No soup for you!
What Made the Next Depression Worse – Mises Institute — A fascinating article written last year.
Now, I’m not predicting another depression any time soon. But I will say that if one comes, all these Bush policies are going to make a depression less easy to recover from. They all work to make the economy less responsive to human ingenuity, harm the manner in which prices convey accurate information to entrepreneurs, and make it more difficult for individuals to put their financial houses back in order.
But just because the depression isn’t here yet, let us not wait to decry all these policies for what they are: violations of free-market ethics and true spirit of American enterprise.
Paul, no need. Everyone knows that already.
Really, Paul – it’s “obvious to the most casual of observers”.
[Damn, now I can’t remember where that quote comes from. Senility is upon me!]
Look at America’s (governmental and personal) debt load and tell me with a strait face that a reckoning is not coming. One day we will wake up and find that our money is worthless.
Wait, it’s a year old…shouldn’t there be a disclaimer on it?
I thought the article was interesting – basically get off the credit machine and cut the subsidies. Blaming Bush though – and you all know how I hate Bush – is a bit over the top. Yeah he spends etc. so has everyone else since FDR.
geez….a depression might mean that people will have to stop paying 250.00 for tennis shoes, 100.00 a month for 300 cable/satillite channels that they don’t watch, 150.00 a month for cellphone bills for their 10 y/o son or daughter, 1100.00 for bikes that they ride for 2 hours a month, 50,000.00 for an SUV that costs 60.00 to fill up with gas, and they would be forced to do horrible things like, cook meals at home, wash and iron their own clothes and cut their own grass, wash their own car and ….oh…I can’t go on, the thought of all that suffering makes me sad.
Here’s one big difference: During the last depression, many people lived on farms or had gardens and had some way to put food on the table, even if it was potato(e)s or turnips. Today, few people grow their own food and many will have no choice but to buy it IF they have the money.
Here’s another: In 1928, people weren’t accustomed to having lots of things and relatively cheap transportation. It will take a while for people to give these up.
Why are we blaming Bush for spending issues? It is Congress that approves spending measures. You want to blame someone, blame your local Representative or Senator.
Great point Thomas!
Blame them both. Bush never vetoed anything.
You want to blame someone, blame your local Representative or Senator.
I think he is laying the blame at Bush’s feet, because Bush hasn’t vetoed any of the spending increases – but I agree that it takes three to tango: House, Senate, and President.
I would like to see more Bush-bashers and Clinton-bashers acknowledge that fact.
Startling to see Martha Stewart’s conviction make his Top-10 list…
…Now, in my ideal world, the US would take the path long recommended by the old liberal tradition. We would have free trade with the world, establish a gold standard that defined the dollar as gold and otherwise ending central banking, and bring about completely free domestic markets. This is the Austrian version of utopia, and it has two key advantages: it would bring about the most productive economy in the history of the world, and it would also serve as the best guard to freedom. …
As I remember my history, that was the situation that prevailed for all the major (and minor) depressions. It has been Keynsian economics that has perhaps saved us from the devastation seen in the great depressions of the 1870s, 1890s, and 1930s. The recessions of the late 1950s, mid 1970s, and early 1990s were all severely blunted by government interference.
It has been too many years since Economics 101, but isn’t this theory called lassaiz faire economics. Sure doesn’t sound like what a liberal tradition would suggest.
As for the sky is falling, film at eleven. This is an economic paper written a year ago. It is still relevant today as an idea. While I believe the author is blowing smoke rings from his butt, an issue needn’t be hot from someone’s lips to be worthy of discussion. Unless of course it is above your intellect.
The Executive branch submits a proposed budget to Congress. The Executive must also sign the Budget into law. It is also responsible for spending the money alloted. The Executive is neither the sole creator nor uninvolved in the process. In today’s world, the President is the leader of his party, as well as the country, and thus holds much suasion over the Federal Budget and Federal Reserve. It is Fiscal and Monetary manipulations that control the economy.
Yes, I agree; Bush is so much easier to spell and remember than Theodoro–?!?!?
Don’t you agree with most of the top 10?
Mr. Confusion
Actually Mr. Fusion you are confusing “government interference.” If you are talking about the *Fed’s* interference, that is highly debatable. It is not at all clear that the Fed’s playing around with interest rates has actually helped the economy grow. Many believe that the Fed’s playing with interest rates causes uncertainty and exasperates the problem. If you are talking about the Federal government interfering through spending, that is an entirely different issue. It was government spending on the war that really pulled us out of the 1930’s depression. But there were other forces at work that limited mobility and opportunity for workers to switch into different more prosperous professions. Those barriers are substantially smaller now.
Lassaiz-faire does work when there are controls in place to limit abuse. The boom of the 1980’s was fairly clear evidence that lassaiz-faire works and that boom was limited because of the Fed’s interference with interest rates (double digit interest rates, remember those?). Keynsian macroeconomic theory, while still studied in college and still important historically has been trumped by the monetarist policy of those like Milton Friedman.
> The Executive branch submits a proposed budget to Congress.
> The Executive must also sign the Budget into law. It is
> also responsible for spending the money alloted. The
> Executive is neither the sole creator nor uninvolved in the
> process. In today’s world, the President is the leader of
> his party, as well as the country, and thus holds much
> suasion over the Federal Budget and Federal Reserve. It is
> Fiscal and Monetary manipulations that control the economy.
Sorry but that argument is hollow. What you are basically saying is that because Congress decides not to take the proactive role given to it by the Constitution, because it lets the President propose the budget and they do nothing to change it that the President is to blame. That is simply a way of passing the buck. Congress has the ultimate authority on the budget. If Congress chooses to go along with the President’s budget instead of doing the work themselves, that still means they are to blame.
Regarding the 10 items:
10. Martha Stewart – Sorry but Martha did more that just defend herself. She went out her way to thwart the investigation. She got what she deserved.
9. Tariff on steel. I agree that it should have never been done. Instead, the government should have created incentives for new and more efficient steel production.
8. Social security. “They are proposing to partially convert the existing tax and spend system into a forced savings program.” What does he think social security is now? It *is* forced savings. I have no choice or control over the savings. Only, what happens now is that it is forced savings that the government can spend so I don’t have it when I retire.
7. Government spending. So, it is the President’s fault for failing to say “No” to Congress?! What about blaming Congress for proposing pork barrel spending in the first place! Bush basically gave Congress the rope to hang themselves.
6. AMT. Agreed. They need to bump the AMT to people making something like $500K or more and adjust it for inflation.
5. Drug benefit law. Completely agree. I’m thinking Bush and Congress got together and smoked something really good when this was passed. IMO, Bush and this Congress’ biggest mistake was passing this law.
4. Fannie/Freddie. I do see a moderate housing bust in the future. However, the inflation of prices was not only because of rates, but because of artificial and legislative controls. The prices will fall, but not by as much as the doomsayers are saying.
3. SOX. I have mixed feelings on this one. I definitely see the insane costs due to compliance. Whole industries have popped up that do nothing but help companies comply (similar to ISO900x companies). I agree that having books more open to investors would probably be a better solution. However, the flip side of this is that we had an issue of the “old boy” network protecting themselves.
2. Markets by force. Sorry but I do not agree. There is no way that Iraq was going to become a free market by economic or diplomatic pressure. We tried that remember? What changed in the twenty years after the first Gulf War? Taking Iraq was more than just about Iraq. It was about forcing change in all of the other counties in that region.
1. Bernanke. Disagree. Bernanke is a monetarist like Greenspan was *supposed* to be. Bernanke believes in *less* interference by the Fed rather than the Keynesian opinion more interference by the Fed. Putting the dollar on gold will not solve the world’s problems.
So, I agree with about 1/2 of what he said.
This current administration is no more spend-happy than Clinton or any other recent President. Relative to GDP, Clinton spent almost the same as Bush does. The large deficits we’ve since seen Bush has just been from the decline in revenues relative to GDP, which can only be explained by lower taxes on earned wealth.
The supply-side theory that lower taxes will increase revenues has never worked and is not supported by many economists. Every time, spending stays constant (relative to GDP) but deficits increase. The argument that the economy grows faster with debt is purely Keynesian and we cannot ignore that deficits reduce future growth by at least the same amount they encourage current growth. It should also be noted that lowering taxes has a smaller beneficial multiplier than the government spending itself.
Actually, supply-side economics does work. We currently have higher tax revenues even though the tax rate has dropped. However, there is no economic theory on the planet that can compete with a Congress that spends more than it makes.
> It should also be noted that lowering taxes has
> a smaller beneficial multiplier than the government spending itself.
Over what period of time? Eventually, government spending, especially deficit government spending will evaporate that benefit. Government spending as a mechanism to boost growth is dandy when they have the money to spend.
Actually, tax revenues are still below the pre-tax cut levels, if we adjust for inflation. Although we are used to revenues increasing all the time just from good old fashioned normal productivity growth, we are still only collecting Clinton-era revenues. Spending has basically stayed exactly where it would have been without Bush, since the growth in spending matches the GDP and general inflation of the overall economy.
I don’t know if we can post links, but search for Federal outlays and receipts, in constant dollars. The White House and CBO cite them often.
You are arguing the Keynesian perspective, not supply-side.
80s supply-side economics believes you can cut taxes and revenues will increase, regardless of growth. That’s the Laffer curve and it’s never worked. Current supply-side economics is that tax cuts will decrease revenues but debt doesn’t matter for some reason or another (it’s not a widely held theory among economists).
Whether tax cuts stimulate the economy is another argument altogether. We can calculate the theoretical demand push, but even first year economics students learn the tax multiplier is less than the spending multiplier (government spending adds more demand than individuals saving taxes). In the real world, there does not appear to be any correlation between economic growth and tax cuts. We’ve had very strong growth after tax raises, especially when the additional revenue is used to balance accounts and keep interest rates low.