. No living organism grows that way. My brother grew 6 inches in one year, for example.

Some products are staples and are needed at the rate of population growth. Food and energy, for example. Weather affects the prices and free trade with other regions NOT affected by weather mitigates the effects. Innovation leading to higher productivity affects prices. Innovation leading to more efficient usage of energy affects prices.
New technology creates demand where none existed before. Radio was such as disruptive technology as is cellular telephones and computers. Bubbles can naturally develop in new markets as capital is risked to capture new markets.

Such changes should be welcomed and anticipated instead of feared and ignored.

When government decides to 'tweak' the market, bubbles are greater and their burst is louder.

Competitive markets will always grow at a non-constant rate as new technologies become commodities, profits are accumulated and new venture capital investments launch the next wave of innovation.

The greatest day is when you buy your fist boat.
The next greatest day is when you sell it.

Or so I am told. I never wanted to own a boat.

Research for free
Why not? If the government gives you money why shouldn't you celebrate as AIG execs did?

If there are no strings and no oversight, you should expect abuse.

You want to increase the size and scope of government to control this, I say stop throwing money away.

The lessons of history
"When you make comments like; 'collective wealth', and 'spread between all participants', do you still expect us to belive you're not a marxist."

Okay, but on the other hand I spent my entire working career in the private sector, first working for capitalists and later working as a capitalist myself. And much of my work entailed transferring wealth from one pocket to another between three sets of principals: the tenants, the property owners and the employers. Because each was dependent on the others.

Somehow I had to stand in the middle of all that, taking money from one side and distributing it among the others just to make capitalism work.

Besides, I think Marx is, if anything, even more inappropriate to a solid understanding of today's economic picture than Ludwig von Mises. And that's saying quite a lot!

"People are not a herd of sheep, but individuals, and individuals have wealth, it's not collective."

We DO have a collective wealth. It's the United States of America, with its laws and protections. You refuse to see this, but without our infrastructure we'd just be another Somalia. You'd have your Mercedes all right.. but no gas stations to fill it up for you, and no roads to drive it on.

"And when you advocate for distributing it out, it's a marxist notion whether you deny it or not."

Go back and read about the historic rise of the middle class, in post-reformation Europe. We used to have a feudal system, with the very wealthy above and a huge mass of impoverished peasants below. What happened was that enlightened rulers chose to empower a middle class of people, so they could encourage trade and crafts, and drum up some business.

Everyone reaped the benefits from that decision to spread the wealth wide. Enough of it still comes back into the hands of the richest among us anyway, so they are in no danger of losing their privilege and status. And demonstrably the old nobility are far wealthier now, living in a world of nice products to buy and contented, productive burghers, than they ever would have been in the old days, with huge armies being necessitated by the presence of so many surly peasants in revolt. That paradigm-- the need for armies to crush the peasantry-- kept even the richest rulers poor. Believe me, when the barons owned everything and kept it all to themselves, you couldn't get a 99 cent burger anywhere.

What a boon the liberal arts would have been, in aiding your intellectual development.

If you want to see what the government is willing to pay for check out the list at this site.

There are some who make a living winning proposals and writing reports with little value added.

The growth paradigm
Probably the biggest problem with modern capitalism is the idea that we have to grow forever. It just can't be done. A better approach is to determine our sustainable limits, grow to that point and then level off. If we do that, out great grandchildren have some hope of enjoying the same high level of comfort and plenty that we have now.

Whenever we try to grow too fast, the bubble bursts. Take 2008 for example. The numbers are just in.. seven trillion dollars in air-money have disappeared over the past year. If we hadn't been trying to grow so fast, richer and richer, faster and faster, it wouldn't have happened.

Let's take the human body as an analogy. Say you're six feet tall now, and you set your goal toward being 6 foot four next year. And you stuff yourself with growth hormones and monkey glands to reach your goal.

What happens? You come down with cancer. Your brother had a six inch growth spurt because he hadn't reached his optimum height yet.

The US economy, on the other hand, has.. as far as current technology will allow it. We're using resources like land and fuel at a FAR faster than sustainable rate.

We need to slow down and retool. And meanwhile it would be good to calculate in the number of hungry mouths on earth, to find a way to divert some of the earth's bounty to them. Otherwise you know very well they're going to be a problem. And more and more of our wealth will have to be devoted to taking them out, one by one, with expensive Predator drones.

2. "When government decides to 'tweak' the market, bubbles are greater and their burst is louder."

Unsupported by the evidence. The S&L failure and the current mortgage meltdown are both classic instances of huge collapses brought on by government failure of the will to effectively regulate. The tech bubble was a little different, relying on the stupidly optimistic vision of a gaggle of credulous investors. But the other two came about due to sharpies manipulating the markets while prosecutors slept.

Let's examine those ideas
"If there are no strings and no oversight, you should expect abuse."

You make my point. Strings and oversight are very cost effective. It would be easy enough for the government to just patent their discoveries. Then they could sell them on the market, not just give them away. And we could use the revenue to help pay the bills.

"You want to increase the size and scope of government to control this, I say stop throwing money away."

Any government that stops funding basic research condemns itself to becoming a third rate country. This is very well known.

One of the principle ways in which government has actually grown is the proliferation of weapons research in the defense industries. Nearly all of this amounts to government pork. Only there's so much of it it would be hard to shut down all the hundreds of entrenched weapons plants. Entire counties and even major cities depend on weapons manufacture. We'd have to retool them to make plowshares instead of swords.

Some expenses wiser than others
There are a huge number of people and organizations making a living by writing grants and living off them. Some are worth it, some are not.

I live in a place with many large universities.. so I know a bunch of these people. So?

The idea would be to reduce the number of grants available to those with great merit.. that is, usefulness to the general population. And from the look of your SBIR list, there are a lot of those. AIDS research, for instance, is still uncovering important facts about life years down the road.

If you want to see how huge amounts of government money get wasted, read James Bovard. He's made a career out of exposing dumb expenditures. And he's fun to read.

"determine our sustainable limits, grow to that point and then level off"
What is the limit?

Who decides?

How do you 'level off'?

If you were a 'capitalist', you CREATED wealth.
Capitalists create wealth.

Socialist distribute wealth.

The reason a feudal system creates less wealth is the peasants have no incentive to work for themselves. The Pilgrims discovered this, the hard way.

Even Aristotle understood this over 2000 years ago.

Big Pharma etc
You must be mistaking me for somebody else. I've never defended Big Pharma corporate welfare, or any welfare, or any entitlements at all.
Re pharma in general though, a guy in the industry told me that most advances in chemistry in general, and pharmacology were actually made in germany before it was even a united country, without any handouts.
So under the system I advocate there would be chance of any corporate welfare, thus no lobbyists in DC corrupting the gov.

"enjoy a greater share of our collective wealth"
Why should I have to pay again for collective wealth?

You didn't tell us you had a system
"So under the system I advocate there would be chance of any corporate welfare, thus no lobbyists in DC corrupting the gov."

Please, tell us more...

Planning an economy
"What is the limit? Who decides? How do you 'level off'?"

You're starting from too far back, marjon. I don't think I'll be able to explain to you who it is who do these things, and how they do them.

But imagine a car company. And the directors get together one day and say "Let's make a car!"

And another guy stands up and says "We need to get our engineers to work up some plans."

So everyone else shouts him down, telling him "Who needs plans? It'll run a whole lot better without a cumbersome bunch of plans!"

An economy is somewhat more complicated than a car. Some planning is involved, if we don't just want the wheels to come off as soon as it comes out of the gate.

Here's a review of a whole book on the subject:

"The free market reactionaries promised that some combination of monetarism, supply side economics, balanced budgets, and free trade was the solution to America’s woes. The mantra “free markets” provided an easy antidote to “planning” that was said to constrain recovery and growth. As each conservative policy was tried, however, it resulted in obvious and even spectacular failure. In truth, all economies are always and everywhere planned—for the simple reason that planning is the use of today’s resources to meet tomorrow’s needs, something that all societies must do if they are going to survive—so the only question is who is going to do the planning, and to whom are the benefits going to flow? There are still a few true believers (principled conservatives that Jamie compares to noble savages in the political wilderness), but most conservatives realized that there is no conflict between “big government” and “the market” as they abandoned the myth but usurped the “free market” label. All we are left with is the liberal who embraces the myth out of fear of being exposed as a heretic, a socialist, or a fool. Thus, the liberal pines to “make the market work better”, never challenging the view (abandoned by all but the most foolish conservatives) that government is the problem."

The Government Crystal Ball
.. and in an area governments didn't even know they should be taking an interest in.

And they are better at predicting the future today? You mean like how they predicted the mortgage meltdown (they caused)?

To bad Roy doesn't fear Big Brother's FDA or DOE as much as "Big Pharma" or "Big Oil" or any of the other private sector boogeymen that actually make money performing valuable services. "Big Pharma" gives us the wonder drugs that have allowed us to live longer, more pain free lives than was even conceivable when Einstein was around.

Clearly Orwell had the Roys in mind when he wrote "Animal Farm" and had the animals all regurgitate simple nostrums in a way that would make Pavolv proud.

Raptor Pork
To bad Roy can't have an F-22 show him personally what Pork can do...

Roy's True Color (Red)
Besides, I think Marx is, if anything, even more inappropriate to a solid understanding of today's economic picture than Ludwig von Mises. And that's saying quite a lot!

Well it sure is, given the hundreds of millions that have been conquered, starved, slaughtered, butchered, imprisoned, exiled, "re-educated", tortured, (really tortured, not forced to wear underwear over their head) that have been sacrificed to prove Marxism is the rantings of a misanthrope whose musings were at war with humanity and human nature.

Roy once said he was an "advocate" for low income housing. Now he considers that being a "capitalist".

The interesting thing is no matter how disputed or disproven Roy is, and despite his lack of knowledge (even on nonpolitical matters like financial accounting practices) he persists on posting the same insane & inane rants and chants. (Government Good-Private Sector Bad)

Savage is right. Liberalism (as the term has been co-opted by the idiot troll collectivist-statist left)is a mental disorder. The cognitive impairment of Roy's past drug use seems to be rearing its head again.

Making fiscal economic sense
"Thanks for the presumption of some brainpower. I hope I don't disappoint you."

Are you kidding? After reading most of the people who post here, it's a wonder I still try. And these responses are pretty good.

1)"The Federal Reserve is the cause of the most recent bubbles--not the people. The Fed increases the money supply, and people start to spend. If you subscribe to the notion that inflation follows an increase in the money supply (I do), then it is the Fed's fault."

Very true. But the Fed doesn't just give the money away to mere mortals.. the Fed loans it to the banks. That's a key distinction.

It's not that difficult to become a bank. But you do have to first learn what it is that bankers do. There's no course taught in the schools.. and understandably, bankers themselves hesitate to let the secret out. But once you get certified as a legitimate bank, the Fed will lend you what today is just about free money.. 0.5%.

So then the question becomes, what do the banks do with it? Some put it out on the street, in the form of consumer loans. That's why there's such a proliferation of credit card offers, they're trying to squeeze a little more juice out of the consumer credit market. Same with car loans.

Of course they're doing nothing like that today. First, no one's buying stuff. Our indebtedness is actually starting to come down. Second, the banks have no clear idea of how much of the money THEY have borrowed has gone into bad loans they're still holding. And so, to stave off a possible insolvency (run on their assets) they're borrowing more money and just holding it, to increase their margin of safety.

But you're right, the existence of all that nearly free money has bloated every market.

However, here's the funny thing. The USA still has a virtually limitless line of credit to draw on. And that's that out of ALL the dollars that have ever been created, most of the largest dollar holders are investing in US Treasury notes: bonds, bills, etc. It's their safe port in the storm. And they're doing so (get this!) in spite of the fact that they're earning, as of the last auction, just about ZERO INTEREST.

That's right. They're loaning us all our old dollars back, for free. And they're hoping we do something useful with those dollars, so they continue to be worth something.

So the Plan, according to the pump primers, is to borrow about a trillion of those dollars already in existence, and to put them to work. The work, of course, is the creation of hopefully three million jobs.

Once the money gets put into wages, a quarter of it goes back to the Treasury. 3/4 gets spent immediately, boosting the profit margins of all the stores out there, and all the landowners who own the premises, and all the suppliers who make and ship the goods that get sold in the stores... etc.

And every time one of those dollars changes hands, another 25 cents gets a free return trip to the US Treasury.. where it can be used to pay down the Debt.

THAT, in the opinion of the overwhelming majority of economists, is thought of as "fiscal common sense".


Roy is free to believe in statism, a flat earth, the moon as being an object made of green cheese, UFO's, Big Foot, Nessie or the alchemistic conversion of ordinary chemicals into gold. He's entitled to hold those beliefs, no matter how unsupported by evidence, facts or reason.

You made a good post-don't dilute its weight by begging the pardon of a fool when you dispute his lunacy.

A lie: " but most conservatives realized that there is no conflict between “big government” and “the
Conservatives believe there is significant conflict between big government and FREE markets.

The only government plan that is of benefit to a free market is to enforce contract laws and prosecute theft and fraud.

All other government plans interfere with the plans of entrepreneurs who are deciding how to best meet the needs of their customers so they can make a profit.

You did not answer. Who, What , How
Get down to the details of who, what, how does the government decide what is best for millions of consumers in an economy.

"Centrally planned economies tend to be less efficient than economies in which agents are free to ch

Planned economies moving towards market based systems
"The still chaotic states of the former Soviet Union, a growing China, and the divergent nations of Eastern Europe are striving to radically transform their economies. In their quest to become more integrated with the global economy, they are making historic changes to mover toward market-based, private-enterprise systems.

In this book, Barry P. Bosworth and Gur Ofer provide a balanced assessment of the progress of integration among the formerly centrally planned economies. So far, the results of the reform process range from amazing success in China to economic and political disarray in the states of the former Soviet Union. The authors outline the key issues that any successful reform program must address and the sequence in which these reforms should take place."

Me and my radical hippie politics
Boy, Joanie.. if I didn't know better, I'd think someone had been helping you with your homework. :)

"From 1920 to 1929 the Fed increased the money supply by 60%. Then the Fed tightened up and the stock market tanked. In an effort to stimulate the economy, Hoover began spending money on public projects in a manner the country had never seen before. Roosevelt continued down that path.

"The economy did not recover until FDR was buried, the war was over and Truman reduced Government spending by cutting the federal budget by 2/3. It seems clear to me that the difference is in the amount of Government interference in the free market."

I'm trying to find some data points now, so I can take a closer look at that. So far, all I've found is this:

"Spending by the federal government grew from approximately 3 percent of GDP in 1925 to 15.6 percent in 1950. Following the Depression, World War II abruptly boosted federal spending to approximately 42 percent of GDP, but afterward it dropped and resumed a less volatile trend."

It doesn't look so much like Truman's actions, but the end of WW Two's spending requirement that brought federal expenditures back down. And, if we look at the raw numbers for 1950, take a look at the trend.

Federal spending that year.. presumably after Truman brought spending under control.. was 15.6% of our GNP. Five times what it was during the boom years of the 1920s. So did it bring on a depression five times more severe than the one that ended the Twenties?

Nope. It brought about the most prolonged period of boom times in this country's history. One would have to say that whatever the federal spending range was during the 1950s and 60s was just about right.

And taxes? Funny how the period of this country's highest income taxes on upper incomes coincides with the longest economic expansion we've seen as a nation.

But that's not really my point. My point was that during a contraction, the banks pull in their horns and hunker down. If they've ended up with all the money and want to keep it, they don't lend it out.. as is happening now.

All the little guys whose jobs depend on that money are left high and dry. And if we wait for many years, until there is an unassisted recovery, those banks come to realize that they don't really need any jobs, or little guys. They can do better just passing all that money around to one another.

Which is good for them, bad for us. I guess the question is, whose benefit is the country supposed to be run for? Is it We the People? Our Declaration of Independence seems to say so. Read what it says about a government of the people, by the people and for the people, as well as the part dedicating that government toward the benefit of the common wealth.

Yes, if the government takes no action we can have a jobless recovery, and those people who benefit from preserving the status quo will get to keep all that money.. with no requirement that it be recycled back into the general economy. We'll have a two-tiered system, as we had back in the Middle Ages.

Spread it around, and they can have the opportunity once again to earn it from our labors. Which is the game plan I prefer. It's like someone winning at Monopoly, and refusing to give any of the money back for another round.

Econ 101
And taxes? Funny how the period of this country's highest income taxes on upper incomes coincides with the longest economic expansion we've seen as a nation.

Econ 101: Do not confuse correlation with causation.

Monopoly is a zero sum game. Life isn't.

Cheap shots from the sidelines
Super-- Your taunts and jibes are wounding me to the essence of my being. But if you want to actually prevail in an argument, it will take more than that.

Give us something in equal detail to my argument, convincing us to the contrary. Let's take as our premise that government spending in 1950 was 15.6% of GNP-- yet what followed was not fiscal disaster but 22 more years of unparalleled prosperity.

Make the argument for us that that isn't so. Correlation may not be causation (there are many aspects to an economy, not just the rate of fiscal expenditure).. but if government spending on that level must necessarily lead us toward disaster, it would certainly be a sufficient cause for grave problems to creep in.

And for the 22 years in question, I don't recall such problems as having crept in.

I will happily concede that we have a related problem, a demographic one. As the ratio of employed workers to retirees and health consumers continues to erode, those workers will have more and more difficulty paying their bills through payroll taxes. But that's another problem.

Your ball, sir. Play it.

Big Pharma contributes to national security
CIA agents payoff informants with Viagra.

The limits of abstract economic theory
You know, there's nothing in Marx that stipulates that "hundreds of millions" must be killed. That was something Lenin and Stalin dreamed up. What Marx wrote was a general theory of how economics operated.

And I have the same problem with his mountain of theories and those of Mises and Rothbard. Neither work very well when they come up against the realities of the world economy.

However it would seem that your poster child is Michael Savage. And certainly, compared to him, I would be on the red end of the spectrum.

As for my saying that at one time I worked as "an advocate" for low income housing, this will make the fourth or fifth time I've tried to correct you. The period I was referring to was when I was running my own business.. in the private sector you say I think is bad.

There is no such thing as a housing advocate. Please explain to us how an "advocate" can make money by advocating.

Once something gets lodged in your brain it's stuck there forever.

Play with yourself.

I don't care how you feel. I don't care whether you enjoy being batted around and take it as some twisted affirmation, I just don't. Most of us know you are a brain-dead loser-no different than the people that join cults. Unfortunately disputing idiots can provide them with reinforcement. Life isn't perfect.

You don't like having errors of analysis pointed out-then don't put such easily refuted drivel out there, Uncertified accountant.. what else you have?

I'm in the game- you aren't even the parking lot. Tell us again your accomplishments, education and source of expertise. I'll help you.. reprobate drug user, low income housing advocate..

Using that crystal ball
Good governments always set up their crystal ball to see where they think research should be taking us. Their projections may be on the mark or off the mark.. but they do always project future needs and imagine future technology. If you sit down and think about it, that's the only way we ever get to the future.. from someone imagining it.

Do you think we'd be better off taking government funding out of such research? Keep in mind that it sustains our university system. Without government projects and public research grants, tuition would have to double or triple what it is now.

How about the pharmaceutical industry? Without being handed the fruits of NIH research, a drug that only costs you $3,000 a month would cost you $6,000 a month. And without Medicare, you might even end up paying all of that yourself. Private insurors wouldn't pick up the tab if this was through your misfortune to have a pre-existing condition.

I'm thinking you feel the way you do because this just hasn't happened to you yet.

Also, the FDA is certainly a playtoy of the entire pharm apparatus, as the USDA is a part of giant agribusiness and DOE is a subsidiary of the energy giants. Did you really think otherwise?

Of course in your world this doesn't compute. roy_bean ALWAYS champions government, and NEVER likes big business. So how can he hold such an opinion?

What a sour old man you are
If you're as good as all that ("I'm in the game- you aren't even the parking lot"), I'm sure you'll have no problem at all refuting any of the highly specific points I've made here. Yet you haven't even ventured to try. Why is that? Is it because you really don't have any good way of looking at the issues we've been raising here?

Between the years 1973 and 1999 I've been earning a living in the housing industry. I've bought, sold and managed housing, mostly rentals. I've managed several dozen apartment buildings, many hundreds of single family homes and headed up a crew of about 35 at highest count.

I've evaluated real estate deals and made cash flow projections, for myself as well as for others. I know my way around an I/E sheet. And I have a depth of experience that only comes from having lived through the market cycle more than once.

Everything I've ever told someone else to do, I've done myself. I can repair a roof, lay floors, repair termite damage or direct someone else how to do it. I'm not very good at electrical work. But to this day I do piecework for others in my retirement.. mostly paperwork like filing their taxes and doing their accounts.

Also, a fact that features highly in all my comments here is that at various times I've worked for others, worked for myself and had others work for me. So I've seen the beast from every side. And I understand very well that the engine won't run if everyone doesn't work together in making it run.

So let's hear some background about you.

"I know my way around an I/E sheet. And I have a depth of experience that only comes from having lived through the market cycle more than once."

Do we really have to revisit the fact that you think depreciation is some sort of necromancy? You may be able to read (and no doubt insist on) some simple cash basis statements prepared for a sole proprieter, but that doesn't mean you know squat about "high finance". On anything beyond Chapter 1 of Course 101 (Pick a cource, any course, accounting, finance, economics) you've demonstrated a grossly illiterate and distorted view of the world, fed by leftist paranoia.

"I can repair a roof, lay floors, repair termite damage or direct someone else how to do it. I'm not very good at electrical work."

Yep, when it comes to being Mr. Fixit, you got me beat (assuming this isn't a delusion). This of course does nothing to bolster your resume re: understanding economics.

"But to this day I do piecework for others in my retirement.. mostly paperwork like filing their taxes and doing their accounts."

Oh God help them-if you can assume the mantle of tax expert-your "clients" are surely in need of more help that tax prep. In short you aren't qualified to be doing tax "piece work", so essentially, your exploiting the ignorance of customers for personal gain. WE NEED TO HAVE MORE REGULATION to stop fraudent tax preparers, don't you agree.

Me? BS Economics, MBA Accounting & Finance. Certified Public Accountant, Master Fellow, Life Management Institute, Chartered LIfe Underwriter, Charter Financial Consultant. Employed previously as Financial Systems Analyst, Pension Compliance Specialist, Accountant, Auditor, currently as Cash Accounting Manager....I believe in poker, that's called a royal flush, but I don't play so...

Roy, when you say Marx has something to offer you lose me the same way I didn't botherlistening to "Mrs. X", the former neihbor and German warbride who in an unusually ill thought out moment of candor told my mother "people forgot the good Hitler did". Maybe you can start telling us about the joys of NATIONAL SOCIALISM too, huh?

And you are older than me (I was to young to make a contract in 1973) and as for sour...

Red End or ....
You used to be able to text-search TCS. No longer. If I could, I'd put your post up for all to see.

Nonetheless it was your self-description, you explain it.

Compared to anybody, you are the left end and the hind end.

What's that stuck in your ears?
You seem to be devoting all your air time here to tearing me down. Do you have some positive point to make? Or is there just nothing more to you?

I tell you I think Marx is a dope and beside the point. You disagree with me, and maintain I'm still a Marxist. Who is right?

I tell you there's no such thing as a low-income housing "advocate" and you disagree, telling me I've said I'm one. Who is right?

We are proceeding along your boundaries for the discussion.. and it has become moronic. Why don't we instead try to see whether you can offer analysis on a level with what I've offered? You can't seem to get above the lowest level, character assassination.

Still just about me, eh?
You can't seem to get that burr out from beneath your saddle. Oh well..

As it happens, anyone can be a tax preparer. You don't have to be licensed to file someone else's return or even to represent them at an audit (which I have done, and successfully). All you have to do is to (1) tell them you've never taken any coursework and (2) do the job right. The rule I follow here as in all client requests is if they want me to, I'll do it. And if I can't do it I'll find someone who can for them.

To further add to my bio, none of the work I've done has come from an academic background. You often have the best of me in use of terms, as I've never taken an accounting course. But I do know how to read and write books.

Correction. I did pass the course for my boiler operator's license, sixth class. Otherwise, no academic qualifications. Have fun with it.

2) "In short you aren't qualified to be doing tax "piece work", so essentially, your exploiting the ignorance of customers for personal gain."

Not really. I do favors for clients, charging no fee beyond my normal management fee. And since retiring, I perform such services for free. Tipping, of course, is allowed.

3) If you were too young to enter into a contract in 1973, you're quite a bit younger than I am. At least in years. But in spirit you're very old and stuck in your ways. Normally I'd suspect the kind of brain damage that comes from years of drinking.. but if you tell me you don't, there must be some other precipitating cause for your dementia.

4) In closing, your C.V. does in fact equip you to be a magnificently competent.. accountant. I've mastered quite a few more skills, becoming a generalist in the field of real estate. I'm not an engineer, but I can replace a bearing wall without knocking the house down. And I can write a contract that covers all hazards, or advise an investor as to the viability of the project (s)he's considering. All in all, an interesting life.. assuming, of course, that I don't screw anything up for my client list.

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